PACRA Maintains Rating of JS Bank – TFC Tier 1

Lahore, June 29, 2020 (PPI-OT): The ratings reflect relative position of JS Bank in the country’s competitive banking landscape. This stems from improved deposit system share (end-Dec19: 2.3%). Funding base comprising borrowings and deposits where term deposit witnessed notable increase in CY19. In the upcoming year, this may have implications on cost of fund. 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.

There was a potential drag of mark to market losses, which has evaporated as of today. The bank was able to cover up its losses incurred during the year while approaching towards the closure of the year end. The strategy of the bank is i) consolidate advances book and replace it with liquid collateralized advances to maintain CAR, ii) build non-fund based income; and iii) hold strength in treasury operations. The challenge to profitability in CY19 was dried return of capital gains. The bank expects the profits to be boosted from growing direct and ancillary business.

Total CAR, on stand alone basis stood at 12.93% (Tier-I at 10.33% as at Dec19) Needs to beef up to make room for future growth. Covid-19 has posed challenges to the banking sector, as almost all segments of the economy, worldwide and domestically, are getting negatively impacted. The ramifications would continue to unfold, warranting vigilance and timely actions where needed.

Ratings are dependent on JS Bank’s ability to sustain 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

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