Lahore: The Pakistan Credit Rating Agency Limited (PACRA) has downgraded the ratings of Escorts Investment Bank Limited, a subsidiary of Bahria Town (Pvt) Limited. The bank, with a limited portfolio in house finance, microfinance, and gold finance, has been facing mounting financial challenges and losses.

Escorts Bank's initial focus on house financing, particularly for Bahria Town customers, did not yield the expected results, prompting a shift towards microfinance. Despite this pivot, the bank continues to struggle with limited revenue and increasing losses, driven by higher non-markup expenses and declining investment income.

The bank's equity structure has been weakened by the absence of in-house profit generation, failing to meet the Minimum Capital Requirement of PKR 750 million as stipulated by NBFC Regulations. The negative outlook reflects the pressing risks, as the bank remains reliant on potential capital injections and new revenue streams to achieve self-sustainability.

The new management is actively seeking a partner to inject fresh equity, which is expected to bolster the bank's capital and facilitate the acquisition of a full-fledged IFS license. PACRA highlights that the successful and timely execution of these plans is crucial for the bank's future stability.

The ratings remain contingent on the bank's ability to improve asset quality and achieve bottom-line profitability. Any further deterioration in the financial profile or delays in support from sponsors could adversely affect the ratings.