MCB Bank’s long term credit rating upgraded:pacra
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.