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The assigned ratings are underpinned by MBL's position as the largest Islamic bank in the country, well-established domestic franchise, sound governance practices, healthy growth in profitability and strong funding base with deposits crossing 1 trillion during ongoing year. In 2019, MBL's net profit increased by 70% to
The Bank has the highest percentage of individual customer deposits amongst all banks in
However, for the banking industry as whole, ongoing uncertainty and slowdown in the economic activity may adversely impact repayment capacity of borrowers; thus, asset quality indicators may witness pressure in the medium to long run along with margin compression and lower profitability. The bank maintains provisions against non-performing financings at 142%, which is considered prudent from a ratings' perspective.
Reading the anticipated economic slowdown, the bank followed a prudent lending strategy in 2019, as a result, financing portfolio stood slightly lower compared to same period last year. The portfolio continues to be dominated by corporate clientele, which comprises about two-thirds of the financing exposures. However, given the strong focus on corporate clientele, the portfolio does depict counterparty concentration, this has decreased in
Increasing interest rate scenario and volumetric growth in advances contributed to healthy growth in profitability during 2019. Rise in expenses due to branch expansion was sufficiently absorbed by growth in the bank's funded and non-funded income resulting in improvement in efficiency ratio. Maintaining conservative lending strategy to maintain asset quality and cost efficiencies would be important rating drivers. Going forward, the oncoming pandemic-induced headwinds are expected to test the portfolio asset quality of the Banking Industry in
So far, SBP has taken notable measures to ensure continued credit supply to the economy and maintain confidence in the banking system to ease the expected credit crisis, resulting from the pandemic. These measures are expected to mask the impact of prevailing headwinds on portfolio asset quality indicators. Given the current economic situation, VIS will continue to closely monitor the Bank's performance metrics on quarterly basis.
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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