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JCR-VIS reaffirms entity ratings of Al Baraka Bank (Pakistan) Limited at A/A-1

Karachi, June 30, 2014 (PPI-OT): JCR-VIS Credit Rating Company Limited has reaffirmed the entity ratings of Al Baraka Bank (Pakistan) Limited (ABPL) at ‘A/A-1’ (Single A/A-One). Outlook on the assigned ratings is ‘Stable’.

Assigned ratings of ABPL derive strength from its association with the Al-Baraka Banking Group; a prominent Islamic Banking Group having diversified operations in 15 countries. During 2013, Al Baraka Islamic Bank B.S.C. (C), Bahrain, the major sponsor of ABPL, has made available Rs. 1.16b (USD 11m) in the form of subordinated loan, to be counted towards ABPL’s minimum capital requirement, which reflects positively on the sponsor’s commitment towards operations in Pakistan.

This amount has been placed in a non-earning foreign currency deposit account with the State Bank of Pakistan (SBP). As per ABPL’s capitalization plan, an additional Rs. 1.65b of subordinated debt is to be made available over the course of the next two years. In order to achieve compliance with CAR requirement of 16%, ABPL is in the process of issuing a Rs. 2.5b unsecured and subordinated Sukuk.

Financing portfolio of ABPL has depicted healthy growth in 2013. Increase has been witnessed across corporate as well as the SME/Commercial segments. Fresh exposures in the corporate segment have been taken against established names.

Overall portfolio now comprises a mix of top and mid-tier clients. As the universe of top-tier clients is increasingly becoming saturated, management has identified Commercial and SME sectors as future growth areas. This will allow ABPL to achieve greater breadth in lending operations while also mitigating the adverse impact of concentration in the portfolio.

Sizeable recoveries against non-performing financing resulted in improvement in portfolio quality, though they still compare less favourably to peers. As per management, recoveries in the ongoing year are expected to further improve portfolio quality.

Profitability indicators have posted improvement in the ongoing year. This is attributable to higher net spreads in absolute terms and increase in fee based income while expense base has only witnessed a slight increase. Continuity of positive momentum in earnings will be tracked over time. Liquidity profile of ABPL is considered adequate in view of sizeable liquid assets in relation to deposits and borrowings.

ABPL opened 16 new branches in 2013. Branch expansion is planned to continue with branch network targeted to reach 235 branches by year-end 2018. This is likely to enable ABPL to achieve broad based growth in deposits.

Overall sector dynamics remain positive with the Islamic Banking Industry (IBI) in Pakistan posting robust growth, with market share of over 10% at year-end 2013 in terms of deposits. The growth trajectory is likely to continue and bodes well for Islamic Financial Institutions.

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

The post JCR-VIS reaffirms entity ratings of Al Baraka Bank (Pakistan) Limited at A/A-1 appeared first on Business News Pakistan.

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