Press Release

JCR-VIS Reaffirms Credit Ratings of Zarai Taraqiati Bank Limited

Karachi, June 30, 2006: JCR-VIS Credit Rating Company Limited has reaffirmed credit ratings of Zarai Taraqiati Bank Limited (ZTBL) at ‘AAA/A-1+’ (Triple A / A-One plus) with ‘Stable’ outlook. The AAA/A-1+ ratings of ZTBL are based on the federal government guarantee for timely repayment of credit lines obtained from the State Bank of Pakistan (SBP). The guarantee covers the principal amount of the lines together with profit payable in arrears. The safety of deposits has also been guaranteed by the Government of Pakistan (GoP) under the Banks’ (Nationalization) Act 1974.

ZTBL is a beneficiary of the Asian Development Bank (ADB) sponsored restructuring plan. One of the key elements in the restructuring of ZTBL was the induction of the Senior Management Team (SMT) which was accomplished in early 2005 and assigned the task of streamlining the operations of the bank. However, the bank has experienced turnover in management since then. The information systems available with the bank also need to be upgraded to enable effective monitoring of operations.

The financial viability of the institution could be at risk due to the lack of independence in pricing its loan portfolio while the terms of the SBP debt have yet to be finalized. Even if rates on these lines are capped at levels proposed by the management of ZTBL, profitability may continue to be weak. Infection in the loan portfolio remains high. In view of the above, JCR-VIS has revised the short-term standalone rating to ‘B’ (Single B) from ‘A-3’ (A-Three) while the medium to long-term rating has been maintained at ‘BB+’ (Double B Plus) with a ‘Negative’ outlook. The bank would be required to pay the first principal installment and mark-up accrued to date in December 2006. Ratings may be revised over the next three to four months, if the credit terms on SBP lines are not favorably finalized and the institution is not allowed to exercise independence in pricing its loans.

For further information on this rating announcement, please contact Mr. Safdar Kazi (safdar@jcrvis.com.pk/ ext: 221) or Ms. Sabeen Saleem (sabeen@jcrvis.com.pk / ext: 222) at 5671822/5671833/5680996 or fax to 5681105/5671600.




Faheem Ahmed
President & CEO

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 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 June 30, 2006 VIS Credit Rating Company Limited. All rights reserved. Contents may be used by news media with credit to VIS.