Press Release

Ratings of Silk Bank Limited

Karachi, June 29, 2013: JCR-VIS Credit Rating Company Limited has reaffirmed the medium to long term entity rating of Silk Bank Limited (Silk) at ‘A-’ (Single A Minus). Short term rating has been upgraded from ‘A-3’ (A-Three) to ‘A-2’ (A-Two). ‘Rating Watch-Developing’ status assigned in February 2011 has been removed. Outlook on the assigned ratings is now ‘Stable’.

With issuance of Non-cumulative, Convertible Preference Shares (PNCPS) in March 2013, Capital Adequacy Ratio (CAR) of the bank improved to 8.25%. Further capital injection is required to achieve compliance with the CAR and minimum capital requirement set by the regulator. Liquidity profile of Silk witnessed some support from the capital inflow; liquid reserves in relation to deposits & borrowings may be augmented further to maintain a comfortable liquidity position.

On the lending side, the bank has broadened its segment wise exposures, and growth is projected to be achieved in consumer and SME segments. Such high margin products may allow the bank to sustain spreads in a declining interest rate environment. Portfolio quality may need to be monitored closely. Cost of deposits has trended downwards in the on-going year.

The bank carries a sizeable amount of non-earning assets on its balance sheet, including deferred tax assets and properties acquired in settlement of non-performing loans. Given that considerable time and effort is required to redeploy OREO properties as earning assets, the bank has not been able to fully realize the benefit of recoveries. Meaningful progress in this regard is projected to be achieved during the on-going year. The bank reported loss during 2012. The bank is striving to achieve operational break even on a monthly basis in the on-going year.

For further information on this rating announcement, please contact the undersigned (Ext: 408) or Ms. Sobia Maqbool, CFA (Ext: 604) at 35311861-70 or fax to 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