Lahore, June 28, 2019 (PPI-OT): The ratings reflect relative position of JS Bank in the country’s competitive banking landscape. This stems from enhanced system share in deposit and advances. The bank’s funding base enhanced attributable to increase in deposit base and borrowings from financial institutions. The increased liquidity has been deployed in advances (34% rise on YOY basis). Hence, ADR jumped to 78.4%. As the growth is substantial; it needs continuous vigilance. 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 by currently high opex and mark to market losses.
The strategy of the bank is i) to foster penetration of existing network beyond 345 branches over the near-term; ii) consolidate advances book and replace it with liquid collateralized advances to maintain CAR, iii) build non-fund based income; and iv) hold strength in treasury operations. The challenge to profitability is dried return of capital gains. The bank expects the profits to be boosted from growing direct and ancillary business. The bank is facing a challenge on its CAR; Total CAR stood at 12.0% (Tier-I at 9.5% as at end-Dec18). The management issued bond (Tier I) to bolster its CAR. Further room needs to be created.
Ratings are dependent on JS Bank’s ability to maintain 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.
For more information, contact:
Analyst
The Pakistan Credit Rating Agency Limited (PACRA)
Awami Complex, FB1, Usman Block New Garden Town,
Lahore – Pakistan
Tel: +9242 586 9504 -6
Fax: +9242 583 0425
Email: hammad.rashid@pacra.com
Web: www.pacra.com