The Pakistan Credit Rating Agency Limited
Press Release


Muhammad Usman

Applicable Criteria

Related Research

This press release is being transmitted for the sole purpose of dissemination through print/electronic media. The press release may be used in full or in part without changing the meaning or context thereof with due credit to PACRA

PACRA Maintains Entity Ratings of Apna Microfinance Bank Limited

Rating Type Entity
(30-Oct-19 )
(30-Apr-19 )
Action Maintain Maintain
Long Term BBB+ BBB+
Short Term A3 A3
Outlook Stable Stable
Rating Watch - -

The ratings capture sustained risk profile of Apna Microfinance Bank ("the bank"). Sponsors' committed efforts to arrest shortfall in minimum CAR benchmark is witnessed through persistent equity injections (1HCY19: PKR~100mln, CY18: PKR~400mln). However, CAR continues to remain below the regulatory benchmark at~10% as at End-1HCY19 (End-CY18: ~9%). Although improving slightly, this remains a key concern. Asset quality, when segregated into old (prior Nov-16) and new portfolio, displays different outlooks, wherein non-performing loans (NPLs) from the current portfolio clocked in at ~4% of the Gross Loan Portfolio (GLP). Rise in NPL ratio may pose challenge given limited profitability. Overall, infection ratio stood at ~14% (End-CY18: ~13%). Disbursal of fresh loans is made to quality customers and is accompanied by stricter follow-ups. Meanwhile, stringent efforts to recover older NPLs are being carried out; the remaining size, though, is still huge. The ratings take into account sponsors' utmost priority to cleanse the old loan book. Auditor opinion is currently qualified in this regard. On the performance front, the bank has been able to almost double its income at the gross level, however, translating into thin profits owing to higher operating costs. Going forward, with the prevalent economic environment, cost rationalization is the key challenge to the bank to keep its margins intact. Additionally, building up a stable and diverse deposit base is fundamental to fuel the momentum of growth.
The ratings are dependent upon cleansing of the older lending book alongside maintaining health of fresh disbursements. Compliance with CAR is essential. Besides, improved profitability is of significance and any further deterioration in asset quality or CAR will have a 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 123 branches. The overall control of the company vests in a seven member Board. Mr. Muhammad Akram Shahid is the chairman of the board. Mr. Gulistan Malik is serving as the President and CEO of the bank. He is assisted by a team of experienced professionals, long associated with the company. Ilyas Saeed & Co. Chartered Accountants are the external auditors of the company. The firm has carried forward its qualified opinion on the financial statements of CY18, in respect of the 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.