The Pakistan Credit Rating Agency Limited
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Sehar Fatima

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PACRA Maintains the Entity Ratings of HBL Microfinance Bank.

Rating Type Entity
(28-Dec-22 )
(28-Dec-21 )
Action Maintain Initial
Long Term A+ A+
Short Term A1 A1
Outlook Stable Stable
Rating Watch - -

The ratings assigned to the HBL Microfinance Bank underpin the Bank's affiliation with Aga Khan Development Network and Habib Bank Limited (HBL) – one of the largest banks in the country. The bank has been able to devise a sound strategy and established a strong footprint over the years. The bank is categorized among top-notch microfinance banks currently. The bank secures a 22.1% market share amongst the microfinance banks as of end-Sep`22 in terms of GLP. The recent growth recorded in the GLP is a result of enhanced outreach secured by the Bank. The same growth pattern is projected in the future as well; wherein the need to curb infection remains vital. The Bank is the largest provider of Housing Finance in the Microfinance Banking Sector and one of the largest contributors from the microfinance industry in the Government Mark-up Subsidy Scheme (GMSS); as of September 30, 2022, its outstanding portfolio amounted to PKR 6.6bln. During 9MCY22, the bank recorded a sizable improvement in markup income, due to an enhanced portfolio. The sustainability and improvement in fee and commission income have been supplementing the profitability. The bank's higher provisioning expense in 9MCY22 is attributable to the increased specific provisioning. However, the net profitability sustained its growth trend. The investment book is vested in government securities which adds to the liquidity side. Funding is majorly fueled through deposits where high contribution arises from the demand deposits. An increase in the equity base provides a cushion in the risk absorption capacity of the bank. Capital Adequacy Ratio (CAR) was recorded at 16.1% as of end-Sep’22. Further, the strengthening of CAR remains vital. The Bank has already initiated the process of issuance of further capital amounting to PKR 1bln by way of the right issue. The additional capital injection will further strengthen the rapid growth potential of the Bank, going forward. The strengthening of the equity base over the last few years is positive. The industry's parameters are deteriorating on account of pressured macroeconomic indicators, attributable to the aftermath of the COVID-19 and recent flood situation. The relative impact and aftermath on the risk profiles of industry players have been unfolding in the ongoing months. The upcoming two quarters will remain important for the industry players as to the behavior of flood-impacted portfolios as well as relevant guidance from the regulators.
The ratings are dependent upon the Bank’s ability to aptly combat the emerging risks under the current scenario to keep its business and financial risk profile intact. Given the strong business acumen of the sponsors, a distinct focus is vested to continue leading the market with good asset quality. Meanwhile, the Bank’s propensity to protect its performance indicators is imperative..

About the Entity
HBL Microfinance Bank (HBL MfB), formerly The First MicroFinanceBank Ltd, “the Bank”, was incorporated in 2002 as a nationwide microfinance bank, licensed by the State Bank of Pakistan. The Bank is majorly owned by Habib Bank Limited (HBL) (76.42%), followed by Aga Khan Agency for Microfinance (AKAM) (14.16%), Aga Khan Rural Support Programme (AKRSP) (5.23%), and Japan International Cooperation Agency (JICA) (4.19%). The Bank is a fast-growing microfinance bank currently operating with a nationwide network of 214 locations with its head office located in Islamabad. The CEO of the Bank is Mr. Muhammad Amir Khan. He has over three decades of experience in consumer and commercial banking.

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.