Karachi: The Pakistan Credit Rating Agency Limited (PACRA) has downgraded the Broker Fiduciary Rating (BFR) of Alfalah Securities (Pvt.) Limited, noting significant challenges related to governance and financial stability. The brokerage firm, primarily owned by Bank Alfalah Limited, was assigned a BFR 2 rating with a stable outlook, a downgrade from its previous BFR 2+ rating.

Alfalah Securities, formerly known as Alfalah CLSA Securities, is facing heightened scrutiny following equity erosion due to substantial provisions linked to financial misconduct under its former CEO. The firm recorded a PKR 1.1 billion provision, which has impacted its financial standing despite a PKR 1.2 billion equity injection by its parent company aimed at stabilizing the capital structure.

The board of Alfalah Securities, comprising six members with four representatives from Bank Alfalah, has recently seen changes in its internal audit operations, transitioning from BDO to KPMG. While the company's governance and management structures remain robust, PACRA has highlighted ongoing risks related to execution and reputation that require careful attention.

The firm has also been placed on Rating Watch, reflecting the uncertainties associated with its efforts to rebuild stakeholder confidence and stabilize its profitability. PACRA emphasized the importance of Alfalah Securities enhancing its internal controls and sustaining revenue growth to improve its credit profile and market position.