The Pakistan Credit Rating Agency Limited
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Ayesha Qasim

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PACRA Maintains Entity Ratings of Mobilink Microfinance Bank Limited | Positive Outlook

Rating Type Entity
(30-Apr-22 )
(30-Apr-21 )
Action Maintain Maintain
Long Term A A
Short Term A1 A1
Outlook Positive Positive
Rating Watch - -

The ratings take comfort from the bank's association with a leading global telecom group – Veon (formerly VimpelCom) - and with Pakistan's largest cellular operator – Jazz (formerly Mobilink). Sponsor’s commitment to the bank is witnessed in the form of both technical collaboration and financial support. Ensuing synergies have strengthened the bank's penetration in target markets. The bank's business model is directed towards fostering core and branchless banking simultaneously. Leveraging on the sponsors' network and brand name - JazzCash, branchless banking domain is taking on sanguine growth and is expanding through platform of Mobile-wallet accounts. The bank's current strategy is pivoted around capitalizing on its digital banking base having strong support from its super-agent cellular operator. Recent launch of Dost App, specifically fulfilling the microfinancing needs of branchless banking customers, is another step forward. However, consumer response and monetary paybacks are yet to unfold. The management's confidence lies in keeping this segment's margins sustained and bring it at the forefront of mobile banking services, amidst rising competition. The bank held a market share of ~9% in the microfinance industry’s Gross loan portfolio as at End-Dec'21. While growth strategies for the Bank have been taken under consideration, overall performance indicators reflected a firm outlook in CY21 despite of economic slowdown, lately exacerbated by the aftermaths of global pandemic spread. Consequently, the Bank’s GLP upsurged. Asset quality impaired on account of expiry of SBP’s deferment scheme period, along-with small portion being unprovided. The Bank has been maintaining a provisioning cushion of 2% (instead of 1% required). SBP’s recent circular pertaining to further relaxation in recording provisioning expense of NPLs is expected to bring reversals for several players in the industry. Markup earned and net markup income increased in line with GLP. Consequently, the Bank reported bottom-line of PKR 728mln (CY20: 530mln). Management’s commitment to recoup the asset health and consolidate the Bank’s position within the stipulated time is an acute necessity. The bank’s footsteps in the growing SME segment, which also comprises larger ticket size, is expected to succor in this situation. Granular small ticket size deposits in the BB domain, is growing, which adds benefit to performance indicators.
The ratings are dependent upon the bank’s ability to aptly combat the emerging risks under the current scenario in order to keep its business and financial risk profile intact. Meanwhile, the bank’s propensity to protect its performance indicators amidst constrained business environment, is imperative. Positive Outlook denotes comfort on business and financial profile as depicted by a higher granularity of deposit, significant expansion in demand deposits and fast rationalizing cost of funds. This would augment the reported profitability, going forward.

About the Entity
Mobilink Microfinance Bank Limited commenced its operations in 2012, as a nationwide Microfinance bank. It is a wholly-owned subsidiary of Global Telecom Holding (GTH), which in turn, is majority-owned by VEON (formerly Vimpelcom) - one of the world's largest telecom groups. VEON also owns Jazz (formerly Mobilink), the bank's super-agent in branchless banking. The Board of Directors comprises seven members consisting of four non-executive directors, two independent directors and the CEO - Mr. Ghazanfar Azzam, who carries with him over 35 years of experience in the banking sector. He is assisted by a qualified and experienced management team.

The primary function of PACRA is to evaluate the capacity and willingness of an entity to honor its obligations. Our ratings reflect an independent, professional and impartial assessment of the risks associated with a particular instrument or an entity. PACRA's comprehensive offerings include instrument and entity credit ratings, insurer financial strength ratings, fund ratings, asset manager ratings and real estate gradings. PACRA opinion is not a recommendation to purchase, sell or hold a security, in as much as it does not comment on the security's market price or suitability for a particular investor.