First National Bank Modaraba’s rating downgraded
JCR- VIS Credit Rating Company has revised credit rating of First National Bank Modaraba ( FNBM) from ‘ stable’ to ‘ negative’ maintaining the entity ratings of at ‘ A+/ A- 1’ ( Single A Plus/ A- One).
The assigned ratings draw comfort from the sponsor profile, with the modaraba management company being a wholly owned subsidiary of National Bank of Pakistan ( NBP). The modaraba has also been able to mobilise deposits by issuing certificates of Musharaka to institutions and high net worth individuals. Broad based depositor profile may however still take some time to develop.
While liquid assets to deposits and borrowings remain negligible, the modaraba has un- utilized credit lines available from various financial institutions, including NBP. In prior years, sound asset quality has also provided comfort with respect to the company’s liquidity position. Accretion of fresh NPLs raises some concerns as regards the same. While net infection ratio still remains modest, net NPLs are considered on the higher side in relation to equity of FNBM.
The modaraba was able to recover cash from some financially distressed clients while negotiating restructuring terms with others. Debt leverage has trended upwards over time. Equity injection is required to improve the financial risk profile of the modaraba.