Karachi: VIS Credit Rating Company Limited has upgraded the entity ratings of Meezan Bank Limited (‘MEBL’ or ‘the Bank’) to ‘AAA/A-1+’ (Triple A/ A-One Plus) from ‘AA+/A-1+’ (Double A Plus/ A-One Plus). The medium to long-term rating of ‘AAA’ denotes highest credit quality, with negligible risk factors, being only slightly more than for risk-free debt of Government of Pakistan (GoP). The short-term rating of ‘A-1+’ denotes highest certainty of timely payment, liquidity factors are outstanding and safety is just below risk-free short-term obligations of GoP. VIS has also upgraded ratings of the outstanding Basel 3 Compliant Tier 1 and Tier 2 Sukuk of MEBL at ‘AA’ (Double A) and ‘AA+’ (Double A Plus) respectively. Outlook on the assigned ratings is ‘Stable’. The previous rating action on the entity was announced on June 30, 2020.
The upgrade in MEBL’s credit rating to the highest credit quality is underpinned by MEBL’s market positioning in the Islamic Banking segment, as the largest bank holding 37% of segment deposits as of Dec’20, and in the banking sector at large, being 4th largest, in terms of domestic deposits and financings. Given the aforementioned market positioning in the sector and the Islamic banking segment, VIS considers MEBL to be a dominant player in the domestic banking sector, right behind the top-3 banks designated by the State Bank of Pakistan (SBP) as Domestic-Systemically Important Banks (D-SIBs). At present, SBP classifies MEBL as a Sample D-SIBs, and in accordance with SBP guidelines, MEBL has successfully complied with SBP’s enhanced supervisory requirements since 2018.
MEBL has achieved its market positioning on the back of consistently stronger growth in deposit growth vis-à-vis industry. In 2020, MEBL’s deposit growth was roughly double the industry growth. The Bank has consistently grown its branch network, which stood 825 strong as of Mar21 and several initiatives on the digitization front, translate in a strong franchise value for MEBL. In terms of profitability, the Banks’ RoAE, RoAA & efficiency ratios compare favorably to peers. MEBL’s liquidity profile is considered strong, as reflected by the Bank’s ability to post strong growth in deposits along with an improvement in deposit composition whilst maintaining the lowest cost of funding amongst peers. At present, MEBL’s deposit market share stands relatively lower than D-SIBs, albeit given the strong growth in Islamic Banking deposits and MEBL’s own historical growth, VIS expects this gap to reduce over time.
MEBL’s capitalization metrics have continued to depict improvement on the back of strong profitability, adequate profit retention, and deployment of excess liquidity in low risk weight assets. As of Mar’21, the Bank was maintaining a comfortable cushion over the minimum CAR requirement, set by SBP for D-SIBs.
The assigned rating remains dependent on maintenance of asset quality and capital adequacy, while continuation of strong growth trend and improvement in market positioning has also been factored in the assigned rating.
For more information
Tooba Tariq Butt
AVP - Corporate Communication
Meezan Bank Ltd.
Head Office PABX: +92 (21) 38103500 Ext. 2705
© Press Release 2021
Disclaimer: The contents of this press release was provided from an external third party provider. This website is not responsible for, and does not control, such external content. This content is provided on an “as is” and “as available” basis and has not been edited in any way. Neither this website nor our affiliates guarantee the accuracy of or endorse the views or opinions expressed in this press release.
The press release is provided for informational purposes only. The content does not provide tax, legal or investment advice or opinion regarding the suitability, value or profitability of any particular security, portfolio or investment strategy. Neither this website nor our affiliates shall be liable for any errors or inaccuracies in the content, or for any actions taken by you in reliance thereon. You expressly agree that your use of the information within this article is at your sole risk.
To the fullest extent permitted by applicable law, this website, its parent company, its subsidiaries, its affiliates and the respective shareholders, directors, officers, employees, agents, advertisers, content providers and licensors will not be liable (jointly or severally) to you for any direct, indirect, consequential, special, incidental, punitive or exemplary damages, including without limitation, lost profits, lost savings and lost revenues, whether in negligence, tort, contract or any other theory of liability, even if the parties have been advised of the possibility or could have foreseen any such damages.