The Pakistan Credit Rating Agency Limited
Press Release


Madiha Sohail

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PACRA Maintains Rating of JS Bank Limited | TFC Tier 1

Rating Type Debt Instrument
(24-Jun-22 )
(25-Jun-21 )
Action Maintain Maintain
Long Term A A
Short Term - -
Outlook Stable Stable
Rating Watch - -

The ratings reflect the relative position of JS Bank in the country's competitive banking landscape. This stems from largely intact customer deposit system share (end-Dec21: 2.2%, End-Dec20: 2.4%). Funding base comprises of borrowings and deposits where term deposit is relatively higher compared to peers. The focus of the bank has been to optimize its cost structure, build profitability around branch network and customer base. The bank has assembled experienced and qualified management team to head various departments. The strategy of the bank revolves around creating a more balanced approach to customer acquisition and offering unique digital solutions to customers. The bank has made substantial capital investment in its digital proposition and launched a new brand ‘Zindigi’, which has been designed to tap the market of Gen Z and millennials by offering them simple and user-friendly digital financial solutions. Meager increase in advances is recorded owing to a cautious lending approach. A sizable increase is recorded in the investment book; owing to higher investment in government securities. A continued uptick in NPLs is a cause for concern, though 1QCY22 NPLs witnessed a minor decline. Going forward, management will focus on enhancing improving coverage on NPLs and enhancing recoveries. Markup income witnessed an increase attributable to the enhanced investments whilst attrition was recorded in non-mark up income. Despite high provisioning expenses, net profitability remained largely intact YoY. In order to strengthen the risk management framework, bank has segregated credit and risk functions into different sub-categories based on functions and geographies. The bank expects to boost profits by growing direct and ancillary business. Pakistan’s economy has gone through several varied phases in last two years due to the COVID-19 pandemic. Banking sector continued to flourish with high profitability. Going forward, the macro-economic environment is beset with myriad challenges due to heightened interest rate, tightening of demand, rupee depreciation and higher inflation. This has repercussions for the entire system including banking.
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 banking sector, adding diversity to income stream, maintaining a cushion in CAR, and a strong governance framework is critical.

About the Entity
JS Bank Limited (JSBL), incorporated in March 2006, commenced its banking operations on December 30, 2006. JSBL is a subsidiary (~75%) of Jahangir Siddiqui and Co. Limited (JSCL), whereas the rest is widely spread. The overall control of the bank vests in the Board of Directors (BoD) including the CEO. Mr. Basir Shamsie joined as CEO in July 2018. He possesses work experience of more than 27 years, primarily in the banking sector.

About the Instrument
The Bank has issued its third rated, privately placed, unsecured, subordinated, perpetual and non-cumulative TFC amounting to PKR 2.5bln in Dec-18. The purpose of the issue was to contributed towards JSBL's additional Tier 1 Capital for capital adequacy ratio requirements as per guidelines set by SBP. The tenure of the instrument is perpetual and carries a profit rate of 6MK+225bps. The Bank retains the call option on the profit payment date, which may be exercised, on/after five years of issue.

The primary function of PACRA is to evaluate the capacity and willingness of an entity to honor its obligations. Our ratings reflect an independent, professional and impartial assessment of the risks associated with a particular instrument or an entity. PACRA's comprehensive offerings include instrument and entity credit ratings, insurer financial strength ratings, fund ratings, asset manager ratings and real estate gradings. PACRA opinion is not a recommendation to purchase, sell or hold a security, in as much as it does not comment on the security's market price or suitability for a particular investor.