Press Release

JCR-VIS Upgrades Entity Ratings of House Building Finance Company Limited

Karachi, June 23, 2017: JCR-VIS Credit Rating Company Limited has upgraded the entity ratings of House Building Finance Company Limited (HBFCL) to ‘A/A-1’ (Single A/A-One) from ‘A-/A-2’ (Single A minus/A-Two). Outlook on the assigned ratings is ‘Stable’. Previous rating action was announced on June 28, 2016.

Ratings take into account a recent capital restructuring whereby all outstanding debt and markup accrued payable to SBP was converted into equity. This conversion aggregated to a total of Rs. 16.4b and was completed in April 2017. As a result, the company is now compliant with the regulatory Minimum Capital Requirement (MCR) of Rs. 6.0b at end-May 2017. Subsequently, risk absorption capacity and operational efficiency of the company has improved significantly. With growth in equity base, capitalization and liquidity indicators of HBFCL have also strengthened.

Gross advances of HBFCL depicted a slow pace of lending on account of turnover at operational level. In line with approved plans to rationalize workforce, voluntary separation schemes were announced in November 2016. Subsequently, headcount of employees reduced in the company. With significant unmet demand for housing and HBFCL’s financial risk profile having received impetus from recent debt-equity swap, the institution is geared to enhance its lending activities, going forward. The company also plans to cater to supply side of the market; developments in this regard are yet to be seen. Portfolio growth would need to be matched with sound risk management policies and long term policies for professional management retention.

Development of a coherent business strategy and its implementation mechanism and ensuring the adoption of sound underwriting guidelines are considered important for the future risk profile of the institution. Moreover, the control infrastructure, including support required from IT, will also need to be strengthened to manage risks in line with the institution’s loss absorption capacity. Assigned ratings continue to be underpinned by demonstrated support of Government of Pakistan (GoP).

For further information on this rating announcement, please contact the undersigned (Ext: 201) at 35311861-70 or fax to 35311872-3.

Javed Callea
Advisor

Applicable Rating Criteria:
Government Supported Entities (July 2002)
http://jcrvis.com.pk/images/gse.pdf

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 2017 VIS Credit Rating Company Limited . All rights reserved. Contents may be used by news media with credit to VIS .