Press Release

JCR-VIS assigns ratings to the subordinated debt issue of Summit Bank Limited

Karachi, April 1, 2011: JCR-VIS Credit Rating Company Limited (JCR-VIS) has assigned a preliminary rating of ‘A’ (Single A) to the subordinated debt issue of Rs. 1.5b, proposed to be issued by Summit Bank Limited (SBL). The issue has a seven year term and is repayable almost entirely in one bullet payment, at the end of the tenor. Entity ratings of Summit Bank Limited remain at ‘A/A-2’ (Single A / A-Two). Rating assigned to the subordinated issue of SBL, derives strength from the personal assurance of the Chairman of SBL, who is also the owner of the bank’s major sponsor –Suroor Investments Limited (SIL). Ratings continue to be under ‘Rating Watch-Developing’ status on account of the pending merger of Summit Bank Limited and Mybank Limited (MYB).

Following the acquisition of a 59% stake in the then Arif Habib Bank Limited (now SBL) by SIL in 2009, the bank has merged with Atlas Bank Limited (ATBL), effective December 31, 2010. The bank’s capital had fallen below SBP’s Minimum Capital Requirement (MCR) for banks as at end-December 2010 on account of losses in the constituent entities, stemming from provisioning against loan losses and a high administrative cost burden, particularly in ATBL. The bank is on the verge of a merger with MYB, which will increase SBL’s equity base. Furthermore, a 20% rights issue is expected to be finalized before June 2011 and a further Rs. 1b is on the anvil for investment in shares of the bank by December 2011. Equity enhancements as planned, and the upcoming merger, are likely to allow the bank to meet its capital and capital adequacy requirements.

Nevertheless, net non-performing accounts of the merging entities are considerable and pose risk to the bank’s financial health. Deposit base needs to be further diversified by optimizing the network of 160 branches that would result from the merger with Mybank. Liquidity indicators, viewed in conjunction with the cost sensitive depositor base, need to be further reinforced.

The bank is taking steps to rationalize its cost structure and focus on recoveries, both of which will be integral to stabilizing the institution and its future growth. The bank is expected to breakeven in 2012, but post markedly improved results by the end of the current year. On the conclusion of the merger with MYB, ratings of the merged entity will be revisited.

For further information on this rating announcement, please contact Mr. Jamal Abbas Zaidi (Ext: 408) or Ms. Sabeen Saleem (Ext: 510) at (+92-21) 35311861-70 or fax to (+92-21) 35311872-3.


Faheem Ahmad
President & CEO

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 2011 VIS Credit Rating Company Limited . All rights reserved. Contents may be used by news media with credit to VIS .