Pakistan Credit Rating Agency Limited maintains ratings of Escorts Investment Bank Limited

Lahore, March 28, 2014 (PPI-OT): The Pakistan Credit Rating Agency (PACRA) has maintained the long-term and short-term entity ratings of Escorts Investment Bank Limited (EIBL) at ‘BBB’ (Triple B) and ‘A3′ (A Three), respectively. The ratings denote an adequate capacity of timely payment of financial commitments.

The ratings reflect EIBL’s limited market presence with struggling business as well as financial profile. The management’s efforts to achieve bottom-line breakeven, though yielding some improvement, have yet to produce sustainable results.

Business losses in recent years, emanating from high level of non-earning assets along with low spreads, have dented the bank’s equity. EIBL is trying to gradually establish small income streams from ancillary avenues to support profitability, including physical commodities, market-making, margin financing, and bills discounting.

Nevertheless, sizeable quantum of non-earning assets (mainly tax refunds and wholly owned subsidiary – Escorts Capital Limited) restricts earning potential. The management’s efforts to recover and revitalize these assets would provide respite to the company’s operations. The ratings incorporate the bank’s plans to expand its deposit base, which would be challenging given the current environment.

The ratings are dependent on the management’s ability to successfully execute the planned initiatives and to build sufficient cushion against contingencies. Strengthening of financial profile while averting further erosion in equity base would help maintain the ratings at the current level.

For more information, contact:
Hammad Rashid
Analyst
The Pakistan Credit Rating Agency Limited (PACRA)
Awami Complex, FB1, Usman Block New Garden Town,
Lahore – Pakistan
Tel: +9242 586 9504 -6
Fax: +9242 583 0425
Email: hammad.rashid@pacra.com
Web: www.pacra.com

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