Analyst
Sehar Fatima
sehar.fatima@pacra.com
+92-42-35869504
www.pacra.com
Applicable Criteria
Related Research
PACRA Maintains Entity Ratings of MCB Islamic Bank Limited
Rating Type | Entity | |
Current (27-Dec-19 ) |
Previous (27-Jun-19 ) |
|
Action | Maintain | Maintain |
Long Term | A | A |
Short Term | A1 | A1 |
Outlook | Stable | Stable |
Rating Watch | - | - |
MIB is a wholly owned subsidiary of MCB Bank Limited (MCB). MCB has long term rating of "AAA" reflecting its robust profile duly supplemented by its strong market position in local banking landscape, established brand equity, and sound financial profile. MIB’s standalone risk profile is improving. The management’s strategy is to consolidate the financing book of corporate clients; curtailed financing book in 9MCY19 to support the same. MIB has set relatively high targets for deposit growth and plans to focus on maintaining its financing book quality. Technological implementation and setting governance structure were mile stones achieved by bank in the last years. The thrust of the business plan is to achieve break-even. During 9MCY19, NIMR witnessed significant improvement attributable to increase in key policy rate. The fee commission income witnessed good jump but was negated with the loss on securities. The bank added branches from parent company resulting in bank's expanded outreach; enhanced costs from new branches is yet to be absorbed. Enhanced provisioning expense has further increased the loss. However, MIB's losses has began to shrink in 9MCY19 where the bank closed 3QCY19 in profits. As at end-Sep19, the bank's CAR is at 13.5%. The ratings incorporate the sponsor's willingness to support MIB evident from capital injection of PKR 350mln in 9MCY19.
The ratings are dependent on bank's ability to hold its risk profile, while maintaining its relative market position in the banking industry.
About
the Entity
MIB was formed as a b anking company in May, 2014. MIB is a wholly owned subsidiary of MCB - one of Nishat Group's major concern - having strong presence in the financial sector. It started its commercial operations in October, 2015. Initially, it had six branches, however, currently working at 178 branches. MCB Islamic bank’s deposits are 0.5% of total banking industry.
The overall control of the bank vests with eight members of the Board of Directors (BoD), including CEO. Board consist of two independent directors and five non-executive members. Mr. Raza Mansha (son of Mian Mansha) is the Chairman of the Board. He is accompanied with ~2 decades of diversified experience in various business sectors including Banking, Textile, Power, Cement, Insurance, Hotels, Properties, Natural Gas, Agriculture, Dairy etc. Majority of the Board members possess extensive national and international banking and financial services industry experience. He is supported by an experienced team.