PPI Original Text (PPI-OT) – JCR-VIS Reaffirms Entity Ratings of Meezan Bank Limited at AA-/A-1+,

Karachi, June 04, 2012 (PPI-OT): JCR-VIS Credit Rating Company Limited has reaffirmed the entity ratings of Meezan Bank Limited (MBL) at ‘AA-/A-1+’ (Double A Minus/A-One Plus). Outlook on the outstanding ratings is ‘Stable’.

Core strength of MBL continues to be its growing deposit base, representing almost one-third of the Islamic banking industry’s deposits. Moreover, the deposit base features increasing granularity over time; low cost of funding of the bank compares favourably to peers. In 2011, the bank achieved 30% growth in deposits which has been facilitated by the expanding branch network, with plans to increase the same to 310 by December 2012 from existing network of 288 branches.

Growth in deposits has largely been channelled into GoP Ijarah Sukuks that represented more than 40% of asset base of the bank. Given the bank’s sizeable holding of GoP Ijarah Sukuks, both in relation to its assets and the aggregate amount of such Sukuks outstanding, the bank’s ability to off-load these in the market, may be restricted to some extent. Diversification in asset mix will also facilitate the bank in broadening its sources of revenues.

Financing portfolio of the bank has yet to achieve a sizeable quantum. Furthermore, financing portfolio depicts concentration, though this risk is mitigated to some extent by the sound risk profile of most counterparties in the portfolio. Going forward, in addition to growth in corporate segment, the bank plans to grow its Commercial and SME portfolio. Meaningful increase in size of financing portfolio will test the underwriting capabilities of the bank further. So far, level of delinquencies has remained low.

Even with rapid expansion in branch network, operational efficiency of the bank has remained strong. Moreover, spreads of MBL are also on the higher side and comparable with larger banks in the sector. Profit after tax doubled to Rs 3.4 billion during FY11 which has strengthened the capitalization level further. Capital Adequacy Ratio was reported at 15.04% as of March 31, 2012.

For more information, contact:
Mr. Javed Callea
Advisor
JCR-VIS Credit Rating Company Limited
Tel: +9221 35311861 (10 lines) (Ext: 501)
Fax: +9221 35311872-3
E mail: javed.callea@jcrvis.com.pk

Leave a Reply