JCR-VIS maintains entity ratings of Dubai Islamic Bank Pakistan Limited

Karachi, June 30, 2015 (PPI-OT): JCR-VIS Credit Rating Company Ltd. has maintained the entity ratings of Dubai Islamic Bank Pakistan Limited (DIBPL) at ‘A+/A-1’ (Single A Plus/A-One). Outlook on the assigned rating has been revised from ‘Stable’ to ‘Positive’. The previous rating action was announced on June 30, 2014.

Ratings assigned to DIBPL take into account the strong franchise of the institution given its association with Dubai Islamic Bank (DIB), the largest Islamic bank operating in United Arab Emirates. Islamic International Rating Agency has assigned ratings of ‘A/A-1’ (Single A/A-One) to DIB on the international scale. Parent support has been witnessed over time both in the form of financial support and technical knowledge transfer.

Ratings also draw strength from the standalone financial profile of DIBPL reflected by solid funding base largely comprising cost effective retail deposits, sound asset quality indicators, increasing core earnings and bank’s moderate risk appetite.

Liquidity profile remains comfortable; the bank has a well diversified deposit mix in addition to which its cost of deposits is one of the lowest in the overall banking sector. The management remains focused on pursuing broad based growth in deposits in a cost effective manner.

Market share of DIBPL in terms of deposits of Islamic banking industry stood at 7.8% at end-FY14 while it was 1% in relation to overall banking sector deposits. Approaching maturities of GoP Ijarah Sukuk in the back drop of no fresh issuance since June 2014 is likely to pose liquidity management challenges for Islamic banks.

Financing portfolio of DIBPL depicted healthy growth during FY14 as a number of new mid tier corporate clients were tapped; overall risk appetite remained moderate. Consumer portfolio continues to grow along with additions in product offering; however its share in overall financing has trended downwards.

Financing activities are projected to continue to grow at an accelerated pace in the coming years; improving overall economic environment may facilitate the bank in achieving these targets. Asset quality indicators have so far remained sound; quality of fresh financing will be tested over time as the portfolio seasons.

In line with banking industry, profitability of DIBPL improved in FY14. Positive momentum in earnings is important to meet the minimum capital requirement through internal capital generation. The amount raised through subordinated debt, as an interim arrangement, is placed in a non-remunerative account with the State Bank of Pakistan (SBP).

For more information, contact:
Ms. Sobia Maqbool
CFA
JCR-VIS Credit Rating Company Limited
VIS House, 128/C,
25th Lane off Khayaban-e-Ittehad,
Phase VII, DHA, Karachi
Tel: +92-21-35311861-72
Fax: +92-21-35311873
Email: sobia@jcrvis.com.pk

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