Islamabad, The Pakistan Credit Rating Agency Limited (PACRA) has assigned an initial long-term rating of 'A' with a stable outlook to BankIslami Pakistan Limited (BIPL) for its ADT-1 Modaraba Sukuk II, valued at PKR 1 billion, as of February 2024. This rating reflects the bank's significant growth and improved performance metrics over the recent years.

According to The Pakistan Credit Rating Agency Limited, BankIslami has shown notable progress under its new leadership, particularly in expanding its deposit base and enhancing its system share, which has improved its competitive stance in the Islamic banking sector. The bank has seen a marked increase in profitability, with net profits rising to PKR 11 billion in CY23 from PKR 4.4 billion the previous year, driven largely by a 97% increase in net markup income to PKR 40.18 billion. This financial upturn is attributed to strategic growth in the investment book, especially in government Ijara Sukuk, alongside an efficient cost of funding base.

BIPL’s financial health is also indicated by its Capital Adequacy Ratio (CAR), which rose to 23.79% in CY23, suggesting a strong capacity for future growth. Asset quality has remained robust, with improved coverage ratios, while the equity base and risk absorption capacity have also seen substantial enhancements.

The banking sector in Pakistan continues to exhibit high profitability, but faces challenges from the macroeconomic environment, including high interest rates, demand contraction, currency depreciation, and rising inflation. These factors, PACRA notes, could affect the banking system's performance, making sustained asset quality and profitable growth crucial for maintaining positive ratings.