Press Release

Ratings of Silk Bank Limited

Karachi, June 30, 2014: JCR-VIS Credit Rating Company Limited has reaffirmed the entity ratings of Silk Bank Limited (SBL) at ‘A-/A-2’ (Single A Minus/A-Two).

With issuance of Non-cumulative, Convertible Preference Shares in March 2013, SBL reported higher Capital Adequacy Ratio (CAR) of 7.7% at end-2013. The bank is however still short of the minimum requirements pertaining to CAR and paid-up capital (net of losses), stipulated by the regulator. In this regard, management has indicated that developments are on-going to bring in fresh capital. In view of this, ratings have been placed under ‘Rating-Watch Developing’ status. In addition to achieving compliance with the regulatory requirements, capital injection is also warranted to address the risks stemming from weak asset quality and to reinstate the risk profile of the bank.

While liquidity profile of the bank has been enhanced with an improvement in deposit mix and lower depositor concentration levels, there is room for further improvement in the same. Given the improvement in deposit mix, cost of deposits has also improved in the outgoing year. During 1Q14, operating losses have been marginalized and bottom line was positive. Future profitability depends on realization of assumptions pertaining to capitalization, asset mix and quality.

Asset mix has improved to some extent, with a decline in non-earning assets, though these still comprise almost one-fifth of total assets. During 2013, the bank has broadened its segment wise financing exposures with growth witnessed in SME and consumer portfolio. Growth is planned to continue in the consumer segment which may allow the bank to sustain spreads in the backdrop of declining interest rates. Quality of fresh financings will be tested over time.

For further information on this rating announcement, please contact Mr. Jamal Abbas Zaidi (Ext: 408) or Ms. Sobia Maqbool, CFA (Ext: 604) at 35311861-70 or fax to 35311873.

Abdur Rahim

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 2014 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