Press Release

JCR-VIS Reaffirms Entity Ratings of Samba Bank Limited

Karachi, June 23, 2016: JCR-VIS Credit Rating Company Limited has reaffirmed the 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 30, 2015.

Ratings assigned to SBL incorporate sound profile of its sponsor. Samba Financial Group (SFG), a leading Saudi Arabian banking group, holds 84.51% stake in the bank. Given the sizeable resource base of SFG, ability to provide financial support to SBL is considered strong; SFG has demonstrated commitment in the form of timely capital injections in SBL.

Risk profile of SBL is also considered sound on a standalone basis as reflected by its adequate capitalization and liquidity profile. Asset quality indicators have also witnessed some improvement on a timeline basis. The bank has a conservative asset deployment strategy given that sizeable proportion of the markup bearing assets constitutes exposure in sovereign entities/instruments. Capital Adequacy Ratio (CAR) of the bank remains healthy and signifies further room for growth in risk weighted assets.

Loan portfolio of the bank witnessed notable growth during the outgoing year. Corporate financing continues to remain forte of the bank. Going forward, growth in advances is anticipated since the bank initiated commercial financing services in 2015. Moreover, SBL also plans to re-launch its discontinued consumer financing products post migration to new core banking system, Temenos T-24. Given that majority of investments constitute sovereign exposure, credit risk stemming from the same is considered limited. However, market risk emerging from the portfolio has increased on account of higher weighted average duration at end-March 2016.

Deposit base of the bank exhibited adequate growth in 2015 vis-à-vis preceding year. Overall liquidity profile of the bank is considered adequate in view of sizeable liquid assets carried on the balance sheet. Going forward, the management may ensure granularity in deposits to mitigate concentration risk.

Despite pressure on spreads during the outgoing year, overall profitability of the bank increased on the back of volumetric growth in earning assets, which resulted in higher markup income. Furthermore, non-markup income of the bank also increased notably on account of higher realized capital gains from investments and gain on disposal of fixed assets. Going forward, spreads of the bank may witness further pressure due to partial re-pricing of high yielding investment portfolio.

For further information on this rating announcement, please contact the undersigned at (Ext: 501) or Mr. Mohammed Khalid Ali (Ext: 508) 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 2016 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