JCR-VIS Credit Rating Company Limited reaffirms Ratings of Silk Bank Limited

Karachi, July 01, 2013 (PPI-OT): JCR-VIS Credit Rating Company Limited has reaffirmed the medium to long term entity rating of Silk Bank Limited (Silk) at ‘A-’ (Single A Minus). Short term rating has been upgraded from ‘A-3’ (A-Three) to ‘A-2’ (A-Two). ‘Rating Watch-Developing’ status assigned in February 2011 has been removed. Outlook on the assigned ratings is now ‘Stable’.

With issuance of Non-cumulative, Convertible Preference Shares (PNCPS) in March 2013, Capital Adequacy Ratio (CAR) of the bank improved to 8.25%. Further capital injection is required to achieve compliance with the CAR and minimum capital requirement set by the regulator. Liquidity profile of Silk witnessed some support from the capital inflow; liquid reserves in relation to deposits and borrowings may be augmented further to maintain a comfortable liquidity position.

On the lending side, the bank has broadened its segment wise exposures, and growth is projected to be achieved in consumer and SME segments. Such high margin products may allow the bank to sustain spreads in a declining interest rate environment. Portfolio quality may need to be monitored closely. Cost of deposits has trended downwards in the on-going year.

The bank carries a sizeable amount of non-earning assets on its balance sheet, including deferred tax assets and properties acquired in settlement of non-performing loans. Given that considerable time and effort is required to redeploy OREO properties as earning assets, the bank has not been able to fully realize the benefit of recoveries.

Meaningful progress in this regard is projected to be achieved during the on-going year. The bank reported loss during 2012. The bank is striving to achieve operational break even on a monthly basis in the on-going year.

For more information, contact:
Mr. Javed Callea
JCR-VIS Credit Rating Company Limited
Tel: +9221 35311861 (10 lines) (Ext: 501)
Fax: +9221 35311872-3
E mail: javed.callea@jcrvis.com.pk

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