The Pakistan Credit Rating Agency Limited
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Abdul Wahab

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PACRA Maintains Entity Ratings of MCB Islamic Bank Limited

Rating Type Entity
(25-Jun-20 )
(27-Dec-19 )
Action Maintain Maintain
Long Term A A
Short Term A1 A1
Outlook Stable Stable
Rating Watch - -

MIB is a wholly owned subsidiary of MCB Bank Limited (MCB). MCB has long term rating of "AAA" reflecting its robust profile duly supplemented by its strong market position in local banking landscape, established brand equity, and sound financial profile. MIB’s standalone risk profile is improving. The management’s strategy is to consolidate the financing book of corporate clients; curtailed financing book in CY19 to support the same. MIB has set relatively high targets for deposit growth and plans to focus on maintaining its financing book quality. MIB have deposit system share of 0.5%. Where term deposits witness notable growth which may have implications on cost of funds next year. Technological implementation and setting governance structure were mile stones achieved by bank in the last years. The thrust of the business plan is to achieve break-even. During CY19, NIMR witnessed significant improvement attributable to increase in key policy rate. The fee commission income witnessed good jump but was negated with the loss on securities. The bank added branches from parent company resulting in bank's expanded outreach; enhanced costs from new branches is yet to be absorbed. Uptick in NPLs; maintaining asset quality intact remains essential. However, MIB's losses has begun to shrink in CY19. As at end-Dec19, the bank's CAR is at 13.82% (CY18: 13.19%). The ratings incorporate the sponsor's willingness to support MIB evident from capital injection of PKR 350mln in CY19. 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.
The ratings are dependent on bank's ability to hold its risk profile, while maintaining its relative market position in the banking industry. Any weakening in asset quality will in turn put pressure on the bank's profitability and risk absorption capacity

About the Entity
MIB was formed as a b anking company in May, 2014. MIB is a wholly owned subsidiary of MCB - one of Nishat Group's major concern - having strong presence in the financial sector. It started its commercial operations in October, 2015. Initially, it had six branches, however, 185 branches at end-Dec19.
The overall control of the bank vests with eight members of the Board of Directors (BoD), including CEO. Board consist of two independent directors and five non-executive members. Mr. Raza Mansha (son of Mian Mansha) is the Chairman of the Board. He is accompanied with ~2 decades of diversified experience in various business sectors including Banking, Textile, Power, Cement, Insurance, Hotels, Properties, Natural Gas, Agriculture, Dairy etc. Majority of the Board members possess extensive national and international banking and financial services industry experience. He is supported by an experienced team.

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.