Press Release

JCR-VIS Reaffirms Entity Ratings of Faysal Bank Limited

Karachi, June 29, 2018: JCR-VIS Credit Rating Company Limited (JCR-VIS) has reaffirmed the entity ratings of Faysal Bank Limited (FBL) at ‘AA/A-1+’ (Double A/A-One Plus). Outlook on the assigned ratings is ‘Stable’. The previous rating action was announced on June 30, 2017.

The assigned ratings reflect sound capitalization, profitability and asset quality as well as mid-tier position of FBL within the industry. Management was able to maintain the market share of the bank in terms of domestic deposits (3%), while pursuing its long-term vision of converting to an Islamic Bank. Significant changes were witnessed in the senior management team during the outgoing year. Vacancies in senior management team were filled in a timely manner, mostly through internal promotions.

Asset quality indicators have depicted favorable movement vis-à-vis 2016; however, the same still compare less favorably to peers, in large part, due to the infected legacy portfolio, which comprises a sizeable proportion of the bank’s NPLs. Credit and market risk emanating from investment portfolio is considered manageable given that majority of investment portfolio comprises lower duration government securities.

Liquidity profile of the bank is adequately supported by presence of sizeable liquid assets in relation to deposits & borrowings and considerable cushion in Liquidity Coverage Ratio and Net Stable Funding Ratio over the regulatory requirement. The bank is continuing its steady expansion of the branch network as this will provide greater momentum to deposit mobilization activities and reduce deposit concentration, both key focus areas for the management.

Profitability of the bank increased during the outgoing year on the back of improvement in topline and controlled growth in expenses. Net markup income increased primarily on account of volumetric growth in average earning assets and some decrease in cost of deposits. Going forward, projected volumetric growth in advances coupled with increasing interest rate scenario is expected to bode well for the operating profitability of the bank provided expenses for branch expansion and NPLs are kept under control.

Capital adequacy of the bank has improved on account of higher growth in capital in relation to Risk Weighted Assets (RWAs). Accounting for projected growth in advances and additional provisioning due to adoption of IFRS 9 accounting standard, capitalization indicators of the bank are expected to remain comfortable vis-à-vis the regulatory requirements.

For further information on this rating announcement, please contact the undersigned (Ext: 201) or Mr. Jazib Ahmed (Ext: 215) at 021-35311861-70 or fax to 021-35311872-3.

Javed Callea

Applicable rating criterion: Commercial Banks Methodology - March 2018

Information herein was obtained from sources believed to be accurate and reliable; however, JCR-VIS Credit Rating Company Limited JCR-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.JCR-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.JCR-VIS is not an NRSRO and its credit ratings are not NRSRO credit ratings.JCR-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 2018 JCR-VIS Credit Rating Company Limited. All rights reserved. Contents may be used by news media with credit to JCR-VIS.

JCR-VIS Credit Rating Company Limited