Press Release

VIS Upgrades Entity Ratings of House Building Finance Company Limited

Karachi, June 07, 2023: VIS Credit Rating Company Limited has upgraded the entity ratings of House Building Finance Company Limited (‘HBFC’ of ‘the DFI’) from ‘A/A-1’ (Single A/A-One) to ‘AA-/A-1+’ (Double A Minus/A-One Plus). Assigned short-term rating of ‘A-1+’ indicates 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. The long-term rating of ‘AA-’ signifies high credit quality. Risk is modest but may vary slightly from time to time because of economic conditions. Outlook on the assigned ratings has been revised to ‘Stable’. Previous rating action was announced on June 30, 2022.

HBFC is owned by the Government of Pakistan (GoP) directly and through State Bank of Pakistan (SBP). Assigned ratings take into account sovereign ownership of HBFC and historically demonstrated track record of financial support by the Government together with improvement in underwriting quality over the past 2-years leading to a decline in Non-Performing Loans (NPL) in 2022. While gross infection is still higher compared to peers, much of it pertains to a legacy portfolio with no incremental infection observed over the recent 2-year period (2021-2022). HBFC has made provisioning reversals and has adequate provisioning coverage, resulting in low net infection ratio.

Assigned short-term rating of HBFC reflects strong liquidity position, supported by its largely equity-funded asset base with a leverage (assets/equity) of 1.6x as of Dec'22. The Company’s borrowings constituted 34% of its funding mix vis-à-vis 10% as of Dec’21. Despite a decline in liquidity coverage of liabilities due to increased borrowings to fund its investments, HBFC's quantum of liquid assets to liabilities remains high and comparable to peers. Managing market risk will remain important for ratings, going forward.

With the increase in benchmark rates in 2022 & 2023, improvement in HBFC's profitability is expected. However, rising inflation and benchmark rates may also affect the debt repayment capacity of HBFC's clientele, leading to potential credit risk headwinds and NPL accretion in the mid-term. Furthermore, amidst ongoing political and economic conditions and interest rate environment, VIS believes that construction sector will remain under pressure, impacting housing demand. In continuation of privatization, Privatization Commission has identified certain bidders. Ratings will remain dependent upon timely support by the Government in providing concessionary finance for middle to low income housing , as well as, keeping the governance oversight by way of a full board at all times.

For further information on this rating announcement, please contact the undersigned at 021-35311861-64 (Ext. 207) or email at

Sara Ahmed

Applicable Rating Criteria: Government Supported Entities (July 2020)

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 2023 VIS Credit Rating Company Limited . All rights reserved. Contents may be used by news media with credit to VIS .