JCR-VIS Credit Rating Company Limited has upgraded the entity ratings of Meezan Bank Limited to ‘AA+/A-1+’ (Double A Plus/A-One Plus). JCR-VIS has also upgraded ratings of the outstanding Basel 3 Compliant Sukuk ratings of Meezan Bank to ‘AA’ (Double A) from ‘AA-‘(Double A Minus). Outlook on the assigned ratings is ‘Stable’. The previous rating action was announced on June 22, 2017.
The assigned ratings to Meezan Bank incorporate the Bank’s dominant position in the Islamic banking industry with the Bank having a market share of around 36% in total Islamic banking deposits. Ratings also reflect Meezan Bank’s healthy customer franchise which has resulted in strong growth with deposits recording a 5-year CAGR of 23.9% (Industry deposit growth of 13.1%) resulting in a continuous increase in overall market share to 5.4% (2016: 5%) at year end 2017.
Besides the market share, the rating upgrade takes into account strong asset quality indicators, improving operational efficiency and a projected increase in capitalization buffers. Ratings also take into consideration the strength and stability of the senior management team spearheaded by the founding President & Chief Executive Officer.
Broad-based growth in financing portfolio was witnessed in the outgoing year with Corporate, Commercial & SME (CBSME) and Consumer financing portfolio increasing by 29%, 53% and 48%, respectively, during 2017. Moreover, the overall trade business of the Bank recorded an increase of 29% and crossed Rs. 700 billion in 2017 putting it amongst the leading players in peer banks in terms of trade business.
Asset quality indicators compare favorably to peer banks with gross infection ratio at 1.54% and provisioning coverage at 133%. Given the aggressive growth in financing portfolio, mid-term economic scenario and policy rate regime, maintaining asset quality indicators in line with benchmarks for the assigned ratings is considered important.
Net investment portfolio of the Bank represents around 15% of the total asset base. Investments include a strategic stake in Al Meezan Investment Management Limited (AMIML). AMIML is a leading player in the asset management industry enjoying strong franchise and financial profile.