Karachi, April 28, 2016: JCR-VIS Credit Rating Company Limited (JCR-VIS) has reaffirmed the entity ratings of U Microfinance Bank Limited (UMBL) at ‘A-/A-2’ (Single A Minus/A-Two). Outlook on the assigned rating is ‘Stable’. The previous rating action was announced on April 29, 2015.
The assigned ratings to UMBL reflect its association with a strong sponsor, Pakistan Telecommunication Company Limited (PTCL). PTCL is co-owned by the Government of Pakistan and Etisalat International Pakistan (LLC) (Etisalat). The management control of PTCL rests with Etisalat, state owned Telecom Corporation of UAE, having a long-term international scale rating of ‘A+’ by an international rating agency (Fitch Ratings Inc.).
During the outgoing year the senior management team at UMBL has been strengthened with the induction of Mr. Kabeer Naqvi, a seasoned professional in the microfinance sector. With change in management, increased focus on branch banking operations has been noted as also evident from expansion in footprint with the bank increasing its presence to over 50 (end-Sep’2015: 25) locations currently. Hiring has also been undertaken in various business and control functions with significant increase in experienced loan officers (LOs).Branchless Banking (BB) operations are also being restructured with product diversification to enable greater support to overall profitability.
Loan book has depicted significant growth during 2015 and in the ongoing year. Proportion of unsecured financings represents over two-third of gross lending portfolio primarily comprising exposure to livestock and agriculture loans. Going forward, net advances are projected to depict significant increase. Growth will be a function of increase in branches, LOs & average loan size and new products launched by the management. Infection in the portfolio has remained within manageable level with PAR-30 reported at 0.3% at end-March’2016. Given the rapid growth in loan book alongwith a sizeable portfolio being based on bullet repayment, as has been in the past, quality of fresh lendingin the portfolio will become evident as the loan cycle matures.
Funding strategy of UMBL entails a mix of deposits and borrowings to finance growth in loan book. Deposit base has shown significant increase during the ongoing year. Growth in deposits is being supplemented by a strategy whereby medium term borrowings have been utilized. Liquidity profile draws comfort from liquid assets carried on the balance sheet, increasing proportion of longer maturity deposits & borrowings in funding mix and unutilized credit lines available with the UMBL. Capitalization indicators of the bank are adequate with Capital Adequacy Ratio (CAR) reported well above regulatory requirement at end-Mar’2016.
For further information on this rating announcement, please contact the undersigned (Ext: 501) or Mr. Mohammed Khalid Ali (Ext: 508) at 021-35311861-70 (10 lines) or fax to 021-35311873.
Applicable Rating Criteria:Microfinance Institutions (October 2003)
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