PACRA Maintains Ratings of NIB Bank Limited

PACRA Maintains Ratings of NIB Bank Limited

 

The Pakistan Credit Rating Agency (PACRA) has maintained the long-term and short-term entity ratings of NIB Bank Limited (NIB) at "AA-" (Double A Minus) and "A1+" (A One Plus), respectively. The rating of

the unsecured TFC issue of PKR 4,000mln has also been maintained at "A+"(Single A Plus). These ratings denote a very low expectation of credit risk emanating from very strong capacity for timely payment of financial commitments.

The ratings reflect NIB's association with Temasek Holdings - the investment arm of Government of Singapore, internationally rated AAA. 

 

The ratings draw material comfort from historically demonstrated commitment of Temasek towards NIB. On a standalone basis, the new team has managed to bring recovery in the bank's financial profile. The key challenge remains non-performing loans; also carrying potential revenue drag. In this regard, an aggressive recovery drive is being pursued; the ensuing reversals are likely to support profitability, which has also observed uptick through different efficiency measures. The new management is re-aligning its business strategy to prevailing market dynamics, wherein, channelizing branch network for low cost deposit expansion and cautious buildup of advances, along with non-fund revenue are imperative.

About The Bank:

NIB Bank, headquartered in Karachi, is the largest foreign bank in Pakistan in terms of its branch network - 179 branches in 59 cities. TheBank's key business units include Consumer Banking, Small Medium

Enterprises and Commercial Banking, Corporate and Investment Banking and Treasury services.

 The bank, incorporated in 2003, after a series of mergers holds ~1% share in total banking deposits at end Dec-12. Bugis Investments (Mauritius) Pte. Limited, a wholly owned subsidiary of Fullerton Financial Holdings (FFH), which in turn is fully owned by Temasek Holdings, owns majority stake in NIB (89%). The eight-member BoD includes the President and seven non-executive directors, three of whom are representatives of Temasek and four are independent. Mr. Badar Kazmi, the CEO since January 2012, is a seasoned banker with extensive local and international experience. The management team, though new to the bank, comprises individuals with extensive banking experience.

About The TFC:

NIB issued listed unsecured, subordinated, 6-months KIBOR plus 115bps TFCs of PKR 4,000mln, for a tenor of 8 years, in Mar08 with semiannual profit payments. The major repayment in six (6) equal semi-annual installments,which started from 66th month (i.e. Sep 2013). The TFCs have a call option, in whole or in part, subject to the approval of SBP, exercisable on any profit payment date after 60 months i.e. from Mar-13.

Benefit of this TFC towards tier-2 CAR has started to diminish. To replenish this, NIB has lately announced issuance of another TFC upto PKR 6,000 mlnwhile availing call option on existing TFC.