PACRA Maintains the Rating of Mobilink Microfinance Bank Limited | PPTFC | Dec-22

The bank's ratings are fortified by its association with Veon (previously VimpelCom), a premier global telecom group, and Jazz (previously Mobilink). The bank's sponsor has displayed unwavering commitment by offering technical collaboration and financial backing, allowing the bank to penetrate its target markets with greater efficiency. The bank's business model prioritizes both core and branchless banking, utilizing the sponsor's network and brand name, JazzCash, to accelerate growth in the branchless banking sphere via mobile wallet accounts. At end Sep'23, the bank captured ~18% market share in the microfinance industry's gross loan portfolio. The advances book posted a huge increase and stand at PKR 67.45bln (end-Dec22: PKR 56.30bln, end-Dec21: PKR 37.12bln). On the asset quality side, the Bank’s non-performing advances recorded huge increase and clocking at PKR 5.10bln (end-Dec22: PKR 2.60bln, end-Dec21: PKR 1.24bln). During 9MCY23, markup earned was recorded at PKR 21bln (9MCY22: PKR 12.14bln, CY22: PKR 17.33bln). Despite the provisioning expense of PKR 4.09bln in 9MCY23 (9MCY22: PKR 1.68bln, CY22: PKR 1.46bln), the Bank's net profitability, amid significant policy rate increase, clocked in at PKR 819mln during same period (9MCY22: PKR 271mln, CY22: PKR 958mln).
The bank's ratings are contingent upon its capacity to effectively mitigate emerging risks under the prevailing circumstances to preserve its business and financial risk profile.

About the Entity
Mobilink Microfinance Bank Limited was established in 2012. The bank is a wholly-owned subsidiary of Global Telecom Holding (GTH), which is mostly owned by VEON (formerly VimpelCom), one of the largest telecom groups worldwide. Jazz (formerly Mobilink), the bank's super-agent in branchless banking, is also owned by VEON. The Board of Directors is composed of six members, including three non-executive directors, two independent directors, and the CEO, Mr. Ghazanfar Azzam, who has over 36 years of experience in the banking sector.

About the Instrument
Mobilink Microfinance Bank Limited has issued Rated, Privately Placed Listed/ DSLR, Unsecured, Tier II Term Finance Certificates (TFC) of PKR 2bln to contribute towards the bank’s Tier II capital for complying with the Minimum Capital Requirements (MCR) and Capital Adequacy Ratio (CAR) requirement prescribed by the SBP. The instrument has a tenor of 7 years from the date of issue. The profit is being paid semi-annually in arrears at the rate of 6MK+210bps p.a on basis of the outstanding principal amount. The Bank has paid the first two semiannual markup payments amounting total ~PKR 422mln till now. The principal of TFC shall be redeemed in four equal installments commencing from the end of 66th from the issue date. The issuer may call the TFCs, in parts or in full, after five years from the issue date on the principal redemption date, thereafter, subject to prior approval from the State Bank. Further, the call option is exercisable if MMBL's MCR, LR and CAR requirements are in compliance with requirements prescribed by SBP. As per the lock-in clause requirement for tier II issues, neither profit nor principal would be payable (even at maturity), if such payment will result in a shortfall in Bank's MCR, leveraged ratio or CAR or results in an increase in any existing shortfall in MCR, LR or CAR. The TFC will be subject to loss absorbency clause, upon the occurrence of a point of Non-Viability event, SBP may fully or permanently convert the TFCs into common shares of the Bank.