JCR-VIS assigns AA+ rating to Basel 3 compliant additional Tier 1 instrument by United Bank Limited
Karachi, June 12, 2018 (PPI-OT): JCR-VIS Credit Rating Company Limited (JCR-VIS) has assigned preliminary rating of ‘AA+’ (Double A Plus) to United Bank Limited’s (UBL’s) proposed Basel 3 compliant additional Tier-1 (ADT-1) TFC. Outlook on the assigned rating is ‘Stable’. Rating will be finalized upon review of signed legal documents. The assigned rating to ADT-1 instrument incorporates JCR-VIS standard notching criteria for Basel 3 compliant ADT-1 instruments issued by AAA rated Banks.
UBL is in the process of issuing a listed, perpetual, unsecured, subordinated, non-cumulative and contingent convertible debt instruments amounting up to Rs. 10.0b (inclusive of Green Shoe Option of Rs. 3.0b). The issue proceeds will contribute towards the bank’s ADT-1 capital and will be utilized towards enhancement of the bank’s business operations. UBL’s ADT-1 instrument will rank ahead of claims of ordinary shareholders but below the bank’s senior creditors, including depositors.
JCR-VIS has assigned entity ratings of AAA/A-1+ (Triple A/A-One Plus) to UBL indicating highest credit quality. The assigned ratings reflect the Bank’s strong domestic franchise, existing market share and diversified operations. Moreover, financial profile is strong as evident from robust liquidity profile and healthy existing and projected capitalization buffers. UBL has exhibited sustained improvement across key performance areas including asset quality, liquidity and capitalization. Tier-1 and overall CAR stood at 11.7% and 16% at end-1Q18, respectively; significantly above regulatory requirements.
The assigned rating portrays the relative risk of the Tier-1 instrument wherein issuer has full discretion on coupon payments, interest servicing from only profits for the year and conversion feature in the event of pre-specified trigger events, lock-in clause and point of non-viability in terms of regulatory requirements. While the regulatory framework may not consider a missed coupon payment as a default; the credit rating methodology employed by JCR-VIS would treat such missed payments as an event of default. In normal course of business, JCR-VIS believes that chances of non-performance risk are considered remote.
For more information, contact:
JCR-VIS Credit Rating Company Limited
VIS House, 128/C,
25th Lane off Khayaban-e-Ittehad,
Phase VII, DHA, Karachi