Karachi, April 28, 2023 (PPI-OT):VIS Credit Rating Company Limited (VIS) has revised the entity ratings of Advans Pakistan Microfinance Bank Limited (APMBL) to ‘BBB/A-3’ (Triple B/A-Three) from ‘BBB+/A-3’ (Triple B Plus/A-Three). 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. Outlook on the assigned ratings is ‘Stable’. Previous rating action was announced on April 29, 2022.
APMBL holds a province-specific license for operating within Sindh; presently working with a network of 19 branches. Assigned ratings account for sponsor strength (100% stake by Advans SA Sicar, an international microfinance group with presence in nine countries) and a decade-long operating experience in domestic market. The ratings revision encapsulates the impact of dismal macroeconomic indicators wherein portfolio credit quality has been impacted and the financial risk profile of the Bank has weakened. The deterioration of asset quality has led to negative bottom line which along with increase in risk weighted assets stemming from continued lending in unsecured segments has resulted in drop in capital adequacy ratio (CAR) during the outgoing year.
Despite increase in spreads, the profitability metrics weakened owing to significant provisioning expense and higher administrative expense booked on account of network expansion. Additional rating triggers include weakening of liquidity position underpinned by high ADR ratio, sizable deposit concentration and full utilization of borrowing lines available. The ratings take positive note of additional equity injection to the tune if Rs. 400m expected during the ongoing year to give the Bank adequate room for growth; the ratings will remain dependent on successful and timely execution of the planned equity infusion. Given weak macro-economic indicators with ongoing inflation putting a drag on clients’ disposable incomes and repayment capacities, maintenance of asset quality will remain important from ratings perspective. Moreover, the strengthening of the capitalization, profitability and liquidity metrics is also important for the sustenance and review of ratings.
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/