Lahore, June 28, 2021 (PPI-OT): The ratings reflect BankIslami’s Improving risk profile. The Bank’s profitability enhanced attributable to improved net markup income despite attrition in advances and sustained non-markup income. The Bank was able to achieve good operating profits; the trend should continue. The Bank’s customer deposit recorded significant addition tilted towards current deposits. Hence, upward trend in CASA recorded (end-Dec20: 62.5%, end-Dec19: 58.5%). Key positions are headed by experienced individuals. The focus is on risk management, IT infrastructure, workforce strengthening and customer facilitation which is assisting the bank in achieving operational efficiency.
The Bank’s CAR is at a comfortable level of 16.1% in CY20. The relaxations related to CAR given by the central bank will be withdrawn in CY21, 60% amount have been deducted from CET I capital in CY20. The positive outlook captures improved profitability, enhanced liquidity, and a sizable increase in funding base driven by deposits largely sustained infection and better CAR. The ratings capture the need to sustain a growth trend in profitability and deposits.
Successful execution of the business strategy, while improving the efficacy of the risk management framework to improve asset quality will remain vital. Going forward, the Bank will continue with its pro-business and pro-tech strategy by placing emphasis on the escalation in trade business, enhancement in low-cost CASA deposits, widening its corporate and consumer financing book. COVID-19 is an ongoing challenge. While it has taken a toll on many businesses, its ramifications are still unfolding.
The proactive measures are taken by the regulators and other concerning bodies have mitigated the potential damages much anticipated from this pandemic. As a result, the banking industry remained protected and in fact posted record profits. Vigilance is required as the loan repayment cycle remains amid variants of the pandemic continue to re-emerge. The bank’s ability to raise its capital base in order to pursue its growth plan is important. In this regard, BIPL made a right issue of PKR 1bln along with the issuance of ADT-1 Sukuk of Rs. 2 billion on April 20.
For more information, contact:
Analyst,
The Pakistan Credit Rating Agency Limited (PACRA)
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Lahore, Pakistan
Tel: +92-42-5869504-6
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Email: hammad.rashid@pacra.com
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