Press Release

VIS Reaffirms Entity Ratings of Pak Brunei Investment Company Limited

Karachi, June 29, 2020: VIS Credit Rating Company Limited has reaffirmed the entity ratings of Pak Brunei Investment Company Limited (PBIC) at ‘AA+/A-1+’ (Double A Plus/A-One Plus). The long term rating of ‘AA+’ signifies high credit quality, protection factors are strong. Risk is modest but may vary slightly from time to time because of economic conditions. The short-term rating of ‘A-1+’ signifies highest certainty of timely payment; short-term liquidity, including internal operating factors and/ or access to alternative sources of funds, is outstanding and safety is just below risk free Government of Pakistan’s short-term obligations. Outlook on the assigned ratings is ‘Stable’. The previous rating action was announced on June 26, 2019.

The assigned ratings incorporate PBIC’s sound capitalization and liquidity indicators. Asset quality indicators have largely been maintained and remain strong reflecting sound risk and control infrastructure. Provisioning coverage, though sound, needs to be further strengthened in alignment with outstanding rating. Ratings also take into account elevated exposure to credit risk due to significant impact of Covid-19 on already weak macroeconomic indicators. Profitability profile has largely been maintained but is expected to improve in 2020 due to higher capital gains. Ratings continue to derive strength from strong sponsor profile of Government of Pakistan and Brunei Investment Agency.

During the period under review, PBIC pursued a conservative lending strategy given the challenging macroeconomic environment. Going forward, the management plans to pursue a consolidation strategy given the challenging operating environment. Resultantly, advances portfolio is expected to witness limited growth in 2020. Regulatory relief measures undertaken by SBP to promote financial stability, ensure continued credit supply to the economy and maintain confidence in the financial system have been received positively and are expected to delay the impact of prevailing headwinds on portfolio asset quality indicators. However, exposure of financial sector to credit risk is elevated due to significant impact of Covid-19 on already weak macroeconomic indicators. Our credit impairment expectations are conservative, albeit there is a probability of deviation from expectations; downside risk is elevated, amidst an uncertain economic environment. With heightened credit risk, particularly in select revival financing exposures, risk management has enhanced monitoring of exposures with regular client meetings, particularly for client where credit risk is on the higher side, and increase in reporting frequency to the board and senior management. Given the ongoing challenging operating environment, general provision for select risky exposures are under consideration.

Exposure to credit risk emanating from investment portfolio remains limited sizeable holding of government securities and highly rated TFCs (primarily issued by Commercial Banks). Duration of sovereign exposures has been timely aligned with changing macroeconomic environment in order to manage market risk while at the same time capitalizing on opportunities in the market to maximize returns on the portfolio. Liquidity profile of the company is considered sound in view of the adequate liquid assets in relation to deposits and borrowings. Capitalization indicators including Capital Adequacy Ratio and net-NPL to Tier 1 equity remain compliant with rating benchmarks. Ratings remain dependent on maintaining liquidity and capitalization buffers and strong asset quality indicators.

For further information on this rating announcement, please contact the undersigned (Ext: 306) or Mr. Talha Iqbal at 021-35311861-70 or fax to 021-35311873.

Faryal Ahmad Faheem
Deputy CEO

Applicable Rating Criteria: Government Supported Entities (June 2016)

Information herein was obtained from sources believed to be accurate and reliable; however, VIS Credit Rating Company Limited (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.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.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 2020 VIS Credit Rating Company Limited . All rights reserved. Contents may be used by news media with credit to VIS .

VIS Credit Rating Company Limited