Karachi, VIS Credit Rating Company Limited has upgraded the entity ratings of Sindh Bank Limited to 'AA-/A-1+' from 'A+/A-1', indicating a high credit quality with strong protection factors and the strongest likelihood of timely repayment of short-term obligations.
According to VIS Credit Rating Company Limited, the upgrade reflects the Bank’s enhanced financial stability backed by sub-sovereign ownership and recent significant capital injections. The provincial government’s involvement and the utilization of the Bank's facilities for government payment services contribute positively to its market standing. Despite a constrained growth in gross advances due to regulatory limitations on corporate lending, Sindh Bank has focused on commodity financing and aims to cautiously expand into consumer, SME, and agricultural lending.
The report also notes a decrease in Non-Performing Loans (NPLs) and an improvement in provision coverage, which help mitigate credit risk. The Bank’s investments are primarily in sovereign securities, which limits exposure to credit risk. Additionally, a shift towards floating rate Pakistan Investment Bonds (PIBs) has reduced market risk.
Sindh Bank's liquidity has strengthened, with liquidity ratios well above regulatory requirements, reflecting its capacity to manage financial commitments effectively. The profitability of the Bank has also improved due to an increase in net markup and non-markup income, which has helped to offset inflationary pressures on administrative expenses.
The Bank’s Capital Adequacy Ratio (CAR) significantly improved from below regulatory requirements in 2022 to 21.46% by the end of March 2024, well above the required 11.5%. This improvement was aided by a timely equity injection from its sponsor and the bank’s return to profitability.