Press Release

JCR-VIS revises the Entity Ratings of The First Micro Finance Bank Limited

Karachi, April 30, 2012: JCR-VIS Credit Rating Company Limited has revised the medium to long term entity rating of The First Micro Finance Bank Limited (FMFB) from ‘A+’ (A Plus) to ‘A’ (Single A), while short term rating has been maintained at ‘A-1’ (A-One). Outlook on the assigned rating is ‘Stable’.

Given the geographical spread of FMFB’s branches, its operations have been adversely affected by floods & rains in the last two years. In view of this, FMFB has not been able to keep pace with growth in the sector. A significant increase in non-performing loans has been reported in 1Q12, with PAR-30 as high as 11%, as the financial impact of floods in 2011 trickled down after year-end, given the bullet structure of majority of loans. Equity injection aggregating Rs. 361.5m in FY11 & FY12 has allowed the institution to absorb the impact of such losses, though profitability may continue to remain under pressure in the on-going year.

Liquidity profile of the bank remains sound. As lending activity remained restricted in FY11, fresh deposits mobilized during the year were largely channeled into liquid avenues. Moreover, there is an improvement in the mix of deposits as reflected in the concentration related indicators in addition to which, the cost of funds also adjusted downwards slightly during FY11. Given the decline in proportion of higher yielding advances to total assets, net markup margin however declined during FY11. Asset mix needs to be optimized to improve earnings profile.

The bank is projecting significant growth in lending operations. The credit policy has also been re-visited. Going forward, the bank plans to diversify its product suite, with an effort to minimize risks associated with agricultural lending and group loans. In lieu of this, pilot test of new products has already been initiated.

There has been instability at senior management positions. Moreover, some key positions are still vacant, for which hiring is in process. Recently, Mr. Amir Masood Khan has been appointed as Advisor to the Chairman, while the bank awaits the State Bank of Pakistan’s approval for his appointment as Chief Executive Officer. Stability in management will be important in realizing the strategic blueprint laid down for the organization.

For further information on this rating announcement, please contact Mr. Javed Callea (Ext: 501) or Ms. Sobia Maqbool, CFA (Ext: 506) at 35311861-72 or fax to 35311873.



Jamal Abbas Zaidi
Deputy CEO

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 2012 VIS Credit Rating Company Limited . All rights reserved. Contents may be used by news media with credit to VIS .