JCR-VIS has assigned medium to long-term entity rating of BB+ (Double B Plus) with a 'Stable' outlook and a short-term rating of A3 (A Three) to the SME Bank Limited (SME Bank).
Following a financial assistance agreement between the Asian Development Bank and the Government of Pakistan (GoP), the SME Bank is undergoing a restructuring process.
The JCR-VIS said the SME Bank has paid/adjusted part of the amount payable to the State Bank of Pakistan (SBP), which was Rs 12.7 billion as on December 31, 2002, adding the balance amount of Rs 4.4 billion is now payable to the SBP by June 30, 2006.
As part of the restructuring, the GoP has also increased the paid-up capital to Rs 1.1 billion in June 2004 from Rs 0.365 billion in December 2003.
The SME Bank has also implemented an ADB-sponsored voluntary separation scheme, as part of restructuring, under which about 700 employees have been voluntarily severed. Through these measures, the GoP is preparing the SME Bank for the privatisation by the end of June 2006.
The JCR-VIS said the ratings are constrained by the SME Bank's expected performance during the period of restructuring, adding over the rating horizon, business activity is expected to remain at low levels.
It will monitor development on the front of acquisition of a commercial banking license and bank's progress in recoveries against defunct assets.