Pakistan Credit Rating Agency LimitedMaintains Entity Ratings of BankIslami Pakistan Limited

Lahore, December 13, 2017 (PPI-OT):The ratings reflect BankIslami’s established position in the country’s Islamic banking space. With the acquisition of defunct KASB Bank in May 2015, BankIslami’s system share in deposits improved (6MCY17: 1.2%). Post-acquisition, BIPL had faced significant withdrawal of deposits, owing to removal of moratorium imposed on defunct KASB Bank. However, same was managed successfully. Moreover, this acquisition resulted in i) increase in footprint, ii) deposit base, and iii) strategic investment book.

The Bank also inherited carried forward tax losses and a sizeable portfolio of non-performing assets; that has its own challenges. To compensate the Bank for negative net worth of the defunct KASB Bank, it was also provided low cost subordinated loan facility from SBP; supporting Bank’s revenue and CAR. Although BankIslami has enhanced deposit base, yet risk of withdrawal from key depositor acquired through amalgamation (representing 12% in total deposit) remains. Given time required to fully absorb defunct KASB Bank related costs, operational performance is yet to stabilize.

Meanwhile, recoveries from non-performing loans is essential. The management, while synergizing on enhanced outreach intends to pursue growth. The ratings require sustainable improvement inBankIslami’s operational performance, in turn, maintaining positive trend in bottom-line. At the same time maintaining a strong capital adequacy while pursuing growth is important. Any downward spiral in profits, or incidence of non-performing assets with consequent impact on equity may negatively impact the ratings. Meanwhile, ratings remain on Watch to monitor profitability from core operations and manage any unforeseen issues related to defunct KASB Bank.

For more information, contact:
The Pakistan Credit Rating Agency Limited (PACRA)
Awami Complex, FB1, Usman Block New Garden Town,
Lahore – Pakistan
Tel: +9242 586 9504 -6
Fax: +9242 583 0425

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