JCR-VIS Reaffirms Ratings of Faysal Bank Limited
Karachi, June 26, 2013: JCR-VIS Credit Rating Company Limited
(JCR-VIS) has reaffirmed the entity ratings of Faysal Bank Limited (FBL)
at ‘AA/A-1+’ (Double A/A-One Plus). Ratings of the unsecured,
subordinated term finance certificates (Issue I & II) of FBL have
also been reaffirmed at ‘AA-’ (Double A Minus). Outlook on the
outstanding ratings is ‘Stable’.
Growth in lending portfolio of the bank surpassed industry growth rate during the out-going year. Instances of non-performance have been limited within fresh lending undertaken by the bank in recent years; nevertheless overall portfolio quality has room for improvement with net infection recorded at 5.4%.
Increase in lending activities has largely been supported by growth in deposit base of the bank. Liquidity profile draws strength from the improving deposit mix. Over time, growth in small ticket deposits has reduced the bank’s reliance on large sized deposits. Moreover, growth in deposits has been achieved through higher volumes of current & savings accounts while proportion of term deposits has reduced in the deposit mix.
Profitability was maintained in FY12, supported by bank’s ability to control costs. Bottom line also derived support from capital gains on trading of government securities and limited provisioning expense. The impact of past credit loses has yet to be fully absorbed by the bank. In view of this, the bank’s ability to realize recoveries against non performing loans will impact future profitability significantly. Over the last year, exposure to equity price risk has been curtailed significantly as the bank shed off its equity holdings. This is also likely to reduce volatility in earnings profile.
Capital Adequacy of FBL stood at 10.75% at end-Dec’12. Capitalization indicators warrant strengthening, given that the bank has sizeable non-performing exposures in relation to equity base. Any developments in this regard will be closely tracked by JCR-VIS.
Growth in lending portfolio of the bank surpassed industry growth rate during the out-going year. Instances of non-performance have been limited within fresh lending undertaken by the bank in recent years; nevertheless overall portfolio quality has room for improvement with net infection recorded at 5.4%.
Increase in lending activities has largely been supported by growth in deposit base of the bank. Liquidity profile draws strength from the improving deposit mix. Over time, growth in small ticket deposits has reduced the bank’s reliance on large sized deposits. Moreover, growth in deposits has been achieved through higher volumes of current & savings accounts while proportion of term deposits has reduced in the deposit mix.
Profitability was maintained in FY12, supported by bank’s ability to control costs. Bottom line also derived support from capital gains on trading of government securities and limited provisioning expense. The impact of past credit loses has yet to be fully absorbed by the bank. In view of this, the bank’s ability to realize recoveries against non performing loans will impact future profitability significantly. Over the last year, exposure to equity price risk has been curtailed significantly as the bank shed off its equity holdings. This is also likely to reduce volatility in earnings profile.
Capital Adequacy of FBL stood at 10.75% at end-Dec’12. Capitalization indicators warrant strengthening, given that the bank has sizeable non-performing exposures in relation to equity base. Any developments in this regard will be closely tracked by JCR-VIS.
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