Following is the text of press release issued by
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The assigned ratings incorporate sound profile of its sponsor,
Gross financing portfolio of SBL witnessed moderate growth of 14.6% to increase to
Overall liquidity profile of the bank depicts room for improvement in view of higher advances to deposits ratio and lower deposit granularity vis-a-vis peers. Limited branch network contributes to concentration in deposit base. Improvement in liquidity profile in view of projected weak economic outlook is important driver for ratings. Capitalization indicators of the bank remain sound and are expected to remain healthy over the ratings horizon.
Net Interest Income improved on back of growth in advances coupled with higher returns on financing. Recurring income of the bank improved due to higher net interest income (NII) and non-markup income. Operating profitability was reported higher due to greater increase in recurring income vis-a-vis expenses. However, growth in net profitability was limited due to provisions booked during the year.
Going forward, while the banks would earn capital gains on investments in higher rate government securities, the Covid-19 crisis and its impact on the economy and the financial sector would make the operating dynamics of the banks in general challenging. SBP has announced regulatory relaxations to manage the asset quality of the banks' portfolio which along with the relief package provided by the Federal Government are expected to provide certain respite to the financial sector.
However, it is expected that the impact of curtailment of economic activity for a certain period of time, higher business risk in the borrower portfolio and lower lending rate scenario may cause NIM compression; hence, the profitability of the banking sector is likely to be impacted in the medium-term rating horizon. Conservative lending strategy to maintain asset quality and cost efficiencies would be important rating drivers going forward. As the duration of business and economic uncertainty prevalent due to ongoing pandemic is difficult to forecast, the assigned ratings may, if considered necessary, be reviewed at shorter intervals as and when stable/volatile signs in economic and business cycles emerge.
For more information, contact:Director Compliance and Rating Analytics,VIS Credit Rating Company LimitedVIS House, 128/C, 25th Lane off Khayaban-e-Ittehad,Phase VII, DHA,
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