Press Release
VIS Reaffirms Entity Ratings of Pak Oman Investment Company Limited
Karachi, June 30, 2020: VIS Credit Rating Company Limited has reaffirmed the entity ratings of Pak Oman Investment Company Limited (POIC) at ‘AA+/A-1+’ (Double A Plus/A-One Plus). The long term rating of ‘AA+’ signifies high credit quality, protection factors are strong. Risk is modest but may vary slightly from time to time because of economic conditions. 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 Government of Pakistan’s short-term obligations. Outlook on the assigned ratings is ‘Stable’ Outlook. The previous rating action was announced on June 24, 2019.
The assigned ratings incorporate POIC’s joint venture shareholding structure, with shares equally held by the Government of Pakistan and the Sultanate of Oman through their respective finance ministries. Sovereign ratings of Sultanate of Oman are currently outstanding ‘BB-/B’ as per an international rating agency. Sponsors of the company have demonstrated financial support towards POIC in the past and VIS anticipates this support to prevail in future in case a need arises.
Gross advances of POIC slightly reduced in 2019. Overall portfolio of the company is considered diversified across various sectors. Client wise concentration in portfolio remained at around half of portfolio with respect to top 10 funded exposures. Going forward, the management has adopted a consolidation approach with focus on maintaining portfolio quality rather than growth. Gross Non-Performing Loans (NPLs) of POIC decreased on account of reversals due to recoveries. Reduction in NPLs coupled with reduction in advances resulted in maintenance of asset quality indicators. Going forward, pressure may be witnessed on asset quality indicators in view of economic slowdown emanating from COVID-19 outbreak. However, the management has enhanced monitoring of its exposures, and continues to maintain sound underwriting practices and pursue strong recovery drives to mitigate any adverse impact on portfolio quality. POIC’s investment portfolio increased in 2019. Credit risk emanating from investment portfolio is manageable, almost entire portfolio was deployed in government securities. Increase in the investment portfolio in 2019 was observed primarily on account of higher investment in T-Bills and PIBs.
During the outgoing year, higher markup income contributed positively to the top line. Around 58% of markup income was contributed by investments. Growth in overall profitability is projected during ongoing year. Overall liquidity profile is considered manageable in view of adequate liquid assets in relation to deposits and borrowings, and regulatory compliant Liquidity Coverage Ratio (LCR) and Net Stable Funding Ratio (NSFR). CAR ratio declined on account of higher risk weighted assets but remained compliant with regulatory requirement.
For further information on this rating announcement, please contact the undersigned (Ext: 306) or Muhammad Ibad Desmukh (Ext: 205) at 35311861-70 or fax to 35311872-3.
Faryal Ahmad Faheem
Deputy CEO
VIS Entity Rating Criteria: Government Supported Entities (June 2016)
http://vis.com.pk/kc-meth.aspx