Press Release

JCR-VIS reaffirms ratings of National Bank of Pakistan at AAA/A-1+

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Karachi, June 28, 2016: JCR-VIS Credit Rating Company Limited (JCR-VIS) has reaffirmed the entity ratings of National Bank of Pakistan (NBP) at ‘AAA/A-1+’ (Triple A/A-One Plus) with ‘Stable’ Outlook. The previous rating action was announced on June 30, 2015.

The assigned ratings are driven by the bank’s ownership structure with majority shares held by the Government of Pakistan (GoP) in addition to which security of deposits is guaranteed under the Banks’ Nationalization Act. The assigned ratings also take into account NBP’s role in handling treasury transactions for the GoP as an agent to the State Bank of Pakistan (SBP).

The rating also reflects the bank’s positioning as the second largest bank in the country having market share of 13.1% (CY14: 13.4%) in domestic deposits. Additionally, increase in deposits was driven by growth in remunerative current, saving accounts and financial institution deposits. Going forward, the bank plans to focus on increasing CASA ratio through improved alternative delivery channels and customer services.

Maturing Pakistan Investment Bonds (PIBs) and declining interest rate environment narrowed spreads to 3.2% (CY14: 3.4%). However, net interest income grew to Rs. 53.7b (CY14: Rs. 45.8b) on the back of volumetric growth. Given compression in spreads, the bank reported net profit of Rs. 19.2b (CY14: Rs. 15.0b) largely on account of increase in income from investments. Going forward, management plans to pursue aggressive growth in low cost deposits and increase financing in high yielding segments while focusing on recoveries to augment profitability levels.

Net worth featured reduction on account of decrease in surplus on revaluation of assets. However, reduction in risk weighted assets led to higher capital adequacy ratio. Improvement in capitalization indicators is considered important to maintain growth at sound capitalization levels.

For further information on this rating announcement, please contact the undersigned (Ext: 501) or Mr. Mohammed Khalid Ali (Ext: 508) at 35311861-70 or fax to 35311872-3.

Javed Callea

Applicable rating criterion: Commercial Banks Methodology - November 2015

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 2016 VIS Credit Rating Company Limited. All rights reserved. Contents may be used by news media with credit to VIS.

JCR-VIS Credit Rating Company Limited