PACRA maintains entity ratings of JSBL

June 24, 2023 (MLN): Pakistan Credit Rating Agency Limited (PACRA) has maintained entity ratings of JS Bank Limited (PSX: JSBL) at "AA-" for the long term and "A1+" for the short term with a stable outlook forecast, a latest press release issued by PACRA showed.

The ratings reflect the relative position of JS Bank in the country's competitive banking landscape.

This stems from largely intact customer deposit system share (Dec, 22: 2%, and Dec, 21: 2.2%).

The funding base comprises borrowings and deposits and the deposit base reflects a higher concentration of term deposits.

The focus of the bank has been to optimize its cost structure and build profitability around the branch network and customer base.

With the management’s concerted efforts, the bank has been able to improve its core profitability.

JSBL has made a substantial capital investment in its digital proposition and launched a new brand `Zindigi', which has been designed to tap the market of Gen Z and millennials by offering them simple and user-friendly digital financial solutions.

The net advances illustrated a decline owing to the continued efforts of consolidation.

The investment portfolio displayed a sizeable increase YoY majorly vested with government securities.

The continuous increase in non-performing advances is a cause for concern.

However, despite the buildup in NPLs and reduction in credit portfolio, the loan infection ratio (6.8%) remained lower than the industry average.

Going forward, management will focus on enhancing coverage of NPLs and other recoveries.

Markup income witnessed an increase attributable to a higher contribution of markup from investments.

Despite higher provisioning expenses, the bank's bottom line clocked at Rs0.96 billion (CY21: RS1.3bn).

During 1QCY23, the markup earned increased sizably whilst the non-markup income portrayed attrition.

The net profitability recorded an enormous growth to stand at Rs856m (1QCY22: Rs410m).

The enhancement of equity stake in a rising Islamic bank of the country is at an advanced stage.

This will benefit the bank, going forward. The bank has assembled a highly experienced and qualified management team to head various departments.

Ratings are dependent on JS Bank's ability to sustain its profitability to support the internal generation of capital.

Meanwhile, upholding asset quality, maintaining its share of advances and deposits in the banking sector, adding diversity to the income stream, maintaining a cushion in Capital Adequacy Ratio (CAR), and a strong governance framework are critical.

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