Lahore, December 21, 2022 (PPI-OT):The ratings reflect the association of U Microfinance Bank Limited (U Bank) with Pakistan Telecommunication Company Limited (PTCL), the country’s leading Information and Communication Technology Service Provider. This affiliation supports the Bank in terms of building a strategic congruence alongside establishing robust systems and controls. The Bank’s ambitious growth strategy encompasses multi-faceted targets focused on achieving growth in the retail banking segment, and developing a digital banking platform.
A sizeable book of GOP securities (End-June 22: PKR 27.7bln) in the investment portfolio assisted in maintaining liquidity. The Bank’s digital segment is yet to progress a long way to mark its presence in the competitive landscape; the mix is currently small. Almost half of the Bank’s portfolio is gold-backed. Asset quality was impaired, as deferred book to total GLP was significant. To build a cushion, the Bank has recognized a sizable subjective provision in order to add a further cushion for the absorption of expected loan losses. This provides a strong mitigate against potential credit risk.
The investment income stream has helped the bank to bolster its profitability through this avenue. Sizable enhanced markup and non-markup income provide comfort. The Bank’s funding needs are primarily fostered through a growing deposit base, coupled with sizable borrowings. The ratings are constrained by high concentration in deposit base; increased on account of gaining. The industry’s few parameters are deteriorating on account of pressured macroeconomic indicators, attributable to the aftermath of the COVID-19 and recent flood situation.
In order to meet the enhancement of advances portfolio the Bank issued TFC amounting to PKR 5bln on 23-Jun-21 and in the process of issuing second TFC amounting PKR 5bln. However, due to delays in certain approvals and unstable economic situations, the issuance of the TFC gets delayed. The ratings are dependent upon the Bank’s ability to aptly combat the emerging risks under the current scenario in order to keep its business and financial risk profile intact. Stable outlook denotes comfort on business risk and financial risk profile of the bank.
For more information, contact:
Analyst,
The Pakistan Credit Rating Agency Limited (PACRA)
Awami Complex, FB1, Usman Block New Garden Town,
Lahore, Pakistan
Tel: +92-42-5869504-6
Fax: +92-42-5830425
Email: hammad.rashid@pacra.com
Website: www.pacra.com