Press Release

JCR-VIS Maintains Entity Ratings of First National Bank Modaraba

Karachi, July 6, 2015: JCR-VIS Credit Rating Company Limited (JCR-VIS) has maintained the entity ratings of First National Bank Modaraba (FNBM) at ‘A/A-1’ (Single A/A-One). The previous rating action was announced on Dec 31, 2013.
The ratings draw strength from the implicit support of National Bank of Pakistan (NBP) which owns National Bank Modaraba Management Company Limited, the management company of FNBM. In addition to name sharing, credit lines and term loans have also been made available from NBP.
Over the past few years, the modaraba has encountered problems in terms of increasing infection and depleting financing portfolio, resulting in higher losses. Consequently, equity base of the modaraba has been considerably eroded. Injection of equity along with improvement in asset quality is considered essential to sustain risk profile of the institution.
With primary focus on recoveries and regularization of non performing accounts, financing portfolio has shrunk largely on account of curtailment in murabaha financing and lately also due to limited disbursements in Ijarah. Disbursements have declined on a timeline basis. In Ijarah financing, the management’s focus remained on vehicle financing for existing clientele. The management plans to concentrate on small leases unless the client has a good repayment history.
Total borrowings decreased on timeline basis on account of both retirement of long-term funds and repayment of short-term credit lines. Given relatively lower rates, the management’s focus remained on mobilizing short-term Certificates of Musharaka.
Since November 2014, the management team had been led by Head of Credit Management till the process of hiring a permanent CEO was completed. With induction of new CEO in May 2015, strategic plan and course of action for business growth will be evident over time.
Outlook on the rating has been revised from ‘Stable’ to ‘Negative’ on account of continuing losses resulting in considerable equity erosion and increase in leverage indicators; thus limiting the loss absorption capacity of the modaraba.
For further information on this rating announcement, please contact the undersigned or Mr. Maimoon Rasheed at 021-35311861-70 and 042-35723411-13, respectively, or fax to 021-35311873.

Javed Callea
Applicable Rating Criteria: Non-Bank Financial Companies

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.

JCR-VIS Credit Rating Company Limited