Press Release

JCR-VIS reaffirms entity ratings of Pak Oman Investment Company Limited at AA+/A-1+

Karachi, June 2, 2017: JCR-VIS Credit Rating Company Limited has reaffirmed the entity ratings of Pak Oman Investment Company Limited (POIC) at ‘AA+/A-1+’ (Double A Plus/A-One Plus) with a ‘Stable’ Outlook. The previous rating action was announced on June 29, 2016.

The credit ratings of POIC take into account sound profile of the sovereign sponsors. The company is a joint venture between the Government of Pakistan (GoP) and the Sultanate of Oman, with equal number of shares vested with both entities. Sovereign ratings of Oman have been revised by international rating agencies in the backdrop of weak oil prices and its effect on the regional economies. Nevertheless, sponsors of the company have demonstrated commitment towards the company in the past and the same is expected to continue in future.

Core lending operations of the company gained momentum with gross advances amounting to Rs. 19.5b (2016: Rs. 15.9b; 2015: Rs. 10.9b) at end-Q1’17. Higher quantum of portfolio can be attributed to adoption of growth strategy by the management to offset the impact of decline in spreads. Sector-wise composition of advances depicts adequate diversification, while client-wise concentration has increased on yearly basis. Asset quality indicators have depicted improvement in comparison to the preceding year. As per management, sound underwriting policies and cautious growth adopted by them would maintain the asset quality indicators. Trends in the same would be tracked, going forward.

During the outgoing year, net markup income witnessed compression on the back of reduction in benchmark interest rates. However, profitability grew on the back of sizeable gain on sale of securities and reversals in provisions booked against diminution in the value of investments. Going forward, the company may need to effectively balance its cost of funding and enhance its portfolio in order to curtail the pressure on net interest margin witnessed in Q1’2017.

While decreasing on yearly basis on account of increased borrowing, liquid assets are considered adequate in relation to total deposits & borrowings. Growth in advances has resulted in lower Capital Adequacy Ratio (CAR); albeit the same remains comfortably above the regulatory requirement.

For further information on this rating announcement, please contact the undersigned (Ext: 201) at 35311861-70 or fax to 35311872-3.

Javed Callea

JCR-VIS Entity Rating Criteria: Government Supported Entities (June 2016)

Information herein was obtained from sources believed to be accurate and reliable; however, JCR-VIS Credit Rating Company Limited (JCR-VIS) does not guarantee the accuracy, adequacy or completeness of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information. JCR-VIS, the analysts involved in the rating process and members of its rating committee do not have any conflict of interest relating to the rating(s)/ranking(s) mentioned in this report. JCR-VIS is not an NRSRO and its credit ratings are not NRSRO credit ratings. JCR-VIS is paid a fee for most rating assignments. This rating/ranking is an opinion and is not a recommendation to buy or sell any securities. Copyright 2017 JCR-VIS Credit Rating Company Limited. All rights reserved. Contents may be used by news media with credit to JCR-VIS.

JCR-VIS Credit Rating Company Limited