Press Release

JCR-VIS Reaffirms Entity Ratings of Samba Bank Limited

Karachi, June 23, 2017: JCR-VIS Credit Rating Company Limited has reaffirmed entity ratings of Samba Bank Limited (SBL) at ‘AA/A-1’ (Double A/A-One). Outlook on the assigned ratings is ‘Stable’. Previous rating action was announced on June 23, 2016.

Ratings of SBL take into account the support emanating from its key sponsor - Samba Financial Group. SBL has benefited from its sponsor’s expertise in various aspects of banking operations, as reflected in ongoing improvement in technology and risk management infrastructure and strengthening of the policy framework. Financial risk profile of SBL has remained robust during the year. Ratings also factor in strong financial support enjoyed by SBL as evident from multiple equity injections in the past.

Gross financing portfolio of the bank depicted growth on the back of healthy growth in commercial lending. However with a limited loan book, market share in terms of domestic gross advances stands lowest among peers. Corporate financing continues to be the mainstay of the bank’s lending portfolio. Financing activities are expected to pick pace further especially in corporate and commercial portfolios. Moreover, SBL has also re-launched its consumer banking products in order to assist growth in advances.

The bank was also able to mobilize higher deposits with growth largely being a function of fixed deposits. Consequently, proportion of Current & Saving Accounts (CASA) stood on the lower side in relation to peers. Given that sizeable depositor concentration exists, the bank plans to grow its CASA accounts which would aid in improving granularity in deposits. With significant deployment in government papers, the bank has a relatively liquid balance sheet mix.

Despite spreads under pressure, net markup income of SBL remained largely stable. This was primarily on the back of volumetric growth in earning assets. Spreads are expected to come under pressure given the expected re-pricing of PIBs and prevailing market conditions for corporate segment. However, with higher markup earning assets to be booked under consumer and commercial portfolios, pressure on the same is expected to ease off. Nevertheless, quality of underwriting within these segments will remain crucial for the bank. In the backdrop of forecasted mid-term economic scenario and policy rate regime along with maturity of PIBs and low lending rates due to excess liquidity, spreads and profitability growth of the banking sector are expected to remain under pressure during 2017.

For further information on this rating announcement, please contact the undersigned (Ext: 201) at 021-35311861-71 or fax to 021-35311872-3.

Javed Callea

Applicable rating criterion: Commercial Banks Methodology - November 2015

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.

JCR-VIS Credit Rating Company Limited