Press Release

JCR-VIS upgrades Short Term Rating of Sindh Bank Limited to A-1+

Karachi, June 28, 2013: JCR-VIS Credit Rating Co Ltd. (JCR-VIS) has upgraded the short term rating of Sindh Bank Limited (SBL) to ‘A-1+’ (A One Plus) from ‘A-1’ (A One). The medium to long term entity rating of SBL has been maintained at ‘AA-’ (Double A Minus) with a Stable Outlook.

Ratings take into account 100% holding of Government of Sindh (GoS) in SBL and its strong equity base. There has been rapid expansion in branch network of SBL that increased to 150 branches and 10 sub-branches by end 2012. Proportion of GoS deposits has declined notably from 78% at end Dec’11 to 21% lately. Concentration in deposit mix persists. An increasing branch network is likely to enhance market based access to deposits. The rating decision takes into account overall liquidity profile of the bank, which remains healthy with sizeable liquid assets carried on balance sheet vis-à-vis deposits & borrowings. Capital Adequacy Ratio (CAR) of the bank is also high at current levels, providing significant room for growth.

Sectoral and client concentration in the lending portfolio is on the higher side; some dilution may be achieved as the bank matures. SBL is largely engaged in short-term lending including seasonal working capital loans against pledge of stock to sugar mills. Long-term loans are provided only as part of syndicate financing. The bank has also engaged in agriculture financing although its proportion in overall financing is small. Investment portfolio largely comprises short term government securities that carry limited credit and price risk; risk arising on the remaining investments is also manageable.

Profitability of the bank improved on account of higher spreads in 2012 as SBL shed off high cost deposits. While cost of deposits has declined further, spreads have come under pressure in 1Q13 on account of higher fall in return on markup earning assets in line with decrease in the discount rate. On account of rapid expansion during 2012 with opening of 100 branches and 10 sub-branches, the efficiency ratio has remained under pressure, which will continue in the on-going year on account of full year impact of branches opened in 2012. Another 40 branches are planned to be opened in 2013; the bank is looking towards consolidation thereafter and increase in expenses going forward is projected to be controlled.

For further information on this rating announcement, please contact Mr. Javed Callea (Ext: 501) or Ms. Sobia Maqbool, CFA (Ext: 604) at 021-35311861-70 or fax to 021-35311873.

Jamal Abbas Zaidi
Deputy CEO

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 2013 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