KARACHI-The Pakistan Credit Rating Agency Limited (PACRA) has maintained BankIslami’s long-term entity rating at A+ (short term rating at A1) with a Stable Outlook. The ratings reflect BankIslami’s sustained risk profile. The Bank’s profitability enhanced owing to asset yield driven by peaked policy rates and volumetric increase in financing and instruments. Higher increase in asset yield than cost of funds - resulting in increase in spreads. The Bank was able to achieve good operating profits; trend should continue. The management is emphatically pursuing for recovery of NPLs, leading to improvement in impairment ratio. Covid-19 has posed challenges to all segments of the economy, worldwide and domestically, most sectors are getting negatively impacted. The ramifications would continue to unfold, warranting vigilance and timely actions where needed. The Central Bank has taken well-tailored and comprehensive actions including reduction in key policy rates (625bps down since Jan-20) and deferment of repayment obligations. While reduction in policy rates would determine the Bank’s profitability, these measures have cushioned the allied risks surrounding the credit exposures.

The Bank’s deposit base recorded significant addition tilted towards term deposits leading to decline in CASA (end-Dec19: 58.5 per cent, end-Dec18: 68.8 per cent) with focus to increase stability and liquidity. Increased term deposits may affect cost of funds in CY20. 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.

The Bank has taken steps to strengthen its fortress against cyber risks; provision needed was created in CY19. Going forward, primary focus is to consolidate CAR as the relaxations given by Central Bank will be withdrawn in CY21. The management is current on 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 made a right issue of Rs. 1 billion along with the issuance of ADT-1 Sukuk of Rs2 billion.