Karachi, June 28, 2016: JCR-VIS Credit Rating Company Ltd. (JCR-VIS) has reaffirmed the entity ratings of Sindh Bank Limited (SNDB) at ‘AA/A-1+’ (Double A/A-One Plus). Outlook on the assigned ratings is ‘Stable’. The previous rating action was announced on June 30, 2015.
The ratings assigned to SNDB take into account the shareholding structure with the bank being a wholly owned company of Government of Sindh. Ratings also draw support from healthy capitalization levels and adequate liquidity profile of the Bank. Profitability of SNDB has also improved in the outgoing year despite higher general provisions.
During 2015, additional funds generated by way of an increasing deposit base were primarily deployed in Pakistan Investment Bonds (PIBs). Resultantly, investment portfolio of the bank represents over half of the asset base. While PIB portfolio has a sizeable revaluation surplus, their duration carries market risk.
On the financing front, the management has reduced portfolio concentration, which remains sizeable, by diversifying into other sectors. Reported infection in the portfolio has increased on a timeline basis with performing portfolio including clients with weak risk profiles. The management has undertaken sizeable general provisions over and above regulatory requirement to cover for future loan losses. Going forward, bank’s focus will be on increasing advances portfolio while proportion of investments in total assets is projected to decline.
Deposit base of the bank witnessed sizeable growth in the outgoing year with decline noted in the proportion of GoS deposits. Growth has been noted in the proportion of fixed deposits while CASA has declined on a timeline basis; depositor concentration continues to be on the higher side. These areas are planned to be addressed, going forward.
Over the last four years, SNDB has pursued aggressive branch expansion with 200 branches added during the period. Resultantly, branch network increased to 250 branches. A more steady branch expansion is planned from 2016 onwards. Listing process of the Bank is planned to be completed in the ongoing year which is expected to strengthen capitalization levels and improve governance framework.
For further information on this rating announcement, please contact the undersigned (Ext: 508) or or Mr. Javed Callea (Ext: 501) at 021-35311861-71 fax to 021-35311873.
Mohammed Khalid Ali
Applicable rating criterion:Commercial Banks Methodology - November 2015 http://www.jcrvis.com.pk/Images/Meth-CommercialBanks201511.pdf
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