JCR-VIS reaffirms Ratings of First Habib Bank Modaraba

Karachi: JCR-VIS Credit Rating Company Limited has reaffirmed the entity ratings of First Habib Bank Modaraba (FHBM) at ‘AA-/ A-1+’ (Double A Minus/ A-One Plus). Outlook on the medium to long-term rating remains ‘Stable’.

The Modaraba is managed by a wholly owned subsidiary of Habib Bank Limited (HBL). As such, the implicit financial and operational support from the country’s largest private commercial bank remains a key rating factor.

FHBM is primarily engaged in operating lease business. However, given the unfavourable business climate during the last two years, fresh business activities have remained constrained. Over this period, the Modaraba has channelled excess cash generated from maturing leases in other investment and financing avenues, after repaying almost all borrowings. As a result, leverage, which has traditionally remained low, fell further. Ratings are also supported by the conservative risk profile of the Modaraba.

The management continues to make efforts towards recoveries from the financing portfolio. Despite decline in income from core business, low provisioning together with controlled operating and meagre financial expenses, contributed to improvement in bottom line profitability during FY11. Business activities have gradually begun to pick up pace, though the management’s approach remains cautious. Underwriting quality of fresh business assumed will be tested over time and trends in this respect will be monitored.

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