Analyst
Uswa Sikandar
uswa.sikandar@pacra.com
+92-42-35869504
www.pacra.com
Applicable Criteria
Related Research
PACRA Maintains Entity Ratings of JS Bank Limited | Outlook Positive
Rating Type | Entity | |
Current (29-Dec-23 ) |
Previous (23-Jun-23 ) |
|
Action | Maintain | Maintain |
Long Term | AA- | AA- |
Short Term | A1+ | A1+ |
Outlook | Positive | Stable |
Rating Watch | - | - |
The ratings reflect the improving position of JS Bank in the country's competitive banking landscape. This stems from its growing presence in the conventional banking sector and lately, via its enhanced stake in one of the rising Islamic bank. The bank is poised to reap fruits from both markets and especially in future, as the industry is gearing towards conversion to Islamic banking. On a consolidated basis, the bank is expected to report a much higher customer deposit system share. On a standalone basis, the bank streamlined its costs, boosting core profitability through focused management efforts on its branch network and customer base. Efficacy in the funding cost plus deployment of assets at a superior rate benefited the bottomline. The latest numbers, as represented by the management, are sanguine. The emphasis is on sustained digital spending to achieve a balanced approach to customer acquisition and provide distinctive digital solutions. In 9MCY23, the bank's digital initiative 'Zindigi' saw strong growth, attracting 2.4 million new users. The platform targets Gen Z and millennials with user-friendly financial solutions. The customer penetration through JS Mobile App and JS BOT reflected a growth of 52% and 63% respectively. The Credit portfolio illustrated a decline attributable to the continuous efforts of consolidation of advances around quality lending. This reflected in the form of a reduction in NPLs. The investment portfolio is majorly vested with Government Securities. The loan infection ratio (7.1%) remained lower than the industry average. Going forward, management has a keen focus on coverage of NPLs and other recoveries. Interest income reflected a sizeable increase at PKR 64.5bln (9MCY22: PKR 48.7bln) reflecting a growth of 32% attributable to a higher contribution of markup from investments. The quantum of Foreign Exchange Income is large (9MCY23: PKR 3.7bln; 9MCY22: PKR 1.9bln), aligning with the industry-wide trend. Despite higher provisioning expense, the bank’s bottom line increased manifold YoY clocking at PKR 2.3bln (9MCY22: PKR 820mln). The bank has recently penetrated into the growing Islamic Banking Industry in Pakistan through the acquisition of a significant stake in BankIslami Pakistan Limited (BIPL). BIPL has demonstrated remarkable growth with an active presence in more than 150 cities through 415 branches. Presently, it is operating in the Islamic domain with a deposit base of PKR 461.9bln. The dividend income from BIPL shall augment the overall profitability.
Ratings are dependent on JS Bank's ability to sustain its profitability to support the internal generation of capital. Meanwhile, upholding asset quality, maintaining its share of advances and deposits in the banking sector, adding diversity to the income stream, building and maintaining a cushion in CAR congruent to its ratings are critical.
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). Randeree Family holds 11.92% of the stake through Mr. Shabir Ahmed Randeree and Mr. Ahmed G.M. Randeree while the remaining stake is widely spread. The overall control of the bank vests in the Board of Directors (BoD) including the CEO. Post-acquisition, the shareholding of the Bank in BIPL has increased to 75.12% and BIPL has become a subsidiary of JS Bank Limited.