Press Release

VIS Reaffirms Ratings to Tier I Capital Sukuk (1st issue) by Dubai Islamic Bank Pakistan Limited

Karachi, June 26, 2023: VIS Credit Rating Company Ltd. (VIS) has reaffirmed entity ratings of ‘AA/A-1+’ (Double A /A-One Plus) to Dubai Islamic Bank Pakistan Limited (‘DIBPL’ or ‘the Bank’). Outlook on the assigned ratings is ‘Stable’. Tier I (ADT-1) Sukuk has been reaffirmed at ‘A+’ (Single A Plus). The previous entity rating action was announced on June 29, 2022.

The instrument is a privately placed, perpetual, unsecured and subordinated Shariah compliant Sukuk amounting to Rs. 3.12b. DIBPL’s ADT-1 instrument ranks ahead of claims of ordinary shareholders but below the bank's senior creditors, including depositors. This Sukuk was issued in Dec’18.

Ratings assigned to DIBPL incorporate sound profile and demonstrated track record of the sponsor, Dubai Islamic Bank (DIB), the largest Islamic bank operating in UAE. Parent support has been witnessed over time both in the form of financial support and technical knowledge transfer. Ratings also draw strength from the standalone financial profile of DIB, rated A+/A1 (Single A Plus / A One) on international scale ratings and AA (ae)/A1+(ae) on national scale ratings.

Although the Advances to Deposits Ratio (ADR) has been reduced over the years, however compared to its peers, DIBPL continued to maintain a higher ADR. The Bank's asset quality indicators have experienced some deterioration while remaining more favorable compared to peers. Maintaining asset quality metrics in a challenging economic environment will be crucial for future profitability.

DIBPL has higher spreads compared to its peers and the industry average. With further increase in interest rates in Q1 2023, spreads may rise in 2024 contributing to greater profitability. However, potential provisioning requirements in the future may offset the gains. Market risk is considered manageable for the Bank due to a significant portion of investments being in floating rate government securities. The Bank is currently facing a deficit on foreign securities, the quantum remains small. Liquidity profile of DIBPL experienced some erosion in 2022, primarily due to increase in wholesale deposit concentration with lower granularity. Liquidity metrics need to improve to be in line with peers. DIBPL's capitalization indicators remained fairly stable, with a Capital Adequacy Ratio (CAR) of 15.83% as of March 2023 (Dec’22: 15.60%, Dec’21: 15.51%).
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For further information on this rating announcement, please contact Mr. Saeb Jafri (Ext: 202) or the undersigned (Ext: 201) at (021) 35311861-64 or email info@vis.com.pk.




Javed Callea
Advisor

VIS Financial Institution Rating (June 2023):
https://docs.vis.com.pk/docs/FinancialInstitution.pdf

VIS Rating Scale:
https://docs.vis.com.pk/docs/VISRatingScales.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 2023 VIS Credit Rating Company Limited . All rights reserved. Contents may be used by news media with credit to VIS .