Press Release

JCR-VIS Revises Ratings of Summit Bank Limited

Karachi, June 30, 2016: JCR-VIS Credit Rating Company Limited (JCR-VIS) has revised the entity ratings of Summit Bank Limited (Summit) from ‘A/A-1’ (Single A/A-One) to ‘A-/A-1’ (Single A Minus/A-One). Rating of the outstanding TFC-1 has also been revised from ‘A(SO)’ (Single A (Structured Obligation)) to ‘A-(SO)’ (Single A Minus (Structured Obligation)). Outlook on the outstanding ratings is ‘Stable’. The previous rating action was announced on June 30, 2015.

The assigned ratings to Summit incorporate commitment and demonstrated financial support of the bank’s major sponsor Suroor Investments Limited. In addition to equity injection of Rs. 7b in 2014 an additional Rs. 2b is being injected in the ongoing year in order to allow the Bank to achieve compliance with regulatory capital adequacy ratio (CAR) requirements and to improve the capital base for future growth. The Bank reported Tier-1 and overall CAR of 7.72% and 9.15%, respectively at end-March’2016. Risk adjusted capitalization levels of the Bank have room for improvement.

During 2015, additional liquidity was deployed in government securities with sovereign exposures by way of investments and advances represented 39% (2014: 28%) of the asset base. Non-earning assets in relation to assets and equity base of Summit were higher and had a drag on profitability. Credit risk emanating from the financing portfolio is sizeable as evident from net infection. However, enhanced monitoring and recovery efforts are being pursued for curtailment of infection, reduction in provisioning expense and for effective management of overall quality of the credit portfolio.

Given the depositor profile and liquid assets carried on the balance sheet, liquidity profile of Summit is adequate. While depositor concentration levels have increased, proportion of CASA in deposit mix was higher at around 70% at end-2015 and cost of deposits has declined. Focus on low cost deposits and aggressive re-profiling of saving deposits is being targeted to reduce cost of deposits in the ongoing year.

The Bank posted significant growth in profit before tax during 2015 on the back of sizeable capital gains on securities realized during the year. Furthermore, quantum of operating loss has also reduced and management has projected operating profitability for 2016. To achieve this, the management has targeted improvement in operating income based on increase in net interest income through reduction in deposit cost and volumetric growth in earning assets and fee based income avenues. Moreover, gain from sale of a property is also projected in the ongoing year which if materializes will support profitability and capitalization levels. JCR-VIS will continue to track progress against the budgeted targets communicated by the management.

For further information on this rating announcement, please contact the undersigned (Ext: 501) or Mr. Mohammed Khalid Ali (Ext: 508) at (+92-21) 35311861-70 or fax to (+92-21) 35311872-3.

Javed Callea

Applicable rating criterion: Commercial Banks Methodology - November 2015
Rating the Issue (Sept 2014)

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