Press Release

JCR-VIS Reaffirms Ratings of Zarai Taraqiati Bank Limited at AAA/A-1+

Karachi, August 13, 2010: JCR-VIS Credit Rating Company Limited has reaffirmed the credit ratings of Zarai Taraqiati Bank Limited (ZTBL) at ‘AAA/A-1+’ (Triple A / A-One Plus) with ‘Stable’ outlook. The ownership of the bank is held with the Government of Pakistan. The bank enjoys federal government guarantee on credit lines obtained from the State Bank of Pakistan (SBP), that form the pre-dominant source of its funding and safety of deposits mobilized by ZTBL is guaranteed under the Banks’ (Nationalization) Act, 1974.

ZTBL enjoys a policy based role, given the importance of agriculture to the country’s economy. Loans are made available to farmers at subsidized rates. The markup differential on these loans, which is recoverable from the Government, has continued to accumulate over time and bears adversely on both the liquidity and earnings profile of the institution.

In 2009, the bank posted considerable growth in its loan portfolio, augmenting its proportion in relation to total assets while absorbing some of the liquidity held by the bank. Arrangements for in-kind lending to farmers in collaboration with a wholly owned subsidiary have also been made to ensure proper utilization of loan proceeds. The bank has made efforts to enhance its deposit base, though these continue to represent a small proportion of the total resource base.

Implementation of software application at the branch-level to consolidate loan disbursement & recovery data has facilitated regular monitoring of lending activities. Gross infection has declined from 16.7% in 2008 to 15.8% in 2009; however there is still need for further strengthening the recovery mechanism.

JCR-VIS has reaffirmed the standalone ratings at ‘B+/B’ (Single B Plus / Single B) with a ‘Stable’ Outlook. The financial viability of the institution depends, to a large extent, on the outcome of the restructuring exercise of the SBP made available debt, which has been underway for the last few years.

For further information on this rating announcement, please contact Mr. Javed Callea (Ext: 501) or Ms. Sobia Maqbool (Ext: 506) at 35311861-70 (10 lines) or fax to 35311872-3.



Faheem Ahmad
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 August 13, 2010 VIS Credit Rating Company Limited. All rights reserved. Contents may be used by news media with credit to VIS.