JCR-VIS Reaffirms Entity Ratings of Pak Oman Microfinance Bank Limited

Karachi, April 29, 2015 (PPI-OT): JCR-VIS Credit Rating Company Limited (JCR-VIS) has reaffirmed the entity ratings of Pak Oman Microfinance Bank Limited (Pak-Oman) at ‘BBB+/A-3’ (Triple B Plus/A-Three). Outlook on the assigned rating is ‘Stable’. Previous rating action was announced on April 29, 2014.

Following the equity injection of Rs. 250m in 2014, Pak-Oman is now compliant with the minimum capital requirement stipulated for microfinance banks licensed to undertake nation-wide operations. The assigned ratings take into account the demonstrated financial support of the sponsors. Sultanate of Oman is the majority shareholder with 67% direct stake in the bank, with remaining 33% shares held by Pak Oman Investment Company Limited (POICL), rated ‘AA+/A-1+’.

Pace of lending activities at Pak-Oman, while having picked up, remains much slower than other market participants. The sector offers tremendous opportunity for growth, with market penetration estimated at 11.6% by the Pakistan Microfinance Network, and a Cumulative Annual Growth Rate in loan portfolio of over 20% in the past 5 years. The management of Pak-Oman plans to increase lending at a measured pace in the coming periods, in line with which income from loans is also projected to increase, going forward.

Almost three-fourths of the bank’s assets at year-end were parked in money market placements and investments. The bank’s balance sheet is almost entirely funded by equity, with a nominal amount of deposits, which are primarily mandatory in nature. In line with the asset mix, earnings are driven by return on placements and investments.

The bank’s returns are amongst the lowest in relation to peers in view of the limited deployment of funds in core lending operations. Losses have been curtailed in 2014 while future profitability remains largely dependent on asset mix and quality. IT infrastructure of the bank requires strengthening. To address the weaknesses, the bank has hired fresh staff which has initiated in-house developments while a change in existing MIS is also being considered.

For more information, contact:
Ms. Sobia Maqbool
CFA
JCR-VIS Credit Rating Company Limited
VIS House, 128/C,
25th Lane off Khayaban-e-Ittehad,
Phase VII, DHA, Karachi
Tel: +92-21-35311861-72
Fax: +92-21-35311873
Email: sobia@jcrvis.com.pk

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