Press Release

VIS Reaffirms Entity Ratings of Pak Brunei Investment Company Limited

Karachi, June 28, 2024: VIS Credit Rating Company Limited has reaffirmed the entity ratings of Pak Brunei Investment Company Limited (PBICL) at ‘AA+/A-1+’ (Double A Plus/A-One Plus). The long-term rating of ‘AA+’ signifies high credit quality; protection factors are strong. Risk is modest but may vary slightly from time to time because of economic conditions. The short-term rating of ‘A-1+’ signifies highest certainty of timely payment; short-term liquidity, including internal operating factors and/or access to alternative sources of funds, is outstanding and safety is just below risk-free Government of Pakistan’s short-term obligations. Outlook on the assigned ratings is ‘Stable’. The previous rating action was announced on June 27, 2023.

Pak Brunei Investment Company Limited (PBICL) is a Development Finance Institution (DFI) that provides financial assistance to industrial and agricultural projects. Regulated by the State Bank of Pakistan (SBP). It is a joint venture equally owned by the Government of Pakistan (GoP) and the Government of Brunei (GoB). The GoP's interests are represented by the Ministry of Finance (MoF), while the GoB's interests are represented by the Brunei Investment Agency (BIA). It is headed by Mr. S. M. Aamir Shamim as CEO & Managing Director, who was appointed in May 2023. The Board of directors comprises of four directors, two nominated by Government of Brunei and two by Government of Pakistan. The Board is headed by Ms. Dk Noorul Hayati Pg Julaihi

Amid socio-political and economic challenges, including rising inflation and high interest rates, PBICL adopted a cautious strategy, resulting in a decline in the gross advances portfolio in CY23. The advances portfolio remained concentrated in sectors like textiles, chemicals, pharmaceuticals, food and beverages and power, with a significant focus on the private sector and the corporate segment. Efforts to enhance the SME segment increased its contribution in CY23. Asset quality, however, depicted some deterioration with a marginal increase in non-performing loans. Nevertheless, provisioning coverage improved leading to lower net infection. The same compares favorably to peers.

The Company leveraged higher yields on government securities to optimize its balance sheet. By participating in SBP's open market operations (OMO), the Company's net investment portfolio saw substantial growth, mainly in government securities, increasing significantly by the end of December 2023. This growth was primarily in floating rate PIBs, which made up 93% of the total government securities investments by the end of March 2024. The liquidity profile strengthened significantly, with liquid assets covering deposits and borrowings improving to 53.4% by March 2024. Despite challenges, profitability saw a boost from higher yields on earning assets and non-markup income, though profitability in Q1 CY24 was pressured by spread compression. Nevertheless, the capitalization profile remained strong with a CAR of 22% in March 2024, well above regulatory requirements.

For further information on this ratings announcement, please contact at 021-35311861-64 or email at info@vis.com.pk.

Applicable Rating Criteria:

VIS Entity Rating Criteria: Government Supported Entities
https://docs.vis.com.pk/docs/Meth-GSEs202007.pdf

VIS Entity Rating Criteria: Financial Institutions Rating Methodology
https://docs.vis.com.pk/Methodologies%202024/Financial-Institution-v2.pdf

Rating Scales & Definitions:
https://docs.vis.com.pk/docs/VISRatingScales.pdf

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