KARACHI, May 5: JCR-VIS Credit Rating Company said on Monday that it had revised medium to long-term entity rating of MashreqBank psc—Pakistan Branches (MashreqBank) to triple B plus and the short-term entity rating to A-2.

“The ratings continue to be on “Rating Watch” due to the proposed amalgamation with Crescent Investment Bank Ltd (CresBank) to form a new, locally incorporated entity”, the agency stated, adding that the proposed amalgamation was subject to regulatory approval.

JCR-VIS observed that the revision in ratings was based on the diminishing support of MashreqBank psc, the head office, in view of the planned amalgamation and the consequential contraction in Pakistan operations. “After the amalgamation, MashreqBank psc’s interest in the proposed new entity will be 20 per cent”, the agency stated. It noted that the major decline in deposit base of the bank had come through the maturity of HO swap funds placed with the SBP. Paid-up capital currently fell short of SBP’s minimum requirement of Rs1 billion. However, MashreqBank had been granted extension till the end of June 2003. “Fundamentals of the bank are strong with sound internal controls and Information Technology systems with negligible new infection in the past five years”, JCR-VIS observed.

It stated that after the amalgamation, the risk profile of the new company was expected to change as it would be locally incorporated and management control would lie with CresBank. The present management was expected to continue “and their expertise in commercial banking is a source of comfort for JCR-VIS”, the rating agency said.