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The Pakistan Credit Rating Agency Limited
Press Release

Date
28-Dec-19

Analyst
Usama Zubair
usama.zubair@pacra.com
+92-42-35869504
www.pacra.com

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This press release is being transmitted for the sole purpose of dissemination through print/electronic media. The press release may be used in full or in part without changing the meaning or context thereof with due credit to PACRA

PACRA Maintains Entity Ratings of JS Bank Limited

Rating Type Entity
Current
(28-Dec-19 )
Previous
(28-Jun-19 )
Action Maintain Maintain
Long Term AA- AA-
Short Term A1+ A1+
Outlook Stable Stable
Rating Watch - -

The ratings reflect relative position of JS Bank in the country's competitive banking landscape. This stems from system share in deposit which largely remained the same and depleted advances. The bank's funding base enhanced attributable to slight increase in deposit base, however borrowings from financial institutions decreased. The increased liquidity inched up to ~33.4% since Dec18 mainly due to less borrowings from financial institutions. Hence, ADR significantly reduced to 74.3%. NPLs have emerged in the recent period, which is a concern. Going forward, higher provisioning expense may pose a challenge to profitability of the bank which is already diluted by currently high markup on deposits and mark to market losses, these are expected and diluted as reaching maturity. The strategy of the bank is i) to foster penetration of existing network beyond 345 branches over the near-term; ii) consolidate advances book and replace it with liquid collateralized advances to maintain CAR, iii) build non-fund based income; and iv) hold strength in treasury operations. The challenge to profitability is dried return of capital gains. The bank expects the profits to be boosted from growing direct and ancillary business. The bank is facing a challenge on its CAR; Total CAR stood at 12.1% (Tier-I at 9.5% as at Sep19). The management has represented that, with their concerted efforts, it would stand compliant as on end- Dec2019. This along with other performance indicator would be reviewed upon finalization of the annual financial statement for 2019.
Ratings are dependent on JS Bank's ability to sustain its profitability to support internal generation of capital. Meanwhile, upholding asset quality, maintaining system share in terms of advances and deposits, adding diversity to income stream, sound CAR and strong governance framework are critical.

About the Entity
JS Bank Limited (JSBL), incorporated in March 2006, commenced its banking operations on December 30, 2006. JSBL is a subsidiary (~75%) of Jahangir Siddiqui & Company Limited (JSCL). Whereas the rest is widely spread. The overall control of the bank vests in the Board of Directors (BoD) including the CEO. Mr. Sohail Aman has been appointed as Independent Director, w.e.f October 24, 2019. He himself accompanied with diversified experience. Mr. Basir Shamsie joined as CEO in July, 2018. He possesses work experience of more than 25 years, primarily in the banking sector.

The primary function of PACRA is to evaluate the capacity and willingness of an entity to honor its obligations. Our ratings reflect an independent, professional and impartial assessment of the risks associated with a particular instrument or an entity. PACRA's comprehensive offerings include instrument and entity credit ratings, insurer financial strength ratings, fund ratings, asset manager ratings and real estate gradings. PACRA opinion is not a recommendation to purchase, sell or hold a security, in as much as it does not comment on the security's market price or suitability for a particular investor.