Karachi, June 30, 2016: JCR-VIS Credit Rating Company Limited has maintained the entity ratings of Al-Baraka Bank (Pakistan) Limited (ABPL) at ‘A/A-1’ (Single A/A-One), outlook has been placed under ‘Rating Watch Developing’ status. The previous rating action was announced on June 29, 2015.
Assigned ratings of ABPL derive strength from its association with the Al-Baraka Banking Group (ABG); a prominent Islamic Banking Group having diversified operations in 15 countries. ABG has demonstrated financial support to ABPL in the form of sub-ordinated loan; the same is to be counted towards ABPL’s minimum capital requirement (MCR), as per the capitalization plan approved by State Bank of Pakistan (SBP). ABPL is in process of evaluating the acquisition/merger of a local bank in the ongoing year, subject to regulatory approval of SBP. The proposed acquisition/merger is expected to strengthen the capitalization indicators of ABPL along with extended market outreach.
During CY15, growth in financing portfolio was restricted in order to keep CAR within required level prescribed by SBP. Recoveries against non-performing financing (NPF) resulted in improvement in portfolio quality indicators. Given the reduction in NPF, gross and net infection exhibited slight decrease. Further, reduction in risk concentration is aimed to be achieved by way of growth in commercial and SME segments. Liquidity profile of ABPL remains adequate in view of the quantum of liquid assets carried on balance sheet in relation to deposits and borrowings. As part of management strategy to reduce cost of funds, ABPL has shed high cost deposits. On the other hand, there was notable increase in current and saving accounts (CASA) to total deposits ratio.
Despite declining discount rates, profitability posted improvement in the outgoing year on account of higher spreads resulting from decline in cost of deposits. In order to improve profitability, ABPL plans to continue focus on generating low cost deposits through increase in CASA.
For further information on this rating announcement, please contact the undersigned (Ext: 501) or Mr. Mohammed Khalid Ali (Ext: 508) at 35311861-71 or fax to 35311872-3.
Applicable rating criterion: Commercial Banks Methodology - November 2015
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