Press Release

JCR-VIS Reaffirms Entity Ratings of Saudi Pak Industrial and Agricultural Investment Company Limited

Karachi, June 19, 2017: JCR-VIS Credit Rating Company Limited (JCR-VIS) has reaffirmed the entity ratings of Saudi Pak Industrial and Agricultural Investment Company Limited (Saudi Pak) at ‘AA+/A-1+’ (Double A Plus/A-One Plus). Outlook on the assigned rating is ‘Stable’. The previous rating action was announced on June 17, 2016.

Key rating driver to the assigned ratings is the implicit support of the two sovereign sponsors, the Government of Pakistan and Kingdom of Saudi Arabia (KSA), having equal stake in the company.

With higher focus on lending activities largely to moderate risk clients, gross loan portfolio augmented during FY16. This along with higher provisioning level improved the net infection level. Sector concentration levels which have improved during the year would need to be monitored given the management future plans to focus clients mainly pertaining to food and energy segments.

The company recently largely exited from its government securities portfolio comprising a significant part of its investments, anticipating an interest rate volatility. Among listed equities, investment reflects dividend yielding and highly liquid stocks. Sectoral limit for investment in power sector equities was enhanced during FY16. Exposure in listed equities as a proportion of tier-1 equity increased, albeit remained within the internal limit of 20%.

Despite lower average markup bearing assets, core income of the company remained intact on the back of higher dividend and rental income. During FY16, non-interest income increased on account of higher gain realized on sale of government securities. In addition, gain realized from capital markets also improved. Net profit was reported lower primarily owing to higher incidence of deferred taxation during FY16. Focus on retention of high quality senior management would need to be continued, going forward.

As a secondary market borrower, the company is primarily reliant on funding from other financial institutions. More than two-third of the borrowings are short term; however, various liquidity gap limits are monitored on an ongoing basis to manage the associated risk. Overall liquidity profile of the institution remained sound. Capital Adequacy Ratio remained sound and provides ample room for growth.

For further information on this rating announcement, please contact the undersigned (Ext: 501) at 021-35311861-70 (10 lines) or Mr. Maimoon Rasheed at 042-35723411-13 or fax to 021-35311873.



Javed Callea
Advisor

JCR-VIS Entity Rating Criteria: Government Supported Entities (July 2002) http://jcrvis.com.pk/images/gse.pdf

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