PACRA Maintains the rating of JS Bank Limited | Tier II TFC | 3.5bln | Aug-23

The assigned ratings of JS Bank Limited's (“JSBL” or the “Bank”) reflect its consolidated position following the majority stake of the BankIslami Pakistan Limited. The strengthened position marked the Bank as one of the Country’s fastest-growing financial institutions. The positive fundamentals of the Islamic banking industry in general also lend support to the ratings. On a consolidated basis, JSBL has retained its market share of 4% (CY23: 4%) based on customer deposits. JSBL, a tech-driven mid-sized Bank, is stabilizing its market position by leveraging its regional presence and diverse product offerings. The Bank has increasingly gained a tech-savvy image, while continuously augmenting its futuristic layout. It has heavily invested in its digital services; "Zindigi," has become a hallmark of the Bank’s digital presence. In CY24, Zindigi's throughput rose 42% to PKR 206bln, deposits hit PKR 6.7bln, and downloads grew 31% to 12.3mln. During CY24, the Bank’s gross performing advances increased to PKR 226.4bln (CY23: PKR 197.6bln) primarily attributable to individuals, financial and textile sectors. However, gross NPLs increased to PKR 21.3bln (CY23: PKR 16.2bln), leading to a rise in the infection ratio to 8.6% from 7.6% YoY basis. The investment is composed of govt. securities, with a tilt towards floating-rate instruments. JSBL shows solid growth in its deposit, which increased to PKR 525bln in CY24 (CY23: PKR 486bln), reflecting improved customer acquisition and retention. As of CY24, the equity stood at PKR 43.7bln (CY23: PKR 40.3bln) with CAR at 13.24% (CY23: 12.53%). During CY24, the Bank’s net markup income recorded an increase of 22% to stand at PKR 27.3bln (CY23: PKR 22.4bln), attributable to a sizeable increase in markup earned recorded at PKR 109bln (CY23: PKR 92bln). The Bank’s non-markup income contracted to PKR 11.3bln in CY24 (CY23: PKR 12.2bln), primarily driven by a substantial decline in foreign exchange earnings to PKR 3.3bln from PKR 5.8bln. While dividend improved to PKR 2.3bln (CY23: PKR 1.8bln), it was insufficient to counterbalance the drop in FX gains. Additionally, provisions escalated to PKR 4.7bln, up from PKR 2.8bln on YoY basis. Consequently, the bottom line witnessed a dip to PKR 2.8bln (CY23: PKR 4.3bln) signaling a need for greater income diversification and a more resilient non-core revenue mix to sustain profitability.
The ratings depend on upholding asset quality, maintaining its share of advances and deposits in the banking sector, adding diversity to the income stream while maintaining a cushion in CAR, and a strong governance framework are critical.

About the Entity
JSBL incorporated in March 2006, commenced its banking operations on Dec 30, 2006. JSBL is a subsidiary (~71.21%) of JSCL, whereas the rest is widely spread. The overall control of the Bank vests in the Board including the CEO. Mr. Basir Shamsie joined as CEO in July 2018. He possesses work experience of more than 33 years, primarily in the banking sector.

About the Instrument
The Bank has issued a Privately placed, Unsecured, Subordinated Tier 2 TFC ("TFC") for PKR 3.5bln on Aug 30, 2023 to contribute towards JSBL’s Tier 2 Capital. The tenor of the TFC is 10 years and carries a profit rate of 3MK+2%. The TFC is subordinated to the payment of principal and profit, to other indebtedness of the Bank, including deposits, but rank pari passu with other Tier 2 and superior to ADT1 instruments. The Bank may call the TFCs, with prior approval of SBP, after five years from the date of issue. Neither profit nor principal will be payable if such payment will result in a shortfall in the Bank’s MCR or CAR. The TFCs shall, if directed by the SBP, converted into ordinary shares and/or have them immediately written off (partially or in full) upon the PONV Trigger Event. The latest payment (Principal+Interest) of PKR 122mln has been made at the end of May 28, 2025.