Press Release

VIS Reaffirms Entity Ratings of Pak Brunei Investment Company Limited

Karachi, June 28, 2022: VIS Credit Rating Company Limited has reaffirmed the entity ratings of Pak Brunei Investment Company Limited (PBIC) at ‘AA+/A-1+’ (Double A Plus/A-One Plus). The long term rating of ‘AA+’ signifies high credit quality, protection factors are strong. Risk is modest but may vary slightly from time to time because of economic conditions. The short-term rating of ‘A-1+’ signifies 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. Outlook on the assigned ratings is ‘Stable’. The previous rating action was announced on June 29, 2021.

PBIC is a joint venture between Government of Pakistan (GoP) and Government of Brunei (GoB); each having an equal ownership. While interest of GoP is represented by Ministry of Finance (MoF), interest of GoB is represented by Brunei Investment Agency (BIA). The assigned ratings continue to factor in sovereign sponsor profile.

Given that portfolio growth remained muted during the period under review, the asset quality indicators have not depicted much change since our last review. PBIC’s gross infection is indicative of moderate credit risk. However, gauging from the yield on advances and PBIC’s internal average ORR of the portfolio, credit quality of underlying counterparties is considered sound. Furthermore, gross infection also compares favorably to peers. Even though provisioning coverage leaves room for improvement, the net infection remains adequately low and is considered superior to peers.

Liquidity profile of the DFI is considered sound in view of availability of funding lines and coverage of borrowings by liquid assets. PBIC’s profitability profile is characterized by thin spreads albeit an adequately low efficiency ratio. The former is mainly a function of lending at lower rates, particularly as counterparty credit risk selection is conservative and declining advances as proportion of assets. As per management, muted credit growth and lower spreads resulted from a deliberate slowdown in build-up post Covid-19 and a shift towards short term advances (carrying lower spreads) in view of the economic conditions. Accordingly, PBIC’s RoAA compares adversely to peers and the industry. Given the recent uptick in the benchmark rates and the lag in repricing of assets vis-à-vis liabilities, the short to medium term outlook on PBIC’s profitability is stressed mainly as spreads are likely to undergo contraction in the short term and normalize subsequently At present, PBIC’s CAR, of 25.7% falls in line with the peers and the benchmark for the assigned rating. As the CAR remains exposed to MTM impact of interest rate increase and given the significant movement in benchmark rates since Mar’22, CAR is likely to be impacted in the short term. Ratings remain dependent on maintaining liquidity and capitalization buffers and strong asset quality indicators.

For further information on this rating announcement, please contact the undersigned (Ext: 201) or Mr. Arsal Ayub, CFA at 021-35311861-70 or fax to 021-35311873.

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 .

VIS Credit Rating Company Limited