LAHORE (PR): The Pakistan Credit Rating Agency Limited (PACRA) has upgraded the long-term and short-term entity ratings of First Punjab Modaraba (FPM) to “BBB+” (Triple B plus) [Previous: BBB] and” A2” (A Two) [Previous: A3] respectively. The ratings denote low expectation of credit risk and an adequate capacity for timely payment of financial commitments. The ratings of FPM reflect demonstrated commitment of key sponsor -The Bank of Punjab (BoP) - a bank majority owned by the Government of Punjab.
Aamir Malik was appointed the Chief Executive Officer of FPM in April 2014. He has over 22 years banking experience working at different management positions. Khalid S Tirmizey, Deputy CEO of BOP having banking experience of more than 40 years, chairs the Board.
PACRA has observed that higher asset yield helped the Modaraba in maintaining its gross revenue. Furthermore, reduced cost of funding, due to subsidized financing by the parent bank, resulting in lower financial charges led to breakeven in terms of net revenue. Meanwhile, FPM managed to register pre-provision operating profit of PKR 6mln in FY14 as against loss of PKR 81mln in FY13 mainly on account of: (i) gain on sale of fixed assets, and (ii) reduced administrative cost. Reversal in provisioning expense of PKR 56mln due to recovery in non performing book helped the Modaraba achieve net profit PKR 74 million in FY14 as against loss of PKR 111mln in FY13. During 1QFY15, continued provisioning reversal resulted in profitable bottom line.
Going forward, the management, while expediting recovery efforts, is targeting careful expansion in loan book. Furthermore, in order to bring diversity in the earnings, FPM intends to offer brokerage services.
Improved business performance in FY14 has strengthened the equity base of the Modaraba resultantly its risk absorption capacity. This is evident by the significant reduction in the Modaraba’s total debt/equity ratio which showed significant reduction.