The Pakistan Credit Rating Agency Limited
Press Release


Ayesha Qasim

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PACRA Maintains Entity Ratings of Apna Microfinance Bank Limited

Rating Type Entity
(30-Apr-19 )
(04-Dec-18 )
Action Maintain Maintain
Long Term BBB+ BBB+
Short Term A3 A3
Outlook Stable Stable
Rating Watch - -

The ratings capture improved risk profile of Apna Microfinance Bank ("the bank"). Sponsors have been reviving the CAR as witnessed through persistent equity injections (PKR~400mln - CY18, PKR~400mln -CY17). However, with steady expansion in unsecured lending book, CAR continued to hover below the regulatory benchmark at ~9% as at End-Dec'18 through slightly higher period on period basis (~8% End-Dec'17). Further cash injections are scheduled for remediation, of which PKR~100mln has already arrived in 1QCY19. Asset quality displayed a notable refinement with the overall infection ratio declining to ~13% (CY17: ~22%). The fresh infection is a concern. This is achieved on the backdrop of disbursing fresh loans to quality customers accompanied by stricter follow-ups. Meanwhile, stringent efforts to recover older non-performing loans (NPLs) are being carried out. The ratings take into account sponsors' cognizance of the situation and their commitment to rectify. Bottomline closed in the positive zone, though remained merely thin; cost rationalization is the key challenge to upgrade performance indicators, particularly from core operations. 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 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 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 a team of experienced professionals long associated with the company. Ilyas Saeed & Co. Chartered Accountants are the External Auditors of the company and they have carried forward their qualified opinion to 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.