Press Release

VIS Reaffirms Entity Ratings of Pak Brunei Investment Company Limited

Karachi, June 27, 2023: VIS Credit Rating Company Limited has reaffirmed the entity ratings of Pak Brunei Investment Company Limited (PBICL) 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 28, 2022.

PBICL is a joint venture between Government of Pakistan (GoP) and Government of Brunei (GoB); each having an equal ownership. The interest of GoP is represented by Ministry of Finance (MoF) while that of GoB is represented by Brunei Investment Agency (BIA). The assigned ratings continue to factor in sovereign sponsors profiles. Recently, new Chairperson of the Board and Managing Director have been appointed by related Government authorities.

In CY22, gross advances portfolio of the Company exhibited a growth of ~19% driven by higher disbursements largely directed towards relatively resilient sectors including power, sugar, food, chemicals & pharma, packaging, agriculture and financial sectors. Whereas, the Company reduced its exposure in sectors more susceptible in economic downturn, including, consumer electronics, steel and engineering, textile and hospitality. In terms of segment-wise exposures, corporate segment remained the mainstay of the DFI’s lending operations, followed by Advisory and Strategic Investment Group (ASIG) and Small and Medium Enterprises (SMEs). The portfolio shows counterparty concentration as a result of significant exposure in corporate sector. Given relatively small size of equity base, concentration of funded advances in terms of tier-1 capital has also remained on a higher side. In CY22, the asset quality indicators exhibited improvement as reflected by decrease in infection ratios on account of lower non-performing loans (NPLs) and growth in advances portfolio. Meanwhile, due to higher incidence of fresh infection and decrease in advances, there was an uptick in gross infection ratio by end-1Q’CY23. However, with higher provisioning against the advances portfolio according to IFRS 9, net infection ratio decreased considerably. Nonetheless, overall PBICL’s infection ratios are indicative of moderate credit risk and compares favorably to peers.

As a result of participation in open market operations (OMO) conducted by SBP, the Company’s net investment portfolio has exhibited sizable growth as of Dec’22 and Mar’23 while the increase was manifested in floating rate PIBs, constituting ~90% of the total investment mix as of Mar’23. The equity portfolio majorly comprised dividend yielding stocks of blue chip companies. Therefore, overall market and credit risk arising from the investment portfolio is expected to remain limited. As of Mar’23, the investment portfolio showed sizable deficit largely attributable to fixed rate PIBs, arising from mark to market losses, the same has been subsequently adjusted due to repricing of floating rate PIBs. The liquidity profile of the DFI is underpinned by availability of adequate funding lines. The deposits base has remained largely stagnant as Pak Brunei does not actively solicit deposits. The coverage of deposit and borrowings via liquid assets has increased notably on account of growth in investment portfolio by end-Mar’23, however, the same needs to be improved further and remain largely stable to be in line with the peers and benchmarks for the assigned ratings. However, given the fact that funding against Govt. securities can be easily be arranged in money market, through OMO or SBP discounting, they pose limited threat to the organization’s liquidity.

Overall PBICL’s profitability profile is characterized by thin spreads primarily as an outcome of lending at lower rates, largely underpinned by conservative selection of counterparty credit risk. As per management, squeeze in markup spreads in CY22 was due to sharp increase in markup rates amidst quarterly repricing of the advances portfolio. In addition, in the backdrop of stressed economic conditions, the management remained focused on short-term advances entailing lower spreads. In 1Q’CY23, markup spreads on advances were further impacted due to hike in benchmark rates. Meanwhile, the Company has subsequently adjusted the repricing of advances on monthly basis which has reduced the stress on spreads to a great extent. On the other hand, risk adjusted returns from treasury operations have supported the profitability profile of the Company in the ongoing year. In 1Q’CY23, the tier-1 capital reduced mainly due to the combined impact of first time adoption of IFRS 9 and net deficit on investment portfolio. Nonetheless, overall capitalization indicators remain sound with healthy buffers as reflected by CAR well above the regulatory requirements. Maintaining asset quality and capitalization indicators while improving liquidity indicators are considered imperative for the assigned ratings.

For further information on this rating announcement, please contact Ms. Tayyaba Ijaz, CFA at 042-35723411-13 (Ext. 8001) and/or the undersigned at 021-35311861-66 (Ext. 201) or email at

Javed Callea

VIS Entity Rating Criteria: Government Supported Entities (July 2020)

Rating Scales & Definitions:

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 .