PACRA Maintains the rating of JS Bank Limited | PPTFC | Dec-21

The ratings reflect JS Bank Limited's (“JSBL” or “Bank”) growing prominence in Country’s banking sector. The acquisition of a 75.12% stake in BankIslami Pakistan Limited in August 2023 marks a key milestone, strengthening JSBL’s position as one of the Country’s fastest-growing financial institutions. The positive fundamentals of the Islamic banking industry in general also lend support to the ratings. In addition, the ratings highlight JSBL's growing stature, on a standalone basis, as a medium-sized Bank. The Bank has increasingly gained a tech-savvy image, while continuously augmenting its futuristic layout. It has heavily invested in its digital services; "Zindigi," has become a hallmark of the Bank’s digital presence. It is designed to provide Gen Z and millennials with simple, user- friendly digital financial solutions. As of Sep’24, savings accounts of JSBL have surpassed current accounts in contribution, with markup on deposits showing a 26% increase on YoY. The increase in savings accounts and higher markup reflects improved customer-centric deposit strategies. As of Sep’24, net advances showed an increase of 29% since CY23, accompanied by a slight rise in the infection ratio, primarily due to the increase in non performing advances. The investment portfolio is predominantly composed of government securities, with a tilt towards floating-rate instruments. The Capital Adequacy Ratio (CAR) is above the regulatory requirement standing at 13.72% (CY23: 12.53%). The equity of JS Bank Limited (JSBL) reached PKR 43.5bln as of Sep’24, up from PKR 40.3bln in CY23. The Bank's net interest income recorded a 33% growth on YoY basis, driven primarily by an improved deposit mix. Profit After Tax (PAT) rose by 34% YoY to PKR 3.1bln (9MCY23: PKR 2.3bln), supported by increase in net interest income, dividend income and gains on securities.
Ratings are dependent on JS Bank's ability to sustain positioning and also profitability trend to ensure internal generation of capital. Meanwhile, upholding asset quality and managing cost structure is important.

About the Entity
JS Bank Limited (JSBL), incorporated in March 2006, commenced its banking operations on December 30, 2006. JSBL is a subsidiary (~71.21%) of Jahangir Siddiqui and Co. 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. Basir Shamsie joined as CEO in July 2018. He possesses work experience of more than 30 years, primarily in the banking sector.

About the Instrument
JSBL issued Tier II capital TFC ("TFC") amounting to PKR 2,500mln on Dec 28, 2021. The tenor of the TFC is 7 years and carries a profit rate of 6MK +2%. The TFC is subordinated to the payment of principal and profit, to other indebtedness of the Bank, including deposits, however senior to the claims of investors in instruments eligible for inclusion in Tier 1 Capital. Neither profit nor principal will be payable in respect of TFC if such payment will result in a shortfall in the Bank’s MCR or CAR. The Bank may call the TFCs, with prior approval of SBP, after five years from the date of issue. The TFCs shall, if directed by the SBP, be fully and permanently converted into ordinary shares and/or have them immediately written off (partially or in full) upon the PONV Trigger Event. Major Principal Repayment (99.76%) would be paid in two equal semiannual installments of (49.88%) each, in the last year. The latest payment (Principal+Interest) of PKR 294mln has been made at the end of June 28, 2024.