Karachi, April 29, 2022 (PPI-OT):VIS Credit Rating Company Limited (VIS) has maintained entity ratings of Rural Community Development Programmes (RCDP) at ‘BBB/A-3’ (Triple B/A-Three) while outlook on the assigned ratings has been revised from ‘Rating Watch-Developing’ to ‘Stable’. The medium to long-term rating of ‘BBB’ denotes adequate credit quality coupled with reasonable protection factors. Moreover, risk factors are considered variable if changes occur in the economy. The short-term rating of ‘A-3’ denotes satisfactory liquidity and other protection factors. Risk factors are larger and subject to more variation. Nevertheless, timely payment is expected. The previous rating action was announced on April 29, 2021.
The ratings assigned to RCDP take into account implicit support available from the parent organization, Rural Community Development society (RCDS) both on financial and technical fronts. Despite support from other income which mainly includes present value adjustment on unwinding of microcredit revolving loan and net exchange gain and profit on investments, net profit decreased on account of contraction in spreads, higher provisioning charge and write-offs during FY21.
Meanwhile, net profit declined further in HY22 amidst considerable increase in write-offs and operating expenses. The infection ratios depicted some improvement with lower NPLs along with growth in portfolio during HY22. Meanwhile, the liquidity indicators have remained adequate as RCDP has maintained considerable liquid assets in relation to outstanding debt obligations on a timeline basis. The capital adequacy ratio has also remained sizeable, reflecting sufficient room for growth.
The institution has envisaged network expansion by adding a certain number of branches in each of the next five years. While enhancing existing loan facilities, the management also plans to tap capital markets in order to finance its expansion plans. Bottomline is expected to remain depressed during the ongoing year primarily due to higher operating expenses. As per management, the expected growth in loan book along with rationalization of operating expenses is likely to result in building a sustainable income stream for the institution, going forward. Meanwhile, ratings will remain dependent on improvement in asset quality indicators, managing spreads, liquidity and capitalization indicators while achieving projected growth in disbursements, 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/