Karachi, July 13, 2012:JCR-VIS Credit Rating Company Limited has once again re-affirmed the entity rating of ‘A/A-2’ (Single A/A-Two).
The ratings incorporate the shareholding structure of HBFCL jointly held 62.5% by the Government of Pakistan (GoP) and indirect stake of 37.5% by the State Bank of Pakistan (SBP). State Bank of Pakistan is both shareholder and major lender of HBFCL. As stated in the letter issued by the CEO of JCR-VIS, the assigned rating incorporates the strategic importance of HBFCL as a housing finance arm of GoP; implicit support of the GoP to restructure the institution in a manner that becomes financially viable has also been built into the ratings.
Liquidity cushion available to HBFCL against borrowing has increased over time with deployment of significant portion of recoveries in highly marketable t-bills and the balance in bank deposits over the past few years. Investment in t-bills represents a higher proportion of total assets at end-2011 as compared to prior years. Moreover, timely payments have been made against the outstanding Sukuk issue.
Despite rise in non-performing loans the institution has managed to get sizable recovery against past dues. Even with these rising NLPs, profitability of the institution has witnessed a positive trend in relation to prior years, attributable to greater contribution of income from investments.
To increase profitability of HBFCL, the current management has increased its investment portfolio to generate healthy returns and managed to reduce cost base. With credit reforms and improvement in collection processes, HBFCL expects fresh accretion of delinquent cases to taper off.
The ratings continue to be placed under ‘Rating Watch-Developing’ status on account of negotiation with SBP and Ministry of Finance for a recapitalization plan, which may entail conversion of SBP debt into equity and injection of additional capital. This would allow the institution to improve capitalization levels and meet the regulatory minimum capital requirement. JCR-VIS will continue to monitor the company’s performance for timely completion of the restructuring process.
For further information on this rating announcement, please contact Mr. Javed Callea (Ext: 501) or Ms. Sobia Maqbool, CFA (Ext: 506) at 35311861-70 or fax to 35311872-3.