Press Release
JCR-VIS Revises Management Quality Rating of Faysal Asset Management Limited
Karachi, March 19, 2018: JCR-VIS Credit Rating Company Ltd. has revised the Management Quality (MQ) Rating of Faysal Asset Management Limited (FAML) from ‘AM3+’ (AM-Three Single Plus) to ‘AM3’ (AM-Three). The outstanding rating has been placed on ‘Rating Watch - Developing’ status. The previous rating action was announced on October 12, 2017.
Rating change incorporates stagnation in Assets Under Management (AUMs) at a level where they are unable to support corresponding operational costs. Over the period, this has eroded equity of the company to a level below the regulatory requirement. JCR-VIS has continued to monitor company’s developments and will update the rating upon finalization of the planned equity injection / sponsor subordinated loan which has been pursued for some time. In case of capitalization through subordinated loan, this would increase the liquidity and capitalization levels; nonetheless, its effective utilization to generate sustainable AUMs and control operational losses would be seen over time. Current rating takes into account Faysal Bank Limited becoming a major shareholder of the company subsequent to planned takeover of 50% equity holding from Islamic Investment Company of the Gulf (Bahamas) Ltd.
Total AUMs amounted to Rs. 8.2b (1Q18: Rs. 8.7b; FY17: Rs. 7.9b) at end-February 2018. As per management projections, achieving a targeted AUM level of Rs. 30b is expected to aid in achieving breakeven by end-FY20. With majority of funds’ performance belonging in the lower quartiles, returns from these funds depict significant room for improvement relative to peers.
For further information on this rating announcement, please contact Mr. Javed Callea (Ext: 201) or the undersigned (Ext: 207) at 021-35311861-71 or fax to 021-35311872-3.
Jamal Abbas Zaidi
Advisor
Applicable Rating Criteria: Asset Management Companies (March 2016)
http://jcrvis.com.pk/docs/AMC-Methodology-201603.pdf