The Pakistan Credit Rating Agency Limited
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Ayesha Qasim

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PACRA Maintains Entity Ratings of Apna Microfinance Bank Limited

Rating Type Entity
(04-Dec-18 )
(28-May-18 )
Action Maintain Upgrade
Long Term BBB+ BBB+
Short Term A3 A3
Outlook Stable Stable
Rating Watch - -

The ratings capture improved risk profile of the bank. Compliance status of the bank has been improved, except capital adequacy ratio (CAR), for which the sponsors injected PKR ~200mln since May'18 to render a bridge to the gap. Management's committed efforts to arrest attrition in loan portfolio is reflected in disbursal of fresh loans to quality customers accompanied by stricter follow-ups. Meanwhile, stringent efforts to recover older non-performing loans (NPLs) are being carried out. This has enabled the bank to subside its infection ratio considerably. Lately, the management has completely revamped the bank's operations including (i) cleansing of HR base (ii) re-building the organizational structure incorporating control monitors (iii) overhauling of IT infrastructure (iv) improving the overall control environment with revisiting policies and procedures and (v) refurbishing the credit mechanism. Outcome of the stated efforts has culminated into positive results, including profit generation since Jan-18. The ratings take into account sponsors' cognizance of the situation and commitment to turnaround the bank, wherein considerable achievement has been achieved. Financial risk profile is, however, reflected by stretched liquidity position, necessitating vigilant management approach.

The ratings are dependent upon recovery of the older infected loans, alongside maintaining asset health of fresh disbursements. Compliance with CAR is essential. Meanwhile, improved profitability is of significance and any further deterioration in CAR and/or erosion of profitability will have negative impact on the ratings.

About the Entity
Apna Microfinance Bank listed on Pakistan Stock Exchange, was established under the Microfinance Institution Ordinance 2001. It started operations in 2005. Headquartered in Lahore, it operates a nationwide network of 116 branches. The overall control of the company vests in eight member Board whereas Mr. Muhammad Akram Shahid is the Chairman of the board. Mr. Gulistan Malik was appointed as President and CEO in Aug'17. He is assisted by team of experienced professionals long associated with the company. Ilyas Saeed & Co. Chartered Accountants is the auditor of the company and they have expressed qualified opinion on 1HCY18 financial accounts in respect to quantum of non-performing advances, related provision and suspended income.

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.