Press Release

JCR-VIS Upgrades Entity Ratings of Meezan Bank Limited to AA/A-1+

Karachi, June 26, 2013: JCR-VIS Credit Rating Company Limited has upgraded the entity ratings of Meezan Bank Limited (MBL) from ‘AA-/A-1+’ (Double A Minus/A-One Plus) to ‘AA/A-1+’ (Double A/ A-one Plus). Outlook on the assigned ratings is ‘Stable’.

MBL is the largest Islamic bank in the country with around one-third of the total Islamic banking sector deposits. The upgrade reflects the bank’s strong domestic operations and franchise which has allowed MBL to build a sizeable retail deposit base - now comprising over 80% of total deposits. Liquidity profile of the bank has consistently remained strong, drawing strength from the granular deposit mix.

As part of the bank’s strategic blue print, MBL has been complementing asset growth through a continuous expansion in outreach through branches. Growth has largely been manifested in GoP Ijarah Sukuk which represents over half of the bank’s asset base at end-Mar’13. While credit and market risk emanating from the same is considered manageable; ability to off-load the bank’s sizeable holding in GoP Ijarah Sukuk may be limited to an extent. Financing portfolio has depicted some growth during 2012. On a timeline basis, asset quality indicators have improved and compare favorably to peers. Given the strategy of focusing on top tier corporate clients, financing portfolio features concentration. Segment wise broadening will overtime reduce its likely adverse impact in case of impairment in large financing and will also allow the bank greater breadth in lending operations.

Further reduction in discount rate to 9% may exert pressure on spreads while some weakening in efficiency indicators has been witnessed on account of rapid branch expansion undertaken by the bank. Asset growth is likely to propel future profitability levels, which are expected to increase in quantum terms over the foreseeable future, provided that growth in non-performing exposures is contained. As an Islamic financial institution with most assets being re-priceable, the bank is exposed to a greater degree of re-investment risk vis-à-vis its conventional counterparts. At the same time, removal of floor on return on saving deposits offers greater flexibility in managing cost of deposits.

Going forward, expansion in the bank’s foot print is planned to continue with the bank targeting to achieve a network of 500 branches by end-2016. Capitalization levels of the bank have remained sound. As per management, internal capital generation is expected to be sufficient to achieve the planned growth in business without affecting the bank’s risk profile.

For further information on this rating announcement, please contact Mr. Javed Callea (Ext: 501) or Ms. Sobia Maqbool, CFA (Ext: 604) at 92-21-35311861 or fax to 92-21-35311873.

Jamal Abbas Zaidi
Deputy CEO

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