Press Release

JCR-VIS Upgrades Ratings of Summit Bank Limited
 

Karachi, December 26, 2014: Following the receipt of Rs. 7b as advance against right shares transaction, which has allowed Summit Bank Limited (SBL) to achieve compliance with the minimum capital requirement of Rs. 10b stipulated by the State Bank of Pakistan in addition to achieving Capital Adequacy Ratio above 10%, JCR-VIS Credit Rating Company Limited (JCR-VIS) has upgraded the entity ratings of Summit Bank Limited to ‘A/A-1’ (Single A/A-One) from ‘A-/A-3’ (Single A Minus/A-Three). Rating of the outstanding TFC-1 has also been upgraded to ‘A(SO)’ (Single A (Structured Obligation)) from ‘A-(SO)’ (Single A Minus (Structured Obligation)). Rating Watch-Developing status assigned to the ratings has been removed. Outlook on the outstanding ratings is now ‘Stable’. The previous rating action was announced on June 30, 2014.

Turnaround in operational performance and demonstrated financial support of shareholders are key factors in the assigned ratings. JCR-VIS expects the equity injection to provide further impetus to the management’s efforts to achieve improvement in operational performance. The bank is projecting meaningful improvement in earnings in the coming years. Liquidity indicators have also been reinforced by the equity injection while the impact of non-performing assets has diluted. Net NPLs in relation to tier-1 capital have reduced on the back of both enhanced capitalization and reduction in NPLs. Reduction in NPLs is reflective of management’s strong focus on recoveries. Management is projecting net infection to decline from 6.5% at end-September 2014 to under 2.5% by end FY17. JCR-VIS will track progress against budgeted targets communicated by the management.

Future strategy of the bank entails provision of Shariah compliant financial solutions and accordingly a phased conversion into an Islamic Bank is underway, with the process expected to be completed in year 2017. The Islamic banking industry has been growing at a faster pace than the conventional banking sector in recent years, with significant potential going forward as well. Competition in this market segment is likely to increase and further development on the product side may be warranted, in addition to tools for deployment of excess liquidity. Ability of SBL to continue to grow its asset book during the conversion phase will be important to achieve the projected financial indicators.

For further information on this rating announcement, please contact Mr. Javed Callea (Ext: 501) or Ms. Sobia Maqbool, CFA (Ext: 604) at (+92-21) 35311861-70 or fax to (+92-21) 35311872-3.


Jamal Abbas Zaidi
Deputy CEO

Applicable rating criterion: Methodology: Commercial Banks (Dec 2001)
Rating the Issue (September 2014)

________________________________________________________________________________________________________________________________
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