Press Release

VIS Credit Rating Company Reaffirms Ratings of U Microfinance Bank Limited

Karachi, April 28, 2023: VIS Credit Rating Company Limited (VIS) has reaffirmed the entity ratings of U Microfinance Bank Limited (Ubank) at ‘A+/A-1’ (Single A Plus/A-One). Long-term rating of ‘A+’ denotes good credit quality with adequate protection factors. Moreover, risk factors may vary with possible changes in the economy. Short-term rating of ‘A-1’ indicates high certainty of timely payment with excellent liquidity factors that are supported by good fundamental protection factors. Risk factors are considered to be minor. The rating of subordinated Tier-2 TFC (Rs. 600m) and Tier-1 TFC (Rs. 1.0b) have also been reaffirmed at ‘A’ (Single A) and ‘A-’ (Single A minus), respectively. The medium to long-term rating of ‘A’ and ‘A-’ denotes good credit quality, with adequate protection factors. Moreover, risk factors may vary with possible changes in the economy. Outlook on the assigned ratings is ‘Stable’. The previous rating action was announced on April 30, 2022.

The ratings assigned to Ubank reflect strong sponsor profile and consistent demonstrated support of PTCL which has been assigned an entity rating of ‘AAA/A-1+’ (Triple A/A-One Plus) by VIS and is co-owned by the Government of Pakistan and Etisalat International Pakistan. The implicit support from the sponsor was witnessed from the conversion of Tier-II Subordinated Debt amounting to Rs. 2.8b over the last three years along with recent conversion of Rs.1.0b into ordinary shares during the outgoing year, which added further depth to capitalization indicators of the Bank. A further addition of Rs. 1.0b to the equity base was made in June’22 in the form of a Tier-1 instrument which has also assisted in maintaining growth momentum and capital buffers for the assigned ratings. The ratings continue to derive strength from the Bank’s business strategy involving enhanced focus towards secured portfolio; a sizable portion of Ubank’s micro-credit portfolio is gold-backed signifying lower credit risk. Moreover, the overall secured portfolio of the Bank continues to be larger than peers. The ratings incorporate fair asset quality indicators; the Bank has also implemented IFRS-9 resulting in additional provisioning buffers. Further, the Bank is adequately protected against risk of non-repayment by the borrowers pertaining to recently restructured flood impacted portfolio as over two-thirds of the portfolio is gold-backed. The ratings reflect growth in business volumes and strengthening of liquidity profile. In addition, comfort is drawn from significant scale of treasury operations reflecting positively in the profitability indicators; Ubank’s profit after tax is the highest amongst peer microfinance banks. Furthermore, with volumetric growth in investment portfolio comprising of T-Bills, PIBs and mutual funds, the coverage of deposits and borrowings by liquid assets improved in the outgoing year. The assigned ratings have taken the impact of first-time adoption of IFRS -9 on account of which the increase in impairment allowance for the Bank was passed through its equity which caused it to decline slightly in comparison to the previous year. The Bank maintained capitalization buffers well above the regulatory requirements. Going forward, ratings are dependent on achievement of projected growth plans while maintaining asset quality and profitability indicators and retaining buffer over regulatory capital requirement.

For further information on this rating announcement, please contact Ms. Maham Qasim at 042-35723411-13 (Ext. 8010) and/or the undersigned at 021-35311861-64 (Ext. 306) or email at

Sara Ahmed

Applicable rating criterion: Micro Finance Banks (June 2019)

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 .