The Pakistan Credit Rating Agency Limited
Press Release


Ayesha Qasim

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PACRA Maintains Entity Ratings of Telenor Microfinance Bank Limited

Rating Type Entity
(07-Nov-18 )
(27-Apr-18 )
Action Maintain Maintain
Long Term A+ A+
Short Term A1 A1
Outlook Stable Stable
Rating Watch Yes -

The ratings take comfort from association with a strong sponsor – Telenor Group. The bank's business profile emanates from its growing customer base and sustained relative position. Securing an ~19% share in the MFB's gross loan portfolio (GLP) and ~21% in its gross deposits, the bank continues to hold a prominent position in the MFBs market. Significant developments in branchless banking (BB) are underway, including insistent steps to enhance the BB Mobile-wallet customer base. The bank is all geared up to undergo induction of ~45% stake by Ant Financial - a Chinese Fintech affiliate company of the Alibaba Group. The transaction is expected to be completed in three tranches, wherein, first tranche would be injected by End-November-18. Net interest/markup revenue (NIMR) increased during the period but the bank's bottomline closed in red due to high marketing OPEX incurred in pursuit of expanding BB customer outreach. Core banking indicators remained sanguine while BB domain continued to generate losses. The bank's business model is presently pivoted around developing a sustainable widespread M-wallet customer platform, with regards to which substantial results have been achieved. Liquidity profile reflects a comfortable outlook. Asset quality, however, slightly decreased (~1.7% infection ratio), mainly on the backdrop of unsecured lending. Currently. the management's paramount focus lies in taking a boom in the BB segment with respect to which entry of a new equity partner is a salient feature.

The ratings are dependent upon successful strategic alliance with Ant-Financial and achievement of positive indicators in the BB domain. Meanwhile, simultaneous growth trends in the core and BB domain remain imperative.

About the Entity
Telenor Microfinance Bank Limited commenced operations in Sep-05 and currently operates with a nationwide network of 86 branches with its head office in Karachi. The Bank has become a wholly owned subsidiary of Telenor Pakistan B.V with entire shareholding being transferred to it. Telenor Pakistan B.V, based in Amsterdam, is an investment vehicle for Telenor ASA to invest in Pakistan. It is a wholly owned subsidiary of Telenor ASA.

Overall control of the Bank vests with nine members including the President & CEO - Mr. Shahid Mustafa. Three members are senior executives of Telenor Group, two senior executives of Telenor Pakistan Limited, and one independent member. Mr. Petter Børre Furberg, the Chairperson, has been in long association with Telenor Group. Mr. Shahid Mustafa has ~23 years of experience and an experienced management team supports him.

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.