Karachi, March16, 2017: JCR-VIS Credit Rating Company Limited (JCR-VIS) has reaffirmed the entity ratings of Advans Pakistan Microfinance Bank Limited (APMBL) at ‘BBB+/A-3’ (Triple B Plus /A-Three). Outlook on the assigned rating is ‘Stable’. The previous rating action was announced on April 29, 2016.
Assigned ratings of APMBL incorporate demonstrated support of bank’s major sponsor, Advans SA SICAR (Advans SA). Sponsors (Advans SA and Netherlands Development Finance Company (FMO)) possess extensive experience in the microfinance sector, as depicted by their presence in microfinance institutions in several countries. Along with financial support, the majority shareholder, Advans SA, also provides technical assistance to its affiliates. Under this arrangement, Advans SA helps to build institutional capacity, including training and system development.
Gross financing portfolio witnessed a decline during 1H16 on account of maturities being higher than disbursements. Disbursements have picked pace subsequently on account of improved productivity of loan officers. With additional hiring of loan officers, financing portfolio is projected to double at end-2017. A number of initiatives taken by the management have translated into improved asset quality indicators. Ability to sustain asset quality indicators at faster and higher level of disbursements is considered important.
While quantum of operating losses has declined during the latter half of 2016, overall operating losses were higher with increase in administrative expenses and decline in net interest income. Going forward, trend in operating losses is expected to continue with quantum of the same expected to decline with growth in portfolio. Cost efficiencies to break-even on operating losses would be a key rating driver, going forward. Management expects to break-even by latter half of 2018.
Capitalization levels of the Bank have strengthened on account of equity injection to the tune of Rs. 340m in 2016. Additional equity injection of Rs. 150m is also planned in the ongoing year. Given the current trend in operating losses, management believes that planned equity injection would suffice to remain compliant with the Minimum Capital Requirement (MCR) in 2017. Capital Adequacy Ratio is expected to remain at comfortable levels over the rating horizon given the growth plans of the Bank. Management team has witnessed a number of changes at senior management level. Stability in senior management team is considered important for continuityof business strategy.
For further information on this rating announcement, please contact please contact the undersigned (Ext: 207) or Mr. Khalid Ali (Ext: 208)at 021-35311861-71 or fax to 021-35311872.
Jamal Abbas Zaidi
Applicable Rating Criteria: Microfinance Institutions (May 2016)
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