Karachi, June 30, 2021 (PPI-OT):VIS Credit Rating Company Limited (VIS) has reaffirmed the entity ratings of Dubai Islamic Bank Pakistan Limited (‘DIBPL’ or ‘the Bank’) at ‘AA/A-1+’ (Double A/A-One Plus). The rating assigned to the Bank’s Tier II Sukuk and Additional Tier-1 (ADT-1) Sukuk has been reaffirmed at ‘AA-’ (Double A Minus) and ‘A+’ (Single A Plus) respectively. Outlook on the assigned ratings is ‘Stable’. The previous entity rating action was announced on June 30, 2020.
The assigned ratings incorporate strong financial profile and track record of demonstrated support of the sponsor, Dubai Islamic Bank PJSC, UAE (DIB). Subsequent to its acquisition of Noor Bank, DIB has established itself as one of the two largest Islamic Banking Institutions in the world.
In 2020, DIBPL posted moderate asset growth, roughly in line with the preceding year. Akin to the industry, DIBPL has also shifted its asset mix towards the investment portfolio, thus rationalizing its financings to deposits ratio on a timeline. Nevertheless, despite the change in asset base composition, DIBPL’s financing growth continued to exceed the industry, with the Bank’s market share, in terms of advances, posting consistent increase over the past 2-year period (2019-20). The Bank’s asset quality indicators, depicted slight adverse trend, which was in line with the industry. Furthermore, overall ratio of Covid relief related deferrals to total financings portfolio was in line with the industry. At present, gross infection is aligned with peers.
During the period under review, the Bank managed to notably improve its deposit composition, while growing roughly in line with the industry and maintaining market share. The change in deposit composition is viewed favourably from ratings perspective. In line with industry, DIBPL’s profitability indicators were affected, mainly been precipitated by lower prevailing benchmark rates during the period, lower other income – given the pandemic-induced lockdown, which affected fee and commission income across the sector – and higher provisioning burden.
DIBPL’s equity base has continued to post improvement on the back of internal capital generation and profit retention. During the period under review, the Bank has continued with full profit retention policy. DIBPL’s capital adequacy remains adequate, at present, in view of the quantum of cushion above the minimum requirement. The assigned ratings remain dependent on maintenance of asset quality, profitability and capitalization metrics, while continued improvement of liquidity metrics is considered important from a rating perspective.
For more information, contact:
Director Compliance and Rating Analytics,
VIS Credit Rating Company Limited
VIS House, 128/C, 25th Lane off Khayaban-e-Ittehad,
Phase VII, DHA, Karachi, Pakistan
Tel: +92-21-35311861-72
Fax: +92-21-35311873
Email: bilal@jcrvis.com.pk
Website: https://www.vis.com.pk/
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