MCB Bank’s long term credit rat­ing up­graded:pacra

The Pak Banker - - FRONT PAGE -

M Ja­hangir Hayat

The Pak­istan Credit Rat­ing Agency ( PACRA) has up­graded Mus­lim Com­mer­cial Bank (MCB)’s Long Term Credit Rat­ing from AA+ to AAA, which de­fines the high­est credit qual­ity with low­est ex­pec­ta­tion of credit risk.

The PACRA in a state­ment here on Wed­nes­day said that such rat­ing is as­signed only in case of ex­cep­tion­ally strong ca­pac­ity for timely re­pay­ment of fi­nan­cial com­mit­ments and which is highly un­likely to be neg­a­tively af­fected by fore­see­able events and re­flects the top sta­tus on the PACRA rat­ing mech­a­nism.

It said that the short term rat­ing of the Bank is main­tained at A1+, which is al­ready the high­est al­lo­cated rat­ing in the grid. A1+ de­notes the abil­ity of the bank to meet its obli­ga­tion sup­ported by the high­est ca­pac­ity for timely re­pay­ment. The state­ment fur­ther pointed out that this el­e­va­tion is co­her­ent with the well-de­fined or­gan­i­sa­tional struc­ture of the bank, ex­pe­ri­enced man­age­ment, high stan­dards of cor­po­rate gov­er­nance, pru­dent risk man­age­ment frame­work, im­prov­ing as­set qual­ity, con­tin­u­ous in­vest­ment in in­for­ma­tion tech­nol­ogy, well es­tab­lished and di­ver­si­fied branch net­work and strong ab­sorp­tion ca­pac­ity.

Mean­while, the PACRA has ob­served that on a stan­dalone ba­sis, First Pun­jab Mo­daraba (FPM), a wholly owned sub­sidiary of The Bank of Pun­jab (BoP) has weak fi­nan­cial pro­file, a re­sult of con­tin­u­ous busi­ness losses, po­ten­tial drag of un-pro­vided non-per­form­ing loans on al­ready thin eq­uity base, and in­ad­e­quate liq­uid­ity. How­ever, PACRA has main­tained the longterm and short-term rat­ings of First Pun­jab Mo­daraba (FPM) at “BBB” (Triple B) and “A3” (A Three), re­spec­tively, con­sid­er­ing the merger process, PACRA has placed the rat­ings of FPM on Rat­ing Watch.

The agency warned that in this re­gard, any weak­en­ing in the per­ceived sup­port from the spon­sor­ing bank would carry neg­a­tive im­pli­ca­tions for the rat­ings. The credit rat­ing agency said th­ese rat­ings de­note low ex­pec­ta­tion of credit risk and an ad­e­quate ca­pac­ity for timely pay­ment of fi­nan­cial com­mit­ments. It also dis­closed that the rat­ings re­flect strong as­so­ci­a­tion of FPM with the Bank of Pun­jab (BoP)-a bank ma­jor­ity owned by the Government of Pun­jab.

The PACRA said that BoP, be­sides pro­vid­ing fund­ing sup­port, is in the process of merg­ing the Mo­daraba into it and the rat­ings are de­pen­dent on timely and suc­cess­ful ex­e­cu­tion of the spon­sor’s plan. First Pun­jab Mo­daraba, es­tab­lished in 1992, is a per­pet­ual multi-pur­pose Mo­daraba listed on all three bourses of the coun­try. The man­age­ment com­pany, Pun­jab Mo­daraba Ser­vices (Pvt.) Lim­ited (PMSL), holds 40% stake in the Mo­daraba. PMSL is a wholly owned sub­sidiary of Bank of Pun­jab. The bank op­er­ates a vast net­work of 284 branches, mainly con­cen­trated in Pun­jab. The Government of Pun­jab main­tains ma­jor­ity stake in BoP (51%), whereas, 13% is owned by EOBI and the rest by var­i­ous stake­hold­ers. It car­ries a long-term en­tity rat­ing of ‘AA-’ from PACRA. The deputy CEO of BoP, Khalid Tir­mizey, chairs the five-mem­ber Board of the Mo­daraba. The CEO, Mr. Khaqan Has­nain Ibrahim, is an MBA and pos­sesses above 30 years of di­ver­si­fied ex­pe­ri­ence in fi­nan­cial man­age­ment. Of the re­main­ing three board po­si­tions, two are held by ex­ec­u­tive mem­bers of BoP while the other is an in­de­pen­dent mem­ber, the agency in­formed.

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