Press Release

JCR-VIS Upgrades Entity Ratings of Saudi Pak Industrial and Agricultural Investment Company Limited

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Karachi, December 1, 2014: JCR-VIS Credit Rating Company Limited (JCR-VIS) has upgraded the medium to long-term entity rating of Saudi Pak Industrial and Agricultural Investment Company Limited (Saudi Pak) to ‘AA+’ (Double A Plus) from ‘AA’ (Double A) while maintaining the short-term entity rating at ‘A-1+’ (A-One Plus). Outlook on the rating has been revised from ‘Positive to ‘Stable’. The previous rating action was announced on July, 02, 2014.

Ratings assigned to Saudi Pak draw comfort from the presence of its two sovereign sponsors, Government of Pakistan and Kingdom of Saudi Arabia (KSA). KSA has outstanding ratings of ‘AA-/A1+’ with a Positive Outlook from an international credit rating agency.

Saudi Pak has achieved a turnaround in its overall risk profile including operating results and financial flexibility as a result of a three years long strategy of balance sheet restructuring. During the initial year, investment portfolio was rationalized by off-loading major non-earning listed securities. Liquidity arising out of sale of securities & mutual funds, redemption of TFCs and adjustment of advances portfolio was deployed into low risk government instruments. This strategy had a two-fold impact; it allowed the company to generate additional liquidity under repurchase transactions at relatively low cost while also augmenting sustainable sources of earnings. Simultaneously, the management’s focus remained on recoveries while coverage against non-performing loans and TFCs was improved. Resultantly, liquidity and financial flexibility of the company witnessed considerable improvement. As per the business plan, the management enhanced its focus on business expansion during the ongoing year. With availability of relatively low cost funding along with volumetric growth, a positive impact was recorded in core earnings.

Major portion of the investment portfolio has been deployed in government securities; credit risk arising from the same is considered minimal in the local context. While investment in PIBs exposes the company to a certain degree of market risk, the current declining trend in interest rates is favorable for valuation of fixed income instruments. Return on equity portfolio has remained higher than the benchmark index, supporting the bottom line.

With growth oriented strategy from FY14 onwards, Saudi Pak may need to fill skill gaps in the management team. JCR-VIS will closely monitor any meaningful developments in this regard.

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

Applicable Rating Criteria: PRIMER - Commercial Banks (December 2001)

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 2014 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