Press Release
Ratings of Summit Bank Limited
Karachi, July 19, 2013: JCR-VIS Credit Rating Company Limited (JCR-VIS) has maintained the long term entity rating of Summit Bank Limited (SBL) at ‘A-’ (Single A Minus); short term rating has been revised from ‘A-2’ (A-Two) to ‘A-3’ (A-Three). Rating of the subordinated debt instrument has also been maintained at ‘A-(SO)’ (Single A Minus (Structured Obligation)).
The assigned rating has been placed under ‘Rating Watch - Developing’ status in view of the re-capitalization plan being pursued by the bank. The process of equity injection of Rs. 2.155b in the form of preference shares is expected to be closed shortly, with Rs. 930m already received from the major sponsor. The issue is underwritten. Furthermore, the bank is working on raising additional capital of Rs. 5b. Timely materialization of capital injection plan is considered critical to reinstate the risk profile of the bank.
The bank is currently incurring operational loss in view of large quantum of non-earning assets inherited as a result of mergers. A multi-pronged strategy is being pursued by the management, which in addition to capital injection, entails, reduction in cost of funds by way of mobilization of current deposits and conversion of non-earning assets into earning assets. Material progress has been witnessed in the on-going year in terms of the quantum of fresh current accounts raised by the bank, bringing down cost of funds. Moreover, the management is also focused on increasing non-interest income and controlling administrative expenses. Continued progress on all fronts is required to achieve a turnaround in the bank’s performance. JCR-VIS will continue to closely monitor the same vis-à-vis the timelines made available.
For further information on this rating announcement, please contact Mr. Javed Callea (Ext: 408) or Ms. Sobia Maqbool, CFA (Ext: 604) at (+92-21) 35311861-70 or fax to (+92-21) 35311872-3.
Jamal Abbas Zaidi
Deputy CEO