First Na­tional Bank Mo­daraba’s rat­ing down­graded

The Pak Banker - - Front Page - Staff Re­porter LA­HORE

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.

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