Press Release

JCR-VIS Reaffirms Entity Ratings of House Building Finance Company Limited

Karachi, May 14, 2018: JCR-VIS Credit Rating Company Limited has reaffirmed the entity ratings of House Building Finance Company Limited (HBFCL) ‘A/A-1’ (Single A/A-One). Outlook on the assigned ratings is ‘Stable’. Previous rating action was announced on June 02, 2017.

The assigned ratings incorporate sovereign ownership of HBFCL, with Government of Pakistan holding entire stake in the company directly and indirectly through State Bank of Pakistan. Ratings also reflect strong capitalization and healthy liquidity profile of HBFCL. Board members comprise professionals having experience in the financial sector. However, ratings are constrained by staff turnover and gaps at senior management level, weaknesses in control infrastructure, high infection levels in the portfolio and subdued lending activity.

Advances, on both, gross and net basis, registered a marginal decline in FY17. Similar to preceding year, pace of lending remained restrained on account of staff turnover at both operational and senior management level. Currently, management is working to fill gaps in senior management. Moreover, a new business plan has been developed, aimed at growth in volumes while remaining focused on meeting housing finance needs of modest and low-income groups. Instead of only relying on walk-in customers, the company is now providing bulk financing to institutions. With significant unmet housing demand in Pakistan, improved financial risk profile and a revamped business plan, the team will have the necessary platform to pursue growth.

Post debt-equity swap in 2017, the company posted a positive bottom line for the first time in three years. Future direction of earnings will be a function of quantum of disbursements and credit quality of the same, recovery from non-performing portfolio and level of administrative expenses. Quality of fresh lending at projected higher levels of disbursements will be an important rating driver, going forward.

For further information on this rating announcement, please contact the undersigned (Ext: 201) at 35311861-70 or fax to 35311872-3.


Javed Callea
Advisor

Applicable Rating Criteria:
Government Supported Entities (June 2016)
http://jcrvis.com.pk/docs/Meth-GSEs201606.pdf

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 May 14, 2018 VIS Credit Rating Company Limited. All rights reserved. Contents may be used by news media with credit to VIS.