Press Release

JCR-VIS Reaffirms Ratings of Faysal Bank Limited

Karachi, June 30, 2017: JCR-VIS Credit Rating Company Limited (JCR-VIS) has reaffirmed the entity ratings of Faysal Bank Limited (FBL) at ‘AA/A-1+’ (Double A/A-One Plus). Rating of the unsecured, subordinated term finance certificates (Issue II) of FBL has also been reaffirmed at ‘AA-’ (Double A Minus). Outlook on the assigned ratings is ‘Stable’. The previous rating action was announced on June 28, 2016.

The assigned ratings incorporate the improvement witnessed in capitalization and asset quality indicators of the bank as well as mid-tier stature of the bank within the industry in terms of market share (3%) in domestic deposits and other key performance indicators. FBL maintained its market share during the outgoing year and going forward additional expansion in branch network is expected to facilitate growth and improve granularity of the deposit base.

Following growth strategy to mitigate pressure on spreads, the financing portfolio of the bank witnessed a significant increase during 2016. The bank is expected to continue this growth in the future by leveraging its relationships with existing clients and through the acquisition of new customers. Asset quality indicators have improved during the outgoing year; however, the same still compare less favorably to peers, in large part, due to the infected legacy portfolio, which comprises a sizeable proportion of the bank’s NPLs. Focused recoveries, on part of management, from NPL portfolio are targeted to improve asset quality indicators. In pursuing its growth strategy, the bank may ensure that sound underwriting policies are maintained.

Low interest rate environment and greater administrative expenses due to expansion in branch network translated into lower operating profit and profit before tax of the bank. Going forward, management aims to mitigate the challenge emerging from lower spreads by targeting volumetric growth in portfolio and by undertaking cost optimization efforts.

Capitalization levels of the bank have improved on account of retained profits and controlled growth in risk weighted assets. Accounting for projected growth in advances and branch network, capitalization indicators of the bank are expected to remain comfortable in 2017.

As part of the strategic direction of the Board of Directors and shareholders, the Bank remains committed to its long term vision of conversion to an Islamic Bank over the medium term. In order to facilitate this transition, a comprehensive business transformation plan has been established and adherence to the same is paramount for the bank to achieve its vision.

For further information on this rating announcement, please contact the undersigned or Mr. Javed Callea (Ext: 201) at 021-35311861-70 or fax to 021-35311872-3.


Javed Callea
Advisor

Applicable rating criterion: Commercial Banks Methodology - November 2015
http://www.jcrvis.com.pk/Images/Meth-CommercialBanks201511.pdf
Rating the Issue (September 2014) http://www.jcrvis.com.pk/Images/criteria_instrument.pdf

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 2017 VIS Credit Rating Company Limited . All rights reserved. Contents may be used by news media with credit to VIS .