Press Release

JCR-VIS Reaffirms Entity Ratings of Sindh Bank Limited

Karachi, June 30, 2015: JCR-VIS Credit Rating Company Ltd. (JCR-VIS) has reaffirmed the entity ratings of Sindh Bank Limited (SBL) at ‘AA/A-1+’ (Double A/A-One Plus). Outlook on the assigned ratings is ‘Stable’. The previous rating action was announced on December 23, 2014.

SBL is a wholly owned entity of the Government of Sindh (GoS) through its Finance Department. Core earnings of SBL posted significant growth during FY14 on the back of an expanding resource base; profitability is expected to remain strong in the on-going year as well as the bank continues to grow in addition to its holding of long term fixed rate bonds, which will support return on assets. Equity to total assets, while declining over time, has remained adequate; further to an initial paid-in capital of Rs. 10b, the capital base of the bank has augmented over time on the back of retained earnings. Capital level is considered adequate to absorb further growth as laid down in the business plan. Stand-alone financial risk profile of the institution is also considered largely sound; the strong liquidity and capitalization indicators are balanced by the high levels of concentration in both the deposit and loan books of the bank.

Advances portfolio features client and sector wise concentration; broadening of customer relationships is warranted to spread out the risk exposures. Going forward, lending strategy of the bank envisages increased penetration in the SME sector while commodity related exposure is expected to remain sizeable. While increasing on a timeline basis, the reported non-performance in the advances portfolio has remained under 1%. Moreover, the bank has created sizeable amount of general provisions to absorb future credit losses.

The current deposit mix features high level of concentration while the deposit cost is also relatively high. In line with its strategic plan, the bank continued to expand its footprint, with 25 new branches (20 conventional and 5 Islamic) set up during FY14 and further 25 branches (17 conventional and 8 Islamic) to be added in 2015. This is likely to contribute positively to the bank’s ability to pursue broad based growth in deposits over time. Meanwhile, the high cost of deposits may partly be attributable to an increasing share of GoS deposits, which are priced at higher level; deposits from GoS represented around one-fourth of the overall deposit base.

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

Javed Callea
Applicable Rating Criteria: PRIMER - Commercial Banks (December 2001)

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 2015 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