Press Release

JCR-VIS reaffirms Entity Ratings of The First MicroFinance Bank Limited at A/A-1 with Stable Outlook

Karachi, April 30, 2013: JCR-VIS Credit Rating Company Limited (JCR-VIS) has reaffirmed the entity ratings of The First MicroFinance Bank Limited (FMFB) at ‘A/A-1’ (Single A/A-One). Outlook on the assigned rating is ‘Stable’.

FMFB is associated with the Aga Khan Development Network and several institutions operating under its umbrella. The assigned ratings take into account implicit support from the primary sponsor. In 2012, Japan International Cooperation Agency has also assumed 18% stake in the bank. Although the bank is in compliance with the minimum capital requirement (MCR) for end-12, equity (net of losses) is slightly lower than the MCR for end-13, i.e. Rs.1b. The primary sponsor stays committed to inject equity, if need arises.

FMFB enjoys the second largest market share of deposits mobilized by microfinance institutions. Balance sheet is funded primarily through deposits which feature low concentration. Over the years, deposit base has depicted stability. In view of this and the sizeable amount of liquid reserves carried on balance sheet, liquidity profile of the institution is considered sound.

In 2012, the bank witnessed considerable growth in loan book following stagnation in lending operations for the last few years. While maintaining cautions stance on agriculture related loans, fresh disbursements were higher in other avenues. The proportion of bullet loans has decreased on a timeline basis and is planned to be rationalized further, going forward. Pilot test of gold backed loans has been initiated; proportion of secured loans is likely to increase with the rollout of the same on a large scale. Successful launch of some more products, development of which is in the pipeline, may further diversify risks associated with agricultural lending. Growth in loan book, the highest yielding asset on the balance sheet, may facilitate in absorbing overheads and improve the bottom line.

Impact of past credit losses arising on account of floods has been absorbed; moreover, in 2012, the bank has created general provisions in excess of the regulatory requirement in anticipation of losses from portfolio outstanding in rain affected areas. Portfolio quality indicators will continue to be closely tracked for impact on risk profile of the institution.

Some key management positions were filled during FY12 while the bank is actively looking to fill the position of Chief Financial Officer. There was a noteworthy change in the structure of risk department. The ambit of risk department has been broadened. The management is planning to deploy a new IT system; timely implementation of an IT system in line with the bank’s requirements is considered very important, as the bank continues to expand operations.

For further information on this rating announcement, please contact Ms. Sobia Maqbool, CFA at 021-35311861-70 or Mr. Maimoon Rasheed at 042-36610681-84.

Jamal Abbas Zaidi
Deputy CEO

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 2013 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