Press Release
VIS assigns Positive Outlook to Entity Ratings of Dubai Islamic Bank Pakistan Limited
Karachi, June 30, 2025: VIS Credit Rating Company Ltd. (VIS) has maintained the entity ratings of ‘AA/A1+’ (Double A/A One Plus) assigned to Dubai Islamic Bank Pakistan Limited (‘DIBPL’ or the ‘Bank’). Long-term rating of ‘AA’ denotes high credit quality; protection factors are strong. Risk is modest but may vary slightly from time to time because of economic conditions. Short-term rating of ‘A1+’ indicates strongest likelihood of timely repayment of short-term obligations with outstanding liquidity factors. The instrument ratings assigned to the Bank’s Tier 2 Sukuk and Additional Tier 1 (ADT-1) Sukuk have been maintained at ‘AA-’ (Double A Minus) and ‘A+’ (Single A Plus), respectively. Outlook on the assigned ratings has been changed to ‘Positive’ from ‘Stable.’ The previous entity and instrument rating actions were announced on June 27, 2024.
The ratings assigned to DIBPL Limited reflects the Banks’s sound sponsor profile. The Bank operates as a wholly owned subsidiary of Dubai Islamic Bank PJSC, UAE, one of the leading and established Islamic financial institutions, rated ‘A+’ by Islamic International Rating Agency (IIRA) on International Scale. The parent bank’s strong capitalization, extensive experience in Islamic banking, and global presence provide both strategic oversight and financial backing to DIBPL, underpinning its long-term sustainability and credibility in the local market.
Ratings also take into account Shari’ah compliance framework of the Bank maintained through a strong governance framework: an independent Shari’ah Board, a dedicated compliance department and regular internal / external audits ensure adherence. Looking ahead, the Bank is set to expand significantly, with Board approval for adding 75 new branches in CY25 as part of a broader strategy to expand the branch network. The expansion aims to enhance geographic outreach, mobilize low-cost deposits—particularly current accounts—and deepen retail market penetration. Branch expansion will target commercially active areas, while the Bank aims to enhance its brand presence by more effectively leveraging the global recognition of Dubai Islamic Bank.
During CY24, DIBPL’s balance sheet reflected the Bank’s de-risking strategy, by reducing its Financing-to-Deposit Ratio to 58.7% (CY23: 71.3%), reflecting a shift away from aggressive lending amid industry-wide efforts to meet the 50% minimum ADR threshold. DIBPL maintained pricing discipline and strategically scaled back its financing book in favor of expanding its investment portfolio and preserving asset quality. This conservative asset allocation, marked by increased exposure to low-risk sovereign instruments, contributed to a more resilient and liquid balance sheet. As market conditions normalized in early 2025 and discounted exposures matured, DIBPL cautiously resumed financing activities, with ADR rising to 68.9% in 1QCY25—signaling a controlled return toward its historical asset mix.
The Bank’s asset quality profile deteriorated modestly, with an uptick in non-performing financings and a decline in provisioning coverage. While management anticipates some recoveries in the near term, Bank’s focus on credit risk mitigation and prudent portfolio management will remain key. DIBPL’s investment portfolio remains conservatively positioned, comprising primarily of sovereign and government-guaranteed securities. Liquidity indicators remain healthy, supported by a strong buffer of high-quality liquid assets. The Bank continues to comfortably meet and, in most cases, exceed regulatory liquidity thresholds, reflecting sound liquidity risk management. Despite a relatively lower share of current accounts in the deposit mix compared to peers, the Bank has successfully contained its cost of deposits. Furthermore, planned expansion of the branch network is expected to bolster deposit mobilization efforts, enhance funding diversification, and improve franchise outreach.
Despite pressures on core earnings from declining spreads, profitability indicators remained stable during the review period. Declining benchmark rates led to compression in asset yields, while rising funding costs—due to changes in deposit composition—further narrowed margins. However, lower provisioning charges and stable non-markup income helped maintain the bottom line. Future earnings will depend on the Bank’s ability to optimize deposit mix, maintain cost discipline, and diversify income sources.
The Bank’s capitalization remains a key rating strength. Capital adequacy ratios have improved, with ample headroom over regulatory thresholds, enabling the Bank to absorb shocks and support growth. The quality of capital remains sound, with Tier-1 capital constituting the majority of total eligible capital.
For further information on this ratings announcement, please contact at 021-35311861-64 or email at info@vis.com.pk.
Applicable Rating Criteria:
Financial Institutions
https://docs.vis.com.pk/Methodologies%202024/Financial-Institution-v2.pdf
Instrument Rating
https://docs.vis.com.pk/Methodologies-2025/IRM-Apr-25.pdf
VIS Issue/Issuer Rating Scale
https://docs.vis.com.pk/docs/VISRatingScales.pdf