Press Release

JCR-VIS assigns Ratings To Pak China Investment Company Limited

Karachi, June 24, 2015: JCR-VIS Credit Rating Company Limited (JCR-VIS) has assigned entity ratings of ‘AAA/A1+’ (Triple A/A-One Plus) to Pak China Investment Company Limited (PCICL). Outlook on the assigned ratings is ‘Stable’.

The ratings assigned to PCICL take into account implicit support of its two sovereign sponsors, Government of Pakistan (GoP) and People’s Republic of China (PRC), with shares held through Ministry of Finance and China Development Bank (CDB), respectively. Given Pakistan’s long-term relations with PRC, being cemented further with the planned opening of economic corridor between the two countries, PCICL may be strategically positioned to play a role in the investments coming in Pakistan from China. PRC has an outstanding foreign currency rating of ‘AAA’ by Dagong Global Credit Rating Co. Ltd.

Distinguishing factors that provide basis for the assigned ratings include the management composition, which has been spearheaded by a representative of CDB since inception, the highest initial paid-in capital amongst all DFIs, focus on lending for capital expansion and restriction on assuming stock market exposure. The last two factors are likely to keep the operational activities of the institution aligned with its core mandate, which is to invest in industrial sector and infrastructure projects.

Ratings also draw strength from the sound standalone financial profile of the institution. In recent years, positive momentum in business operations has been noted with growth exhibited in the loan portfolio. Credit risk profile of the loan portfolio has improved over time with no fresh infection reported over the last two years. Advances portfolio mainly comprises mid tier corporate; overall risk appetite of the institution is moderate. Profitability of the company is expected to remain a function of portfolio size, mix and quality; the company plans to strengthen its fee based income by participating in infrastructure projects and privatization transactions.

The liquidity profile of the institution draws comfort from the high proportion of equity to assets of about 65%; meanwhile, advances currently comprise less than one-third of total assets. In view of this, the current level of liquidity carried on balance sheet is very high. As a secondary market borrower, the institution is primarily dependent on funding from other financial institutions; fund mobilization activity under COIs from corporate clients has only recently commenced.

Recently, there was a change at the helm of the institution. Management team is now spearheaded by Mr. Li Peng. Both the current MD and his predecessor have been associated with CDB, which is likely to ensure that the philosophy of the sponsor trickles down to PCICL while also enabling greater networking with the Chinese institutions. The management is very keen on supporting Chinese investment in various projects in Pakistan. Timely appointment of personnel to fill in vacancies at the senior management level is considered important for organizational growth. Governance standards require improvement with Board and its committee meetings to be convened regularly.

For further information on this rating announcement, please contact the undersigned (Ext: 501) or Ms. Sobia Maqbool, CFA (Ext: 506) at 021-35311861-70 or fax to 021-35311873.



Javed Callea
Advisor

JCR-VIS Entity 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 2015 VIS Credit Rating Company Limited . All rights reserved. Contents may be used by news media with credit to VIS .