The Pakistan Credit Rating Agency Limited
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Madiha Sohail

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PACRA Maintains Rating of JS Bank Limited | PPTFC | Dec-21

Rating Type Debt Instrument
(23-Jun-23 )
(24-Jun-22 )
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-Dec22: 2.0%, end-Dec21: 2.2%). The deposit base reflects a higher concentration of term deposits. The latest numbers, as represented by the management are sanguine. The bank has made a 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. The net advances illustrated a decline owing to the continued efforts of consolidation. The investment portfolio displayed an increase YoY majorly vested with government securities. The continuous increase in non-performing advances is a cause for concern. However, despite the buildup in NPLs and reduction in Credit portfolio, the loan infection ratio (6.8%) remained lower than the industry average. Going forward, management will focus on enhancing coverage of NPLs and other recoveries. Markup income witnessed an increase attributable to a higher contribution of markup from investments. Despite higher provisioning expenses, the bank's bottom line clocked at PKR 965mln (CY21: PKR 1.3b1n). During 1QCY23, the markup earned increased sizably whilst the non-markup income portrayed attrition. The net profitability recorded an enormous growth to stand at PKR 856mln (1QCY22: PKR 410mln). The enhancement of equity stake in a rising Islamic bank of the country is at an advanced stage. This will benefit the bank, going forward.
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, 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 (~75.02%) 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 29 years, primarily in the banking sector. He is supported by a team of highly qualified and seasoned professionals.

About the Instrument
JS Bank has issued Tier II capital TFC. The instrument has been issued for PKR 2,500mln on 28-Dec-21. The tenor of the instrument is up to 7 years and carries a profit rate of 6MK + 200bps p.a. The TFC would be subordinated to the payment of principal and profit, to other indebtedness of the Bank, including deposits, however senior to the claims of investors in instruments eligible for inclusion in Tier 1 Capital. Neither profit nor principal will be payable in respect of TFC, if such payment will result in a shortfall in the bank’s MCR or CAR. The bank may call the TFCs, with prior approval of SBP, after five years from the date of issue. The TFCs shall, if directed by the SBP, be fully and permanently converted into ordinary shares and/or have them immediately written off (partially or in full) upon the PONV Trigger Event. Major Principal Repayment (99.76%) would be paid in two equal semiannual instalments of (49.88%) each, in the last year.

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.