Press Release

VIS assigns Positive Outlook to House Building Finance Company Limited

Karachi, June 30, 2022: VIS Credit Rating Company Limited has maintained the entity ratings of House Building Finance Company Limited (‘HBFC’ of ‘the DFI’) at ‘A/A-1’ (Single A/A-One). The long-term rating of ‘A’ signifies good credit quality; protection factors are adequate. Risk factors may vary with possible changes in the economy. The short-term rating of ‘A-1’ indicates high certainty of timely payment; liquidity factors are excellent and supported by good fundamental protection factors. Outlook on the assigned ratings has been revised from ‘Stable’ to ‘Positive’. Previous rating action was announced on June 28, 2021.

HBFC is owned by the Government of Pakistan (GoP) directly and through State Bank of Pakistan (SBP). The sovereign ownership of HBFC, along with historically demonstrated track record of financial support to the entity, translates in strong sponsor profile, which has been incorporated in to the assigned rating. Following change at helm of the DFI in 2021, the Board has also been reconstituted in the ongoing year. Subsequently, HBFC has developed a strategy plan, with pre-defined targets of loan disbursement and NPL reduction. Going forward, upward revision in ratings is dependent on materialization of strategic targets, as envisaged by the management.

Even though asset quality indicators depict room for improvement, mainly on account of sizable legacy non-performing book, the same has been adequately provided for and net infection is considered to be low. Ratings take into account HBFC’s comfortable liquidity positioning, which derives strength from its largely funded equity base, wherein borrowings comprise merely a tenth of the asset base. HBFC’s liquidity profile is considered sound, in view of considerable liquid assets in relation to borrowings and total liabilities. Furthermore, given largely equity-funded operations, asset maturities adequately cover maturing liabilities.

Ratings incorporate profitability indicators of HBFC, which compare favorably to industry. HBFC’s spread depicted contraction in 2021. The DFI’s RoAA, has exceeded the industry RoAA over the past 2-year period (2020-21). In case of HBFC, the lag impact of asset & liability repricing is expected to be more pronounced, given that part of the portfolio features repricing over 2-year tenures. Nevertheless, with funding line at much lower than benchmark rates, HBFC’s spread is expected to remain comfortable over the rating horizon. HBFC was also well positioned in terms of their investment holdings as of Mar’22, as a result of which MTM loss caused by the significant movement in benchmark rate is expected to be minimal in case of HBFC. Given the significant uptick in benchmark rates and rising inflation level, the debt repayment capacity of HBFC’s clientele has been affected. Accordingly, the same translates in credit risk headwinds. As per management, as of Jun’22, the credit quality indicators remain intact.

The ratings continue to factor in strong capital adequacy of HBFC. The DFI’s Capital Adequacy Ratio (CAR) remained above the minimum requirement set by the financial regulatory authorities and VIS benchmarks. In terms of CAR, HBFC compares favorably to peers; this is mainly attributable to the low leveraging of the DFI, with assets to equity ratio of 1.16x as of Mar’22. Given moderate growth projections, largely equity funded operations and stable outlook on profitability, HBFC’s CAR is expected to remain strong through the rating horizon. The assigned rating remains dependent maintaining liquidity and capitalization buffers and asset quality metrics in line with VIS benchmarks.

For further information on this rating announcement, please contact Mr. Arsal Ayub, CFA at 042-35723411-13 (Ext. 8004) and/or the undersigned at 021-35311861-66 (Ext. 306) or email at

Javed Callea

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 2022 VIS Credit Rating Company Limited . All rights reserved. Contents may be used by news media with credit to VIS .

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