JCR-VIS Upgrades Entity Ratings of Burj Bank Limited

Karachi: JCR-VIS Credit Rating Company Ltd. (JCR-VIS) has upgraded the entity ratings of Burj Bank Limited (formerly Dawood Islamic Bank Limited) (BBL) from ‘A-/A-2’ (Single A Minus /A-Two) to ‘A/A-2’ (Single A/A-Two) with a ‘Stable’ Outlook.

In line with sponsors’ commitment to inject fresh capital into the institution by June 30, 2011, paid-capital of the bank (net of losses) has been enhanced to Rs. 6b. Shareholding pattern has changed post-rights issue, as expected. Ratings assigned to BBL incorporate the strength arising from Islamic Corporation for Development of the Private Sector (ICD), now one of the largest shareholders and also the key driver of future business strategy.

While the bank is still short of the regulatory capital requirement of Rs. 7b that was required to be met by end-December 2010, capital adequacy ratio is comfortably higher than the regulatory minimum, providing the bank with significant potential to grow without compromising its risk profile. The bank has also received regulatory relaxation in this respect.

In a bid to reposition itself under a new brand identity and develop its franchise value, the bank has changed its name recently. Profitability indicators have showcased improvement vis-à-vis FY10, with the bank posting net profit for the first time in the last two and a half years, with significant impetus received from reduced loan losses.

Deposit volumes witnessed growth during first half FY11, however deposit cost remains on the higher side. Developing depositors’ profile both in terms of cost effectiveness and mix will continue to be tracked by JCR-VIS.

Given the change in ownership structure, changes in Board composition are on the anvil for adequate representation of majority shareholders. Furthermore, appointment of independent directors is targeted to be achieved by end-2011. The bank may benefit from a more stable Board composition for effective Board oversight.

For more information, contact:
Mr. Javed Callea
Advisor
JCR-VIS Credit Rating Company Limited
Tel: +9221 35311861 (10 lines) (Ext: 501)
Fax: +9221 35311872-3
E mail: javed.callea@jcrvis.com.pk

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