Press Release

VIS Assigns Preliminary Rating of AA to the Proposed Basel 3 compliant Tier 2 Sukuk by Meezan Bank Limited

Karachi, November 19, 2019: VIS Credit Rating Company Ltd. has assigned preliminary rating of ‘AA’ (Double A) to planned Tier 2 Sukuk issue of Meezan Bank Limited (MBL). Outlook on the assigned rating is ‘Stable’.

MBL is in the process of issuing second tranche of a regulatory compliant unsecured, subordinated privately placed Tier 2 Sukuk amounting up to Rs. 4.0b. The Sukuk is structured based on the principles of Mudarabah and will have a tenor of 10 years with bullet maturity and semi-annual profit payments. The Issue proceeds will contribute towards the Bank’s Tier-2 capital and will be utilized towards enhancement of the bank’s business operations.

The assigned rating incorporate MBL’s strong Islamic franchise, growing market share, sound financial profile and stable & experienced senior management team.

As at end-September 2019, MBL’s asset base crossed Rs. 1 trillion while equity stood at Rs. 46.8b. VIS has assigned an entity rating of ‘AA+/A-1+’ (Double A Plus/A-One Plus) to MBL. Assessment of financial profile incorporates the following factors:

· Despite continuous branch expansion, volumetric growth in earning assets, higher fee based income and spread improvement has translated into 75% increase in profit after tax during 9MCY19. Profitability growth was highest in the banking sector while cost to income ratio has improved from last year and is comparable to efficient large banks.
· Strong liquidity profile as evident from sizeable, granular and cost effective deposit base. Customer base has depicted healthy growth while liquidity buffer has increased on a timeline basis.
· Despite slight increase in NPLs, asset quality indicators remain sound and compare favorably to peer banks. Provisioning coverage remains strong at 136% at end-Sep’2019.
· Capitalization indicators supported by healthy internal capital generation and decline in risk weighted assets. Tier 1 and overall CAR were reported at 14.67% (2018: 12%) and 17.63% (2018: 14.6%), respectively as at end-Sep’2019. Issuance of second tranche of Basel 3 compliant Tier 2 Sukuk to further strengthen capitalization buffers.

For further information on this rating announcement, please contact the undersigned (Ext: 201) at 92-21-35311861 or fax to 92-21-35311873.

Javed Callea

Applicable rating criterion: Commercial Banks Methodology - March 2018

Information herein was obtained from sources believed to be accurate and reliable; however, VIS Credit Rating Company Limited (VIS) does not guarantee the accuracy, adequacy or completeness of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information.VIS , the analysts involved in the rating process and members of its rating committee do not have any conflict of interest relating to the rating(s)/ranking(s) mentioned in this report.VIS is not an NRSRO and its credit ratings are not NRSRO credit ratings.VIS is paid a fee for most rating assignments. This rating/ranking is an opinion and is not a recommendation to buy or sell any securities. Copyright 2019 VIS Credit Rating Company Limited . All rights reserved. Contents may be used by news media with credit to VIS .

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