Press Release

VIS Reaffirms Entity Ratings of Pakistan Mortgage Refinance Company Limited (PMRC)

Karachi, April 5, 2021: VIS Credit Rating Company Limited (VIS) has reaffirmed entity ratings of Pakistan Mortgage Refinance Company Limited (PMRC) at ‘AAA/A-1+’ (Triple A/A-One Plus). Outlook on the assigned ratings is ‘Stable’. The long-term rating of ‘AAA’ indicates highest credit quality; the risk factors are negligible, being only slightly more than for risk-free Government of Pakistan’s (GoP) debt. The short-term rating of ‘A-1+’ signifies highest certainty of timely payment; Short-term liquidity, including internal operating factors and /or access to alternative sources of funds, is outstanding and safety is just below risk free GoP’s short term obligations. Previous rating action was announced on April 06, 2020.

The assigned ratings continue to remain underpinned by PMRC’s shareholding structure (public sector holding of 43.45%) and strong Government and Regulatory support. The ratings also take into account low exposure to credit & market risk, sound capitalization indicators, satisfactory policy framework, seasoned management team and strong risk management controls. Maintaining conservative risk profile and sustaining financial performance remain key rating sensitivities going forward.

Demand for housing finance is expected to remain sound over the rating horizon given the deficit of housing units in the country vis-à-vis demand and low mortgage finance penetration. Furthermore, GoP’s initiatives such as Construction Package and Naya Pakistan Housing Scheme are also expected to provide positive impetus to house loan demand going forward. Hence, business risk is considered low.

During 2020, advances portfolio increased by approximately 94% with disbursements to twelve Islamic and conventional Partner Financial Institutions (PFIs). Going forward, growth momentum is targeted to continue with broad based increase in portfolio to existing PFIs. Credit risk emanating from the advances portfolio is considered minimal on account of financing with recourse to PFIs and 25% overcollateralization on Mortgage Loan Portfolio (MLP). Maintaining sound portfolio quality indicators through continued effective implementation of credit risk management strategy is considered a key rating driver. Exposure to market risk is on the lower side with the exposure undertaken in only sovereign instruments (T-bills & PIBs).

Sizeable growth in the markup income on account of volumetric increase in the advances and investment portfolio resulted in considerable improvement in the profitability profile of PMRC during 2020. Volumetric growth will continue to remain a key profitability growth driver going forward. Overall capitalization indicators are sound as indicated by the presence of sizeable capital buffers. Given the healthy projected growth and profitability, equity base is projected to grow over the rating horizon. With increase in refinancing portfolio, risk weighted assets are projected to grow but only at a limited pace given the low risk weight on financing extended to PFIs. Hence, capitalization indicators are expected to remain comfortable. Liquidity profile remains strong in view of sizeable liquid assets in relation to total borrowings. Funding profile draws support from availability of long-term funding from World Bank (WB) and close matching of the duration and maturity of assets and liabilities.

For further information on this rating announcement, please contact Mr. Narendar Shankar Lal (Ext: 203) or the undersigned (Ext. 306) at 021-35311861-70 or email at .

Faryal Ahmad Faheem
Deputy CEO

Applicable Rating Criteria: Government Supported Entities (July 2020)

Information herein was obtained from sources believed to be accurate and reliable; however, VIS Credit Rating Company Limited (VIS) does not guarantee the accuracy, adequacy or completeness of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information.VIS , the analysts involved in the rating process and members of its rating committee do not have any conflict of interest relating to the rating(s)/ranking(s) mentioned in this report.VIS is paid a fee for most rating assignments. This rating/ranking is an opinion and is not a recommendation to buy or sell any securities. Copyright 2021 VIS Credit Rating Company Limited . All rights reserved. Contents may be used by news media with credit to VIS .

VIS Credit Rating Company Limited