Karachi, December 30, 2016: JCR-VIS Credit Rating Company Limited (JCR-VIS) has reaffirmed the entity ratings of First Credit and Investment Bank Limited (FCIBL) at ‘A-/A-2’ (Single A Minus/A-Two). Outlook on the assigned rating is ‘Stable’. The previous rating action was announced on December 30, 2015.
The assigned ratings take into account the profile of major sponsors of the company, namely, National Bank of Pakistan and Water and Power Development Authority, with each having a shareholding of 30.8%. Rating also reflects improving control environment as evident from documentation of policies and procedures, healthy liquidity and improving profitability profile of FCIBL. However, ratings are constrained by challenging operating environment with significant competition for rates, shortfall in compliance with minimum equity requirement (MER) and limited room for diversification in revenue streams available for NBFCs.
Placements represented significant part of FCIBL’s asset base as at end-June’2016 while exposure has also been built in ready future transactions. While credit risk emanating from the financing and investment portfolio is considered manageable with net non-performing exposure at less than one-tenth of FCIBL’s equity, overall sectoral concentration is present in investment grade Microfinance Banks. Strong focus on recoveries has continued while negotiation for restructuring of a number of non-performing exposures is underway.
Major portion of the company’s balance sheet still continues to be funded by equity. In contrast to the preceding year, borrowings have been mobilized, primarily from parent entity, and deployed at higher rates to earn a spread. As at end-1Q17, gearing ratio of the company stood at 0.3x and is expected to remain at manageable levels, going forward. Liquidity profile of the company draws support from sizeable liquid asset in relation to outstanding obligations. Despite decline in average KIBOR rates, profitability of FCIBL doubled due to capital gains.
SECP as per amendment in regulations has specified the minimum equity requirement (MER) for the companies undertaking business of deposit taking investment finance companies at Rs. 750m. At end-1Q17, shortfall in MER was Rs. 27.6m. FCIBL has received extension for compliance with MER till 30th June’2017. Risk adjusted capitalization levels of the company are considered adequate.
For further information on this rating announcement, please contact the undersigned (Ext: 207) or Mr. Javed Callea (Ext: 201) at 021-35311861-71 or fax to 021-35311872-3.
Jamal Abbas Zaidi
Applicable Rating Criteria: Non-Bank Financial Companies (March 2005)
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