Press Release

JCR-VIS Reaffirms Entity Ratings of House Building Finance Company Limited at A/A-2

Karachi, July 06, 2012: JCR-VIS Credit Rating Company Limited has reaffirmed the entity ratings of House Building Finance Company Limited (HBFCL) at ‘A/A-2’ (Single A/A-Two).

The ratings incorporate the shareholding structure of the institution, with Government of Pakistan (GoP) having a direct holding of 62.5% and indirect stake of 37.5% through State Bank of Pakistan (SBP). SBP is both shareholder and major lender of HBFCL; funding support is available from SBP through credit lines of Rs. 11.2b that are guaranteed by GoP and form the pre-dominant source of the company’s funding. The assigned rating incorporates the strategic importance of HBFCL as a housing finance arm of the GoP; implicit support of the GoP to restructure the institution in a manner that it becomes financially viable has also been built into the ratings.

Liquidity cushion available against borrowings has increased over time with deployment of significant portion of recoveries in highly marketable t-bills and the balance in bank deposits over the past few years. Investment in t-bills represents a higher proportion of total assets at end-2011 as compared to prior years. Moreover, timely payments have been made against the outstanding Sukuk issue.

Sizeable recovery against past dues is considered positively; however, there has been an increase in total non-performing loans. Even with rise in NPLs, profitability of the institution has witnessed a positive trend in relation to prior years, attributable to greater contribution of income from investments.

Paid up capital is well below the regulatory requirement of Rs. 6b; an extension has been provided to the institution to meet the regulatory capital requirement, till such time that financial restructuring is completed. Restructuring of credit lines is under consideration by SBP, Ministry of Finance and HBFCL; however, modalities have not been finalized. In view of this, ratings continue to be placed under ‘Rating Watch-Developing’ status.

For further information on this rating announcement, please contact Mr. Javed Callea (Ext: 501) or Ms. Sobia Maqbool, CFA (Ext: 506) at 35311861-70 or fax to 35311872-3.



Jamal Abbas Zaidi
Deputy CEO

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 July 06, 2012 VIS Credit Rating Company Limited. All rights reserved. Contents may be used by news media with credit to VIS.