Karachi, VIS Credit Rating Company Ltd. has reaffirmed the robust ratings of Pak Oman Investment Company Limited (POIC) at ‘AA+/A-1+’, emphasizing strong long-term credit quality and the highest short-term payment certainty.
According to VIS Credit Rating Company Limited, The sustained ratings reflect POIC’s solid joint venture structure, shared equally between the Government of Pakistan and the Sultanate of Oman. Notably, recent upgrades to Oman’s sovereign ratings by S and P from ‘BB’ to ‘BB+’ and a revision of the outlook to ‘Positive’ have bolstered confidence in POIC’s financial backing. These upgrades are attributed to Oman’s fiscal improvements and increased hydrocarbon production.
Despite economic headwinds, POIC maintained a prudent disbursement approach, focusing on sectors such as textiles, power, and communications. Although the lending portfolio remains concentrated, management plans to diversify over the next one to two years. The adoption of IFRS-9 has improved provisioning coverage, enhancing asset quality—a crucial factor in maintaining high credit ratings. The investment portfolio, mainly in government securities like PIBs and T-bills, reflects low credit risk and a strategy to mitigate market fluctuations through repo borrowings for floating rate PIBs.
Financial performance indicators for POIC have been positive, driven by higher interest rates and improved markup spreads. Despite rising operating expenses, efficiency improved significantly in FY23 due to increased recurring income. Adjusted liquid assets relative to deposits and borrowings have decreased slightly but remain strong. The deposit base showed slight contraction with some withdrawals by banking and private sectors, though deposit concentration has improved.
POIC is on the brink of expanding its services to include Islamic banking, pending final regulatory approvals, with plans to start Islamic deposit mobilization by the end of FY24. This initiative is expected to bolster its funding base. However, the Capital Adequacy Ratio has dipped, albeit remaining above regulatory requirements, mainly due to an increase in market risk-related RWAs. Improvements in the leverage ratio are anticipated.