The Pakistan Credit Rating Agency Limited
Press Release


Madiha Sohail

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PACRA Assigns Preliminary Rating to JS Bank Limited | Tier 2 TFC | PKR 4bln | TBI

Rating Type Debt Instrument
(12-Jun-23 )
Action Preliminary
Long Term A+
Short Term -
Outlook Stable
Rating Watch -

The ratings reflect the relative position of JS Bank in the country's competitive banking landscape. Funding base comprises of borrowings and deposits. 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 investment book of the Bank increased by 6% to PKR 302bln as at end Dec'22 (Dec'21: PKR 228bln). Owing to policy rates hike the Bank offloaded a part of its investments in Government Securities resulting in a loss of PKR 494mln during 1QCY23. The Bank Non-performing loans increased by 17% from PKR 13.9bln at end Dec'21 to PKR 16.3bln at end Dec'22 (Mar'23: PKR 15.8bln). Going forward, the management will focus on improving coverage NLPs and recoveries. While the lending activities during CY22 remained limited, resulting in 8.56% reduction in Gross Advances portfolio. During CY22, the Bank reported a PBT of PKR 2.1bln (PAT: PKR 965mln) as compared to PBT PKR 2.2bln (PAT: PKR 1.3bln) last year. While during 1QCY23, the Bank reported a PBT of PKR 1.5bln (PAT: PKR 856mln) as compared to PBT PKR 674mln (PAT: PKR 410mln) during 1QCY22. As at Dec'22 the CAR stood at 13.26% (Dec'21: 13.77%, Mar'23: 13.51%). In order to improve its CAR further, the Bank is going to issue Tier-2 TFC amounting to PKR 4bln near Jun'23 end. While during the year, the Bank made a public announcement of its intention to acquire a controlling stake in BankIslami Pakistan Limited which would add value to the Bank's CET. The bank expects to boost profits by growing direct and ancillary business.
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, 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.

About the Instrument
The Bank is going to issue privately placed, unsecured, subordinated Tier 2 TFC amounting to PKR 4bln (inclusive of green shoe option of PKR 1bln) to contribute towards JSBL’s Tier 2 Capital. The tenor of the instrument would be 10 years and carries a profit rate of 3MK+2%. The TFC would be subordinated to the payment of principal and profit, to other indebtedness of the Bank, including deposits, but rank pari passu with other Tier 2 instruments and superior to ADT1 instruments. 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.

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.