Policy rate and earning assets increase BankIslami’s profit during 1HCY19-PACRA

October 10, 2019: Pakistan Credit Rating Agency (PACRA) has assigned initial entity rating of ‘A+’ for long term to BankIslami Pakistan Limited, while the short term rating is ‘A1’. Meanwhile the outlook forecasted on this rating is ‘stable’.

As per an official press release by the agency on this occasion, the ratings reflect BankIslami's sustained risk profile. During 1HCY19, the bank’s profit increased owing to asset yield driven by increase in policy rate and earning assets. The bank’s new management is emphatically pursuing for recovery of NPLs.

In 1HCY19, NPLs inched down on account of some recoveries. The funding base comprised of deposits and borrowings. The bank witnessed slight uptick in its asset yield, better than the cost - ultimately translating into better spread. Deposit mix (CASA) and concentration need to improve. The bank was able to achieve good operating profits; trend should continue. Key positions are headed by experienced individuals.

The bank’s management is positive about performance and achieving cost efficiency, pursuing the new business plan under leadership of the CEO. The focus is on risk management, IT infrastructure, workforce strengthening and customer facilitation which will help bank to achieve operational efficiency. It has taken steps to strengthen its fortress against cyber risks; adequate provision has been created.

Going forward, primary focus is to consolidate CAR as the relaxations given by central bank will be withdrawn in CY21. The management is following the planned steps to enhance capital of the bank which will assist in inching up CAR.

The bank's ability to raise its capital base in order to pursue its growth plan is important. In this regard, BIPL's Board is raising the bank's equity approximately by Rs. 1 billion. It has also approved the issuance of Sukuk of worth Rs. 2 billion which will add to Additional Tier-1 Sukuk of the bank.

Additionally, the bank's operational profitability needs to be observed against financial ramifications which may emanate from recent cyber-attack or incidence due to non-performing assets owing to slow economic growth.