Karachi, December 16, 2022 (PPI-OT):VIS Credit Rating Company Limited (VIS) has revised the entity ratings of FINCA Microfinance Bank Limited (FINCA MFB) to ‘A-/A-2’ (Single A Minus/A-Two) from ‘A/A-1’ (Single A /A-One). The medium to long term rating of ‘A-’ signifies good credit quality; protection factors are adequate. Risk factors may vary with possible changes in the economy. The short-term rating of ‘A-2’ indicates good certainty of timely payment. Liquidity factors and company fundamentals are sound. Access to capital markets is good. Risk factors are small. Outlook on the assigned ratings is ‘Negative’. The previous rating action was announced on April 30, 2022.
The revision in ratings takes into account the lingering impact of Covid-19, weakening macroeconomics indicators along with the impact of the recent floods wherein portfolio credit quality and the financial risk profile of the Bank has weakened. The weakening of the financial profile has led to a negative bottom line, this along with weak asset quality indicators has placed the CAR at below the minimum regulatory requirement and is accordingly recognized in the ratings revision.
The ratings also incorporate the observations of external auditors involving going concern assumption pertaining to reduction in markup income and CAR. In that regard, the ratings take note of the management’s plan to recapitalize the bank in the forthcoming twelve months, however, are constrained by uncertainty pertaining to the timeline of achievement of plans when the Bank’s lending operations are already impacted. The strengthening of the capital adequacy along with liquidity of the bank is important for the sustenance and review of ratings and outlook. VIS expects a capitalization plan to place the Bank’s CAR and liquidity at levels which would support its financial risk profile, going forward.
For more information, contact:
Director Compliance and Rating Analytics,
VIS Credit Rating Company Limited
VIS House, 128/C, 25th Lane off Khayaban-e-Ittehad,
Phase VII, DHA, Karachi, Pakistan
Tel: +92-21-35311861-72
Fax: +92-21-35311873
Email: bilal@jcrvis.com.pk
Website: https://www.vis.com.pk/