PACRA Maintains the Rating of BankIslami Pakistan Limited | ADT-1 Modaraba Sukuk I | PKR 2 Bln| Apr-20

BankIslami Pakistan Limited (BIPL), the first Islamic commercial bank to receive an Islamic banking license in Pakistan, has demonstrated notable growth in recent years across key areas relevant to the risk profile of a commercial bank. In CY23, the Bank underwent a significant ownership transition when JS Bank Limited increased its stake to 75.12%, becoming the majority shareholder and Parent Company, thereby making BIPL an integral part of the JS Group. With the strategic backing of the JS Group, BIPL has been able to leverage synergies to enhance its product offerings, improve operational efficiency, and expand its market outreach. The integration has also enabled a stronger focus on innovation, customer service, and sustainable growth, further solidifying the Bank’s position in Pakistan’s Islamic banking sector. The Bank launched its digital mobile app, ‘AIK’, mirroring the functionality of the Parent Bank’s app ‘Zindigi’, and has mobilized PKR 482mln in deposits till Sep'25. During 9MCY25, the Bank grew its branch network to 550 branches (CY24: 540 branches), aiming to tap high-potential markets and boost customer access in a key economic hub. As of 9MCY25, the deposit base grew by 8% to stand at PKR 606bln (CY24: PKR 559bln) with a major contribution from current and term deposits. On asset side, advances of the Bank contracted to PKR 259bln (Dec’24: PKR 296bln), contributing to a decline in the ADR to 47.9% (CY24: 58.5%). At the end of 9MCY25, BIPL’s investment grew to PKR 353bln (CY24: PKR 345bln), due to increased exposure to Government securities. The rapid policy-rate decline and MDR impact compressed spreads, dragging net profit margin down by 22% on YoY basis. Strong fee generation and gains on securities partially absorbed margin pressure. The Bank’s operating expenses registered a significant increase, primarily attributed to the ongoing branch network expansion. However, the profitability of the Bank dropped by 50% to PKR 5bln at the end of 9MCY25 (9MCY24: PKR 10.2bln), majorly due to dip in net profit margin and an increase in operating expenses. The equity base, in turn, the risk absorption capacity of the Bank stood at PKR 48bln at the end of 9MCY25 (CY24: PKR 48bln) with the CAR stood at 17.78%, above the minimum regulatory requirement. As per the business plan, key focus areas include deposit and trade business growth, enhanced risk and compliance frameworks, branch expansion, and a strengthened digital presence through upgraded channels.
The rating incorporates the Bank's ability to strengthen its market position in its peers with improved risk management. The transformation in the ownership structure adds value to the ratings. However, the improvement in the asset quality will remain significant.

About the Entity
BIPL commenced operations in Apr-06 and is listed on PSX. BIPL is a subsidiary (75.12%) of JS Bank Limited. Mr. Ali Hussain holds 12.53% of the stake while the remaining stake is widely spread among general public. BIPL’s eight-member board including the CEO. Mr. Suleman Lalani, Group President of JSCL, is serving as the Chairperson of the Board. Mr. Rizwan Ata, a seasoned banker, is serving as CEO.

About the Instrument
BIPL issued fully paid up, rated, listed, perpetual, unsecured, subordinated, non-cumulative and contingent convertible listed modaraba Sukuk certificates (“Sukuk”). The Sukuk has an issue size of PKR 2bln, is perpetual in tenor, and offers a profit rate of 3MK + 2.75%. The profit is being paid monthly in arrears on the outstanding principal amount on a non-cumulative basis. The amount raised is part of BIPL's Additional Tier 1 Capital for CAR as per guidelines set by SBP. They are callable after 5 years with SBP approval and may be fully or partially converted to shares or written off on SBP’s PONV trigger.