Press Release

JCR-VIS Reaffirms Ratings of Dubai Islamic Bank Limited

Karachi, June 29, 2018: JCR-VIS Credit Rating Company Limited (JCR-VIS) has reaffirmed the entity ratings of Dubai Islamic Bank Pakistan Limited (DIBPL) at ‘AA-/A-1’ (Double A Minus/A-One). Rating of the Tier II Sukuk instrument (Sukuk I) has also been reaffirmed at ‘A+’ (A Plus). Outlook on the assigned ratings is ‘Stable’. The previous entity and instrument rating actions were announced on May 17, 2017 and September 5, 2017, respectively.

The assigned ratings incorporate strong profile of the sponsor, Dubai Islamic Bank (DIB), the largest Islamic bank operating in United Arab Emirates. DIB has been rated ‘A/A-1’ (Single A/A-One) on the international scale by Islamic International Rating Agency (IIRA). Ratings also draw support from sound asset quality indicators, satisfactory capitalization and efficient cost of funds. Liquidity management, while being adequate, may need to be further strengthened with the growing asset base along with a reduction in concentration level in the deposits.

The management adopted a growth strategy in 2017 as sizeable increase was witnessed in the financing portfolio. With focus on increasing yield, majority of the growth was undertaken in high yielding consumer and commercial segments. The yield on corporate portfolio also showed increasing trend. Asset quality indicators of the bank witnessed improvement on the back of slight reduction in non-performing loans and sizeable increase in advances portfolio.

Capitalization indicators of the bank strengthened during the outgoing year due to injection of additional capital, retention in profits, issuance of Tier II Sukuk and controlled growth in risk weighted assets (RWAs). Resultantly, overall CAR of the bank improved to 13.4% (2016: 11.2%) at end-2017. On the deposits front, a considerable increase was witnessed in the quantum of fixed deposits; hence, proportion of the same in overall deposit mix increased on year-on-year basis. The bank remains compliant with the regulatory requirements of Liquidity Coverage Ratio and Net Stable Funding Ratio. However, the liquidity profile of the bank needs to be strengthened in terms of proportion of liquid assets in relation to deposits and borrowings and granularity in deposit base.

Profitability of the bank was reported higher in Q1’18 and 2017 vis-à-vis the corresponding periods in the preceding year. This increase was primarily attributed to volumetric growth in average earning assets resulting in higher topline and controlled growth in expenses of the bank. Spreads of the bank were also reported higher on the back of growth in corporate, commercial and consumer segments. Going forward, the ratings are underpinned by the projected improvement in profitability and efficiency.

For further information on this rating announcement, please contact the undersigned (Ext: 201) at 92-21-35311861 or fax to 92-21-35311873.

Javed Callea

Applicable Rating Criteria: Commercial Banks Methodology - March 2018

Information herein was obtained from sources believed to be accurate and reliable; however, JCR-VIS Credit Rating Company Limited JCR-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.JCR-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.JCR-VIS is not an NRSRO and its credit ratings are not NRSRO credit ratings.JCR-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 2018 JCR-VIS Credit Rating Company Limited. All rights reserved. Contents may be used by news media with credit to JCR-VIS.

JCR-VIS Credit Rating Company Limited