Lahore, August 20, 2021 (PPI-OT):The rating of the TFC reflects the coverage of the instrument through the security structure. Among other features of the security structure, 50% of the TFC’s amount is secured against lien on government securities of a similar tenor. The security agent will have the right to en-cash proportionate amount from the pool to settle due payments, should the issuer not be in any eventuality, in a position to make the payment. U Microfinance Bank Limited (UMBL) is a fast growing player in the Microfinance Sector (End-Dec’20: 9.3% market share in total Gross Loan Portfolio).
The Bank’s ambitious growth strategy encompasses multi-faceted targets focused towards achieving growth in the retail banking segment, developing digital banking platform and building a wholesome treasury book. The Bank’s funding needs are primarily fostered through a growing deposit base, coupled with sizable borrowings. Sponsor support is reflected by way of conversion of subordinated debt into Tier-I capital in the form of preference shares of PKR 1,000mln in Dec 2020. Almost half of the Bank’s portfolio is gold backed which provides a strong mitigant against potential credit risk.
COVID-19 is an ongoing challenge. While it has taken a toll on many businesses, its ramifications are still unfolding. The proactive measures taken by the regulators and other concerning bodies have mitigated the potential damages much anticipated from this pandemic. Vigilance is required as the loan repayment cycle remains amid variants of the pandemic continue to re-emerge. Pandemic (Covid-19) is a concern; its continuity would pose challenges. Average loan size of the Bank is on the higher side in relation to its peers on account of gold backed lending. The rating is dependent upon the Bank’s compliance with the agreed terms.
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