Press Release

JCR-VIS Reaffirms Entity Ratings of House Building Finance Company Limited at A/A-2

Karachi, June 12, 2014: JCR-VIS Credit Rating Company Limited has reaffirmed the entity ratings of House Building Finance Company Limited (HBFC) at ‘A/A-2’ (Single A/A-Two).

HBFC is the premier specialized house financing institution in the country. It has the largest market share providing house financing services to lower income groups. The company’s shares are jointly held by the Ministry of Finance (MoF) and the State Bank of Pakistan (SBP). SBP is also the major lender to the institution, with credit lines made available by SBP having been guaranteed by the Government of Pakistan (GoP).

The ratings assigned to HBFC take into account its unique positioning whereby the shareholder/creditor/guarantor to credit lines are various arms of the GoP or itself; notwithstanding the weak risk absorption capacity of the institution with non-performing loans being 1.3x the company’s equity base. With restricted lending activities whereby only partial recovery proceeds in any given year have been utilized for fresh disbursements, gross loan portfolio has depicted a declining trend over the last 5 years. Meanwhile, the company has accumulated a sizeable portfolio of marketable securities; liquid assets in relation to borrowings, including payables to SBP, stood at 70% at end FY13.

The ratings continue to be placed under ‘Rating Watch-Developing’ status due to the company’s on-going negotiations with SBP and MoF pertaining to the shortfall vis-à-vis the minimum capital requirement and the status of SBP’s credit lines. Given the strategic nature of the institution, it may reasonably be expected that mechanism for pay back of credit lines will take into account the financial viability of the institution itself as these credit lines are the primary source of funding for HBFC.

For further information on this rating announcement, please contact Mr. Javed Callea (Ext: 501) or Ms. Sobia Maqbool, CFA (Ext: 506) at 35311861-70 or fax to 35311872-3.

Javed Callea
Advisor

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 2014 VIS Credit Rating Company Limited . All rights reserved. Contents may be used by news media with credit to VIS .