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Karachi, June 30, 2014 (PPI-OT): JCR-VIS Credit Rating Company Limited has reaffirmed the entity ratings of Silk Bank Limited (SBL) at ‘A-/A-2’ (Single A Minus/A-Two). With issuance of Non-cumulative, Convertible Preference Shares in March 2013, SBL reported higher Capital Adequacy Ratio (CAR) of 7.7% at end-2013.
The bank is however still short of the minimum requirements pertaining to CAR and paid-up capital (net of losses), stipulated by the regulator. In this regard, management has indicated that developments are on-going to bring in fresh capital.
In view of this, ratings have been placed under ‘Rating-Watch Developing’ status. In addition to achieving compliance with the regulatory requirements, capital injection is also warranted to address the risks stemming from weak asset quality and to reinstate the risk profile of the bank.
While liquidity profile of the bank has been enhanced with an improvement in deposit mix and lower depositor concentration levels, there is room for further improvement in the same. Given the improvement in deposit mix, cost of deposits has also improved in the outgoing year.
During 1Q14, operating losses have been marginalized and bottom line was positive. Future profitability depends on realization of assumptions pertaining to capitalization, asset mix and quality. Asset mix has improved to some extent, with a decline in non-earning assets, though these still comprise almost one-fifth of total assets.
During 2013, the bank has broadened its segment wise financing exposures with growth witnessed in SME and consumer portfolio. Growth is planned to continue in the consumer segment which may allow the bank to sustain spreads in the backdrop of declining interest rates. Quality of fresh financings will be tested over time.
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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