Press Release

JCR-VIS Maintains Ratings of Summit Bank Limited

Karachi, June 30, 2017: JCR-VIS Credit Rating Company Limited (JCR-VIS) has maintained the entity ratings of Summit Bank Limited (SBL) at ‘A-/A-1’ (Single A Minus/A-One). Rating of the outstanding TFC-1 has also been maintained at ‘A-(SO)’ (Single A Minus (Structured Obligation)). Ratings have been placed on ‘Rating Watch-Developing’ status in view of the ongoing potential merger with another commercial bank. Previous rating action was announced on June 30, 2016.

The ratings assigned to SBL incorporate continued financial support of the bank’s major sponsor, Suroor Investments Limited (SIL). During the outgoing year, an additional Rs. 1,855m (including Rs. 1,158 m by SIL) was injected by the way of advance against capital in order to allow the Bank to achieve compliance with minimum capital requirements. During the outgoing year, SBL and another commercial bank decided to consider the potential merger of the two institutions, subject to approval of State Bank of Pakistan and applicable corporate and regulatory compliances. The regulatory details with respect to the merger are expected to be finalized within the upcoming quarter; ratings will be reviewed once the merger deal is executed and finalized structure of the transaction is made available. The regulatory short fall in capital adequacy ratio at end-2016 is expected to be resolved with the planned merger.

Deposit base of the bank witnessed a healthy growth in the outgoing year. With lower depositor concentration levels than the median of peers and sizeable liquid assets carried on the balance sheet, liquidity profile of SBL is considered adequate. Deposit mix of the bank has posted improvement, as reflected in growth in current accounts relative to end 2015 level alongside deposit cost which has also posted improvement. Focus on current and low cost deposits together with re-profiling of saving deposits is being targeted to further reduce cost of deposits in the ongoing year.

Liquidity generated during the year was mainly deployed in government securities. Non-earning assets of the bank, although declining year on year, remain on the higher side creating a drag on the bank’s earnings. Infection levels improved in 2016 mainly on the back of enhancement in financing portfolio as well as additional provisions undertaken during the year. Moreover, NPLs have also exhibited a slight decrease. Going forward, management plans to continue making aggressive recovery efforts for further reducing NPLs along with curtailment of infection. Maintaining sound underwriting policies would be important rating driver, going forward.

The Bank posted a loss before tax of Rs. 1.9b during 2016 mainly on account of sizeable provisioning. Furthermore, operating loss of the bank amounted to Rs. 1.2b (2015: Rs. 257m) for the year 2016. This increase in operating loss was due to fall in net interest income (NII) and increase in operating costs. However, there is a positive trend during 1Q17 with operating loss decreasing mainly due to improved earnings of the bank. Going forward, overall profitability has been projected to improve on account of expected improvement in operating results and gain on sale on the partial disposal of a property held on the balance sheet of the bank.

For further information on this rating announcement, please contact the undersigned (Ext: 201) at (+92-21) 35311861-70 or fax to (+92-21) 35311872-3.

Javed Callea

Applicable rating criterion: Commercial Banks Methodology - November 2015

Rating the Issue (Sept 2014)

Information herein was obtained from sources believed to be accurate and reliable; however, VIS Credit Rating Company Limited VIS does not guarantee the accuracy, adequacy or completeness of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information.VIS, the analysts involved in the rating process and members of its rating committee do not have any conflict of interest relating to the rating(s)/ranking(s) mentioned in this report.VIS is not an NRSRO and its credit ratings are not NRSRO credit ratings.VIS is paid a fee for most rating assignments. This rating/ranking is an opinion and is not a recommendation to buy or sell any securities. Copyright 2017 VIS Credit Rating Company Limited. All rights reserved. Contents may be used by news media with credit to VIS.

JCR-VIS Credit Rating Company Limited