Press Release
JCR-VIS places Entity Ratings of Pak Oman Microfinance Bank Limited under ‘Rating Watch-Positive’ Status
Karachi, April 28, 2017: JCR-VIS Credit Rating Company Limited (JCR-VIS) has placed the entity ratings of ‘BBB+/A-3’ (Triple B Plus/A-Three) assigned to Pak Oman Microfinance Bank Limited (Pak-Oman), under ‘Rating Watch Positive’ status. Previous rating action was announced on April 28, 2016.
Assigned outlook takes into account the ongoing acquisition of 50.1% stake by Lanka Orix Leasing Company PLC (LOLC); the group is primarily involved in providing diversified financial solutions with existing microfinance projects in Sri Lanka, Cambodia and Myanmar. LOLC is expected to inject Rs. 1.2b in the ongoing year. Subsequently, shareholding of Pak Oman Investment Company Limited and Sultanate of Oman will decline. The management control of Pak-Oman will rest with LOLC, having a long-term rating of ‘A’ by ICRA Lanka Limited. As a result, positive developments with respect to governance structure of the bank will be monitored, going forward. With closure of the transaction, business model of Pak-Oman will be brought in line with LOLC’s methodology practiced in its overseas investments.
During 2016, net advances of Pak-Oman increased and represented 34.0% of resource base. With upcoming equity injection, management envisages growing its portfolio to Rs. 1b mark by end-2019. Ability to improve asset quality indicators while maintaining disbursements is considered important. Infection levels of the bank improved largely on account of write offs and limited accretion of fresh NPLs. Strengthening in risk assessment function of the company would be warranted, going forward.
Deposit mobilization activity of the bank also picked up pace in 2016. At current level, the deposit profile features significant concentration; liquidity risk associated with the same is mitigated by the high level of liquid assets carried on balance sheet. Both excess capital and liquidity are likely to be absorbed as the bank scales up its lending activities, though still projected to be maintained at healthy levels over the foreseeable horizon.
For further information on this rating announcement, please contact Mr. Jamal Abbas Zaidi (Ext: 207) or the undersigned (Ext: 201) at 35311861-70 or fax to 35311873.
Javed Callea
Advisor
Applicable Rating Criteria: Micro Finance Banks (June 2016)
http://www.jcrvis.com.pk/docs/Meth-MFBs201606.pdf