Lahore, August 19, 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. U Bank is a fast-growing player in the Microfinance Sector (end-Sep21: 12.9% market share in total Gross Loan Portfolio).
The Bank’s product mix mainly comprises livestock and agriculture lending. Going forward, the envisaged strategy encompass diversification at segmental, geographical, and product level. A sizeable book of GoP securities (end-June22: PKR 27.7bln) in the investment portfolio assisted in maintaining liquidity. 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 to add a further cushion for absorption of expected loan losses.
SBP’s recent circular about further relaxation in recording provisioning expense of NPLs is expected to bring reversal. 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 recent issuance of Tier- I Capital Term Finance Certificates of PKR 1bln provided a cushion to the equity base where all other parameters remained largely the same.
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. Meanwhile, the ratings are also placed under “Watch” to reflect the need for overseeing the risk profile of the Bank against unavoidable challenges.
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