PACRA Maintains the Rating of BankIslami Pakistan Limited | ADT-1 Modaraba Sukuk I | PKR 2 Bln| Apr-20

BankIslami Pakistan Limited (BIPL) is the first Islamic commercial bank to receive an Islamic banking license in Pakistan. The Bank has demonstrated remarkable growth over the last couple of years in areas crucial to the risk profiling of any commercial bank. During CY23, the Bank underwent a significant change in ownership, JS Bank Limited, one of the sponsor shareholders of the Bank, elevated its shareholding to 75.12% and became the Parent company of the Bank, making BankIslami an integral part of the JS Group. At end-Dec23, the deposit base of the bank grew by 26% to stand at PKR 522.5bln (end-Dec22: PKR 415.9bln) with a large contribution from current and term deposits. The deposit growth is in line with the Bank's strategy to bring the sticky deposits and firm up the balance sheet. BIPL's net advances have increased by 14% to stand at PKR 230bln (end-Dec22: 201bln) with the intact infection ratio, reflective of sustained asset quality. During CY23, the profit after taxation strengthened to PKR 11bln (CY22: PKR 4.4bln) attributable to enhanced gross return witnessing an increase of 100% YoY to stand at PKR 92.8bln (CY22: PKR 46.3bln). The Bank is actively working on growing the trade business which would ultimately facilitate in CA growth. At end-Dec23, the CAR of the bank enhanced to 23.8% (end-Dec22: 17.9%) indicating sufficient growth cushion for the bank.
The rating incorporates the bank's ability to strengthen its market position in its peers with improved risk management. The recent transformation in the ownership structure adds value to the ratings. However, the improvement in the asset quality will remain significant.

About the Entity
BIPL, commenced operations in Apr-06 and is listed on PSX. The bank has 440 branches as of end-Dec23. BIPL is a subsidiary (75.12%) of JS Bank Limited. Mr. Ali Hussain holds 12.53% of the Stake including 1.95% shares held through SAJ Capital Management Ltd; while the remaining stake is widely spread. BIPL’s eight-member board of directors including the CEO constitutes representatives of sponsoring groups and independent directors. During CY23, Mr. Suleman Lalani, Group President of Jahangir Siddiqui & Co. Limited, appointed as the Chairman of the Board, succeeding Mr. Ali Hussain. Mr. Rizwan Ata has become the President & CEO. While Mr. Imran Haleem Shaikh has been appointed as the Deputy CEO of BIPL.

About the Instrument
BankIslami issued fully paid up, rated, listed, perpetual, unsecured, subordinated, non-cumulative and contingent convertible listed modaraba Sukuk certificates (“Sukuk”). The issue amount of PKR 2bln. The tenor of the instrument is perpetual and carries a profit rate of 3MK + 2.75%. The profit is being paid monthly in arrears on the outstanding principal amount on a non-cumulative basis. The amount raised is part of BIPL's Additional Tier 1 Capital for capital adequacy ratio as per guidelines set by SBP. Neither profit nor principal will be payable in respect of Sukuk, if such payment will result in a shortfall in the bank’s MCR or CAR. The bank may call the Sukuks, with prior approval of SBP, after five years from the date of issue.