PACRA maintains entity ratings of the Bank of Punjab

June 27, 2023 (MLN): Pakistan Credit Rating Agency Limited (PACRA) has maintained entity ratings of The Bank of Punjab at "AA+" for the long term and "A1+" for the short term with a stable outlook forecast, the latest press release issued by PACRA showed.

The bank enjoys a respectable position in its peer universe, reflected by its system share.

The parentage of the bank has provided associated benefits to the institution and the management, led by sound leadership, is poised to strengthen the profile of the bank.

The bank grew its deposit base by 22% to stand at Rs1.22 trillion higher than the industry's growth where deposits remained tilted towards saving.

During CY22, the bank maintained its PBT equal to CY21, taking benefit from the reversals.

However, PAT declined by 13% to stand at Rs10.8 billion on account of the difference in taxation rate (CY21: Rs12.4bn).

The mark-to-market losses of the investment book have caused a decrease in the equity base of the bank.

Consequently, the capital adequacy ratio of the bank weakened to 11.7% (12.91% including advance subscription money for Tier-II Capital), which is expected to improve by the end of June 2023 by a 2% to 3% margin, as projected by the management.

For this, the prudent management of CAR remains essential.

Furthermore, the risk absorption capacity of the bank is being augmented by a successive issuance of ADT-I and Tier-II bonds.

The parental association has again benefited the bank by way of raising money from investors.

During 1QFY23, the spread of the bank remained under pressure due to gaps in the durations of liabilities and assets of the bank.

The ratings are dependent on the financial risk profile of the bank, mainly emanating from volumetric increases in core operations and continued healthy profitability trends in line with the management's plans.

Moreover, any weakening in asset quality will in turn put pressure on the bank's profitability and risk absorption capacity.

Going forward, ample management of the CAR above the regulatory threshold remains necessary.

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