Analyst
Usama Zubair
usama.zubair@pacra.com
+92-42-35869504
www.pacra.com
Applicable Criteria
Related Research
PACRA Maintains Entity Ratings of JS Bank Limited
Rating Type | Entity | |
Current (29-Jun-20 ) |
Previous (28-Dec-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 improved deposit system share (end-Dec19: 2.3%). Funding base comprising borrowings and deposits where term deposit witnessed notable increase in CY19. In the upcoming year, this may have implications on cost of fund. 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. There was a potential drag of mark to market losses, which has evaporated as of today. The bank was able to cover up its losses incurred during the year while approaching towards the closure of the year end. The strategy of the bank is i) consolidate advances book and replace it with liquid collateralized advances to maintain CAR, ii) build non-fund based income; and iii) hold strength in treasury operations. The challenge to profitability in CY19 was dried return of capital gains. The bank expects the profits to be boosted from growing direct and ancillary business. Total CAR, on stand alone basis stood at 12.93% (Tier-I at 10.33% as at Dec19) Needs to beef up to make room for future growth. Covid-19 has posed challenges to the banking sector, as almost all segments of the economy, worldwide and domestically, are getting negatively impacted. The ramifications would continue to unfold, warranting vigilance and timely actions where needed.
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 27 years, primarily in the banking sector.