Press Release

VIS Maintains Entity Ratings of Foundation Securities (Private) Limited

Karachi, October 26, 2022: VIS Credit Rating Company Ltd. (VIS) has maintained entity ratings of Foundation Securities (Private) Limited (FSL) at ‘A-/A-2’ (Single A Minus/A-Two). Merger of Askari Securities Limited (ASL), wholly owned subsidiary of Askari Bank Limited, with and into FSL entails transfer of ASL's entire undertaking including all properties, assets, liabilities, and obligations of any kind; approval is currently being sought from Sindh High Court. Rating outlook hence remains on 'Rating Watch - Developing,' and will be reviewed once the amalgamation is completed and consolidated financial statements are made available. Previous rating action was announced on January 24, 2022.

Assigned ratings continue to draw comfort from strong sponsor strength, Fauji Foundation (one of Pakistan's largest conglomerates with sizable financial strength and presence in diversified business sectors) and strategic partnership with Macquarie Capital Securities Limited (an affiliate of global financial institution – Macquarie Group). Ratings also take note that amid low market volumes, FSL managed to post positive bottom-line. Liquidity and market risk is low given conservative asset allocation combined with small proprietary book while a low-leveraged capital structure continue to provide support to the ratings.

FSL's market share (in volumetric terms) has depicted a declining trend over the years (FY22: 4.7%; FY21: 5.8%; FY20: 6.6%) while retail client base currently stands at 15K+ individuals, up 8% from the previous year. Management believes that following the merger with ASL, overall market share will increase to ~7%, with an additional 4K+ clients. Going forward, clientele growth will continue to be a focus area of management through digital channels.

The company’s revenues nearly reduced by half in line with the industry trend of subdued market volumes. Equity brokerage remained the most important segment, accounting for ~80% of total recurring revenues, with the remainder mainly comprising profit on saving accounts and income on deposits to regulators. Hence, diversification in revenue sources would lower volatility risk in earning profile. Retail clientele accounts for around four-fifth of brokerage income while the remaining is generated from domestic institutions and foreign corporates. Cost-income ratio has weakened to 80.3% (FY21: 58.1%) in FY22.

For further information on this rating announcement, please contact Mr. Muhammad Tabish (Ext: 204) or the undersigned (Ext: 207) at 021-35311861-71 or fax to 021-35311872-3.

Sara Ahmed

Applicable rating criteria: Methodology – Securities Firms Rating (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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