JCR-VIS revises entity ratings of Burj Bank Limited to BBB+/A-2

Karachi, May 06, 2016 (PPI-OT):JCR-VIS Credit Rating Company Limited has revised the entity ratings of Burj Bank Limited (BBL) to ‘BBB+/A-2’ (Triple B Plus/A-Two) from ‘A-/A-2’ (Single A Minus/A-Two). Ratings have been placed under ‘Rating Watch – Developing’ Status on account of ongoing merger and acquisition (M and A) activity. Currently three commercial banks have received permission for undertaking due diligence while one bank has already started the due diligence exercise. Management expects early closure of the M and A activity which will allow compliance with minimum capital requirement.

A higher regulatory Capital Adequacy Ratio requirement and shortfall in the MCR continue to place restriction on growth resulting in continued losses and erosion in the bank’s capital base. Reduction in cost of deposits and administrative expenses has been noted during 2015. Moreover, given the protraction in M and A activity, operating losses and erosion in equity base is expected to continue.

Existing sponsors though strong are following a strategy of M and A thus equity injection is not forthcoming. The bank reported net equity of Rs. 4.4b (2014: Rs. 4.8b; 2013: Rs. 5.36b) at year-end’2015 while Capital Adequacy Ratio was reported at 18.06%. Loss before tax incurred during 2015 was lower at Rs. 480.5m vis-a-vis Rs. 614.8m 2014.

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