The Pakistan Credit Rating Agency Limited
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Muhammad Fahad Iqbal

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PACRA Maintains Entity Ratings of Standard Chartered Bank (Pakistan) Limited

Rating Type Entity
(25-Jun-21 )
(25-Jun-20 )
Action Maintain Maintain
Long Term AAA AAA
Short Term A1+ A1+
Outlook Stable Stable
Rating Watch - -

The ratings reflect the Standard Chartered Bank (Pakistan) Limited “SCBPL” association with a financially sound and reputed international bank - Standard Chartered PLC. This is supplemented by SCBPL's strategic and operational integration into the parent as the Bank continues to benefit from the technical resources and cumulative expertise developed at the Group level. Bank’s market share in customer deposits stood at 3.1% as of end-Dec20 (end-Dec19: 3.0%). SCBPL's pre-dominantly low-cost deposit base has enabled the Bank to achieve one of the best CASA mix in the industry (CY20: 92.5%, CY19: 93.1%) while distinguishing it from its peer universe it also facilitates core operating activities. The ratings incorporate the Bank's dominant position in its targeted niche market (MNCs, established domestic Corporates & affluent retail clients) through a comprehensive product suite and significant digital capabilities complemented by its international franchise and its extensive presence in tier-I cities. The strategy is to focus on retail business and digitization along with traditional banking. The Bank is focused on enhancing yield, cost efficiency, increasing client revenue, and growing customer assets. The Bank's net mark-up income remained largely the same while the non-mark-up income enhanced YoY. Higher provisioning expense was recorded resulting in declined YoY net profitability. The advances of the Bank also witnessed attrition in CY20 and ADR clocked in at 32% (CY19: 46.8%). The rating factor is sound management quality, healthy spreads, efficient operating structure, and ample liquidity of the Bank. The risk absorption capacity of the Bank, measured in terms of CAR, is robust (19.1%). COVID-19 is an ongoing challenge. While it has taken a toll on many businesses, its ramifications are still unfolding. The proactive measures are taken by the regulators and other concerning bodies have mitigated the potential damages anticipated from this pandemic. As a result, the banking industry remained protected and in fact posted record profits. Vigilance is required as waves/variants of the pandemic continue to emerge.
The ratings remain dependent on the Bank's ability to maintain its presence in profitable segments while remaining abreast of changing domestic operating environment. Meanwhile, maintaining spreads whilst not compromising on the asset quality is important for the Bank.

About the Entity
SCBPL, incorporated in Pakistan in Jul 2006, is ultimately owned (98.99%) by Standard Chartered PLC and operates with a network of 49 branches across 11 cities at end-Mar21. In recent years, Bank has extensively focused on digitizing its services and the emphasis on digitization is expected to continue in the future. Standard Chartered (PLC) credit ratings as of 17th January 2021 were BBB+ with a stable outlook (S&P), A2 with a stable outlook (Moody’s), and as of 08th December 2020, and A with a Negative Outlook (Fitch) as at 15th October 2020. SCBPL's seven-member BoD comprises qualified and experienced professionals. The board has four members of the Standard Chartered (SC) Group, including SCBPL's CEO. The remaining members of the board are independent or non-executive directors. Mr. Rehan Sheikh, the CEO of the bank, is a seasoned banker, he is assisted by an experienced team.

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.