Press Release

JCR-VIS Reaffirms Entity Ratings of Pak Oman Microfinance Bank Limited
 

Karachi, April 29, 2014: JCR-VIS Credit Rating Company Limited (JCR-VIS) has reaffirmed the entity ratings of Pak Oman Microfinance Bank Limited (Pak-Oman) at ‘BBB+/A-3’ (Triple B Plus/A-Three). Outlook on the assigned rating is ‘Stable’. Previous rating action was announced on April 29, 2014.

Following the equity injection of Rs. 250m in 2014, Pak-Oman is now compliant with the minimum capital requirement stipulated for microfinance banks licensed to undertake nation-wide operations. The assigned ratings take into account the demonstrated financial support of the sponsors. Sultanate of Oman is the majority shareholder with 67% direct stake in the bank, with remaining 33% shares held by Pak Oman Investment Company Limited (POICL), rated ‘AA+/A-1+’.

Pace of lending activities at Pak-Oman, while having picked up, remains much slower than other market participants. The sector offers tremendous opportunity for growth, with market penetration estimated at 11.6% by the Pakistan Microfinance Network, and a Cumulative Annual Growth Rate in loan portfolio of over 20% in the past 5 years. The management of Pak-Oman plans to increase lending at a measured pace in the coming periods, in line with which income from loans is also projected to increase, going forward.

Almost three-fourths of the bank’s assets at year-end were parked in money market placements and investments. The bank’s balance sheet is almost entirely funded by equity, with a nominal amount of deposits, which are primarily mandatory in nature. In line with the asset mix, earnings are driven by return on placements and investments. The bank’s returns are amongst the lowest in relation to peers in view of the limited deployment of funds in core lending operations. Losses have been curtailed in 2014 while future profitability remains largely dependent on asset mix and quality. IT infrastructure of the bank requires strengthening. To address the weaknesses, the bank has hired fresh staff which has initiated in-house developments while a change in existing MIS is also being considered.

For further information on this rating announcement, please contact the undersigned (Ext: 501) or Ms. Sobia Maqbool, CFA (Ext: 604) at 35311861-70 or fax to 35311873.



Javed Callea
Advisor

Applicable Rating Criteria:
Micro Finance Institutions - Oct 2003 (http://www.jcrvis.com.pk/images/MicroFinance.pdf)

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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 2015 JCR-VIS Credit Rating Company Limited. All rights reserved. Contents may be used by news media with credit to JCR-VIS.

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