Karachi: VIS Credit Rating Company Ltd. (VIS) has announced the upgrade of the Broker Fiduciary Rating for BMA Capital Management Limited from 'BFR3++' to 'BFR2'. The outlook on this rating has been classified as stable. The BFR2 rating reflects the company's strong fiduciary standards. This upgrade follows the last rating action on September 27, 2023.
According to VIS Credit Rating Company Limited, the new rating underscores BMA's robust management and client services, effective internal controls, and sound ownership and governance. The financial sustainability and business practices of the company are deemed adequate. With a history spanning three decades, BMA provides equity brokerage services and is active in commodities, fixed income, and forex markets. The company also offers economic research and corporate financial advisory services. Based in Karachi, BMA operates through a network of 20 branches nationwide and holds a Trading Right Entitlement Certificate from the Pakistan Stock Exchange Limited. The firm's external auditors, RSM Avais Hyder Liaquat Nauman Chartered Accountants, are approved by the State Bank of Pakistan.
The rating also reflects the ownership and governance framework of BMA, backed by a strong sponsor profile. However, improvements are needed in governance structure, such as increasing board size with independent directors and enhancing disclosure through CEO statements. This would also prevent repetition of committee members. The rating further emphasizes BMA's management strength and client services, supported by its geographical reach and research resources. While internal controls and compliance are well-structured, increasing review frequency and expanding internal policies could enhance the system further.
Financially, BMA's return to profitability is driven by increased brokerage revenue. Although operational efficiency has improved, it remains high. The company's liquidity is adequate, supported by a favorable ratio of liquid assets to liabilities. Market risk is controlled with investments in equity maintained at manageable levels. While the gearing ratio is adequate, leverage remains high. The company's growing equity base supports its capitalization profile.
Looking ahead, diversifying revenue streams and improving operational efficiency, liquidity, gearing, and leverage will be crucial for maintaining the rating.