Press Release

VIS Reaffirms Entity Ratings of Advans Pakistan Microfinance Bank Limited

Karachi, April 29, 2022: VIS Credit Rating Company Limited (VIS) has reaffirmed the entity ratings of Advans Pakistan Microfinance Bank Limited (APMBL) at ‘BBB+/A-3’ (Triple B Plus/A-Three). Outlook on the assigned ratings is ‘Stable’. Previous rating action was announced on April 29, 2021.

APMBL holds a province-specific license for operating within Sindh; presently working with a network of 16 branches. As at year-end 2022, market share in terms of advances stood at ~0.6% (2020: 0.3%). Assigned ratings account for sponsor strength (100% stake by Advans SA Sicar, an international microfinance group with presence in nine countries) and a decade-long operating experience in domestic market. Ratings also factor in the demonstrated sponsor-level support as evident from Rs. 435m capital injection over the last two years. Rating triggers include enhanced liquid asset coverage of deposits & borrowings, continued improvement in profitability profile, further strengthening of capitalization buffers and maintenance of CAR at expected growth levels.

With gradual recovery in various pandemic-hit sectors, specifically MSME that represents the largest chunk of loan book, pace of disbursements escalated post June’21. Subsequently financing portfolio registered a robust growth of 127% in 2021 entirely funded by increase in deposit base. Given sizeable fresh disbursements and decline in NPLs, overall gross and net infection ratios have noted marked improvement with majority of pandemic related deferred/re-structured loans resuming normally. Since last review, deposit mix has noted a shift from individuals to institutional depositors; major inflows pertained to retirement funds of corporates mobilized at improved cost of funding. Moreover, depositor concentration levels indicate significant room for improvement.

Post consecutive two years of weak earnings, the bank’s profitability has witnessed a turnaround in 2021 on the back of volumetric growth in markup bearing assets, sizeable uptick in spreads (against the industry trend) and non-markup income along with the drop in provisions. Capitalization indicators have depicted some weakening due to significant increase in risk-weighted assets; however, equity base stood higher on account of internal capital generation and sponsor support. Aggressive growth strategy is being pursued by the management with plans to increase total workforce to 600+ employees, addition of 6 new branches, mobilization of additional borrowing lines/debt instrument for liquidity management and further capital injection planned over the rating horizon. Ratings remain dependent on maintaining asset quality and performance indicators in line with assigned ratings level.

For further information on this rating announcement, please contact Mr. Muhammad Tabish (Ext: 203) or the undersigned (Ext: 306) at (021) 35311861-70 or email at .

Faryal Ahmed Faheem
Deputy CEO

Applicable Rating Criteria: Microfinance Institutions (June 2019)

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