The Pakistan Credit Rating Agency Limited
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Afnan Iqbal

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PACRA Maintains Broker Management Rating of Habib Metropolitan Financial Services Limited

Rating Type Broker Management
(28-Oct-22 )
(29-Oct-21 )
Action Maintain Initial
Long Term BMR2 BMR2
Short Term - -
Outlook Stable Stable
Rating Watch - -

Habib Metropolitan Financial Services Limited ("HMFSL" or the "Company") is a public unlisted company primarily providing the services of equity brokerage to HNWIs and corporate/institutional clients. The Broker Management Rating reflects the Company's association with a well-established bank, one of the banking sector's dominant players. The rating incorporates the Company's sponsor support, experienced management team, and the availability of a client services platform with quality research available to customers. The governance framework is considered satisfactory; however, the formation of board-level audit and risk management committees and the inclusion of independent directors with relevant experience would strengthen corporate governance. The Company has a lean organizational structure to manage its operations. The assigned rating also takes into account sound internal controls with adequately documented and disseminated internal policies. The Company has an in-house internal audit department, which ensures the implementation of the policies and procedures. The Company has established rigorous protocols regarding risk assessment by implementing KYC, CDD, AML, CFT, and whistle-blowing policies. The appointment of auditors from SBP’s approved ‘A’ category list has strengthened the transparency. The IT infrastructure allows full integration of the front and back-office functions, allowing the generation of real-time reports. The Company has no proprietary trading book hence, less exposed to market risk. The average market share of HMFSL during 1HCY22 stands at ~1.6%.; however, the brokerage income which clocked in at ~PKR 19mln for 1HCY22, lacks diversification. The Company reported a net loss of ~PKR 2.6mln during 1HCY22 compared to a profit of ~PKR 3.2mln in 1HCY21. The reduced profits are on account of condensed traded volume. The Company has an equity base of ~PKR330mln at end-June'22.
The ratings are dependent on the management's ability to increase and retain its market share and diversification of revenue base to improve its competitive position in the brokerage industry. Retention of key personnel, adherence to regulatory requirements, and sustainability of profits will remain imperative from the rating's perspective.

About the Entity
Habib Metropolitan Financial Services Limited ("HMFSL" or the "Company") was incorporated in 2007 as a public limited company under the Companies Act, 2017 and commenced its operations in 2008. Habib Metropolitan Bank Limited (HMBL) is the parent company of HMFSL. HMBL currently operates with an expanding nationwide network of 493 branches in 191 cities across Pakistan at end-June'22. HMFSL enjoys a close institutional relationship with Habib Metropolitan Bank Limited. Habib family, having been involved in banking for over 75 years, is considered the pioneer of introducing banking in Pakistan. The Company has three directors on the board including the Chairman. All the directors are non-executive directors and represent HMBL on the Board. The Chairman of the Board is Mr. Khurram Shahzad. All Board members possess a vast experience in the financial sector. The CEO, Mr. Ather Husain Medina is a qualified professional with extensive work experience of over 29 years in the financial sector and has worked with BIPL Securities Ltd., Alfalah GHP Investment Management Ltd., Invest Capital Investment Bank Ltd. and Atlas Asset Management Ltd.,among other reputed Financial Institutions.

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.