Lahore, December 29, 2021 (PPI-OT):The ratings assigned to The First Microfinance Bank Ltd (FMFB) underpin the Bank’s affiliation with Aga Khan Development Network and Habib Bank Limited (HBL) – one of the largest banks of the country. The First Microfinance Bank Ltd (FMFB) has been able to devise a sound strategy and establish strong footprint over the years. The Bank held a 19% market share amongst the microfinance banks as at end-Sep`21 in terms of GLP, being second highest in the industry, which grew by 216 basis points on a YoY basis. The recent growth recorded in the GLP is a result of enhanced outreach secured by the Bank.
The same growth pattern is projected in the future as well; wherein the need to curb infection remains vital. During 9MCY21, the Bank recorded sizable improvement in markup income, due to enhanced portfolio as well as investment book. Sustainable and improving the fee and commission income has been supplementing the profitability. The Bank’s higher provisioning expense in 2020 is attributable to increased general provisioning to create additional cushion on rescheduled loans. The Bank enjoys sizable increase in net profitability.
The investment book is vested in the government securities which adds to the liquidity side. Funding is majorly fueled through deposits where high contribution arises from saving and demand deposits. However, the concentration of the Top-20 deposits is tilted towards higher side. A high equity base provides cushion in the risk absorption capacity of the Bank. Capital Adequacy Ratio (CAR) was recorded at 18.6% as at end-Sep’21 amid equity injection by parent company, HBL, in form of the share capital through right shares issuance of Rs. 2b in the ongoing year.
Risk management framework is supported by Loan Origination System which has been implemented in 120+ branches as at end-Sep’21 while branchless banking (FirstPay) has been commercially launched in 1QCY21. Under the current scenario COVID-19 pandemic has poised challenge to business and asset quality; guarding against the infection is of prime importance.
The ratings are dependent on the Bank’s ability to sustain and improve the current market position. Given the strong business acumen of the sponsors, a distinct focus is vested to continue leading the market with good asset quality. Meanwhile, the Bank’s propensity to protect its performance indicators is imperative.
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