Press Release

VIS Reaffirms Entity Ratings of Zarai Taraqiati Bank Limited

Karachi, June 30, 2020: VIS Credit Rating Company Limited (VIS) has reaffirmed entity ratings of ZTBL at ‘AAA/A-1+’ (Triple A/A-One Plus). The medium to long-term rating of ‘AAA’ denotes highest credit quality, with negligible risk factors, being only slightly more than for risk-free debt of Government of Pakistan (GoP). The short-term rating of ‘A-1+’ denotes highest certainty of timely payment, liquidity factors are outstanding and safety is just below risk free short-term obligations of Government of Pakistan. Outlook on the assigned ratings is ‘Stable’. The previous rating action was announced on June 26, 2019.

The ratings assigned to ZTBL take into account the implicit support of GoP being the sole shareholder of the bank and its guarantee on the deposits of the bank. The ratings incorporate the fundamental role of ZTBL in the overall ecosystem of the country since the bank remains the principal development financial institution used as an agricultural financing arm by GoP. However, the financial risk profile of the bank has been adversely impacted during the outgoing year owing incidence of sizable non-performing loans (npls) leading to substantial equity erosion. The bank’s profitability has also been severely affected by increasing provision requirement primarily as an outcome of progression of npls to subsequent loss categories. The ratings factor in improvement in liquidity profile and increasing trend in spreads; the latter is a function of change in loan pricing strategy, which now pertains to floating pricing regime as opposed to fixed pricing in previous years. It is expected that with Board of Directors becoming functional in the near term, strategic level goal-setting can be achieved.

With the advent of global corona virus pandemic and the following lockdown, the small to medium agri-credit borrowers and especially those in urban areas will have a further reduced capacity of meeting obligations. The ratings take into account SBP’s relaxation on repayment terms for borrowers by giving a blanket extension of one year; however, VIS expects that the same will only stagger the infection ratios, which will eventually come forth by end-FY21. Also the liquidity management may pose challenges in the backdrop of collections being reduced due to loans payment deferment and outstanding deposit liability. Going forward, ratings are dependent on undaunted support of the government in keeping the financial profile of the bank aligned with its objectives and providing the needed funding support to meet timely all its obligations. Moreover, the bank meeting recovery targets, improving asset quality indicators, strengthening deposit profile and retaining buffer over regulatory capital requirement are also important rating drivers.

For further information on this rating announcement, please contact Ms. Maham Qasim (042-25723411-13, Ext: 8005) or the undersigned at 021-35311861-70 or email at

Faryal Ahmad Faheem
Deputy CEO

Applicable rating criterion: Government Supported Entities (June 2016);

Information herein was obtained from sources believed to be accurate and reliable; however, VIS Credit Rating Company Limited (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.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.VIS is not an NRSRO and its credit ratings are not NRSRO credit ratings.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 2020 VIS Credit Rating Company Limited . All rights reserved. Contents may be used by news media with credit to VIS .

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