The JCR-VIS Credit Rating Company has assigned a medium- to long-term entity rating of BBB- (triple B minus) with a 'stable' outlook and a short-term rating of A-3 (A three) to Saudi Pak Commercial Bank Ltd.
It said these ratings acknowledge the efforts of the management in the area of human resource, infrastructure, information technology, and the restructuring of the Bank that are directed towards improvement in business, growth, removing weaknesses inherited by it, primarily in the form of loan losses and consequently, the extent of capitalisation of the bank.
The loan losses now stand fully provided in 2003 notwithstanding the permission from the State Bank of Pakistan to stagger these loan losses over a period of five years. Additionally, the equity amounting to Rs 750 million was injected in 2003 over and above the amount of capital raised at the time of take-over of the Bank amounting to Rs 1,000 million. In addition to this, the shortfall in capital has been bridged by injection of subordinated debt of Rs 650 million by the sponsors, which counts towards tier-II capital.
The rapid growth in deposits has given a boost to the Bank's resources and in order to expedite loan recoveries, defaulting debtors are actively being pursued.
Currently, profitability levels have been aided by high capital gains, which are non-recurring in nature and, therefore, are unlikely to be available in future. Further steps are required to manage the market risk on long-term government securities. With 28 branches, the Bank faces a challenge in competing against well-established private banks and in accessing a diversified funding base.
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