Pakistan Credit Rating Agency reviews the ratings of Network Microfinance Bank Limited

Lahore –– The Pakistan Credit Rating Agency (PACRA) has downgraded the long-term and short-term ratings of Network Microfinance Bank Limited (NMBL) to ‘BBB’ (Triple B) [Previous: BBB+] and ‘A3’ (A Three) [Previous: A2] respectively. These ratings denote an adequate capacity of timely payment of financial commitments.

The ratings reflect significant squeeze in business operations of NMBL, mainly on account of increase in non-performing loans, low deposit base, and minimal operating margins; thereby, subdued performance prospects. The ratings recognize the bank’s concentrated business operations, persistent inflationary pressure on micro-borrowers, and deteriorating socio-economic factors impacting the sector. Nevertheless, while meeting capitalization requirements, the bank maintains strong liquidity profile and has adopted a cautious stance towards credit expansion. The ratings draw comfort from the bank’s majority ownership by Jahangir Siddiqui and Company Limited (JSCL).

The ratings are dependent upon the bank’s ability to arrest rising trend in NPLs, while building a quality loan book to improve its earnings prospects. At the same time, strengthening of risk management procedures and control mechanism, supplemented by vigilant post disbursement monitoring of loans would remain important. In addition, persistent pressure on the bottom-line, in turn impacting risk absorption capacity of the bank may have negative implications for the ratings.

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