The Pakistan Credit Rating Agency Limited
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Muhammad Harris Ghaffar

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PACRA Maintains Entity Ratings of Escorts Investment Bank Limited

Rating Type Entity
(05-Apr-21 )
(09-Apr-20 )
Action Maintain Maintain
Long Term A- A-
Short Term A2 A2
Outlook Stable Stable
Rating Watch - -

The ratings reflect the adequate financial strength of the bank. The strength was embodied hitherto in the subordinated loan given to the bank and lately of which the intended amount has been converted into equity, pursuant to the right issue exercise undertaken by the bank. As a consequence, the equity base of the bank was augmented. The bank has a total long-term financing of approximately PKR 192mln at end Dec-20. The bank grown by 5% only, wherein the house financing grows by 8% reaching PKR 148mln and the micro financing contracted by 6.5%, reaching PKR 43mln. The obvious challenge to growth has been the outbreak of COVID-19. The other offshoot of this is the rise in NPL from PKR 31mln to PKR 35mln (16% infection ratio in June-2020, 17% in Dec-2020). The bank booked net loss of PKR 36mln. Building erstwhile COVID profitability is essential for the sustained risk profile of the bank and hence its rating. The management has represented that profitability is expected by end of this financial year on a monthly basis. The bank is funding its needs through equity at the moment. CODs base is limited with small amounts mobilized from the corporate segment. No aggressive deposit mobilization drive is planned. The bank has entered into micro lending wherein which the size is evolving though small at the moment. Branch network has been expanded. Going forward, the ongoing wave of COVID-19 and low interest rates can hinder the growth of the bank. The appointment of a new CEO after the resignation of incumbent CEO is vital for the growth strategy.
The ratings are dependent on the continuous financial strength and maintained liquidity position. Immaculate financial discipline and corporate governance is important. Any discrepancy in achieving its targets or regaining its lost momentum remains critical to the ratings.

About the Entity
Escorts Investment Bank Limited (EIBL), a Non-Banking Finance Company (NBFC), started its commercial operations in 1996. Major shareholding is held by Bahria Town (Pvt.) Limited and its associates (~89%) while the rest is owned by the public sector companies and general public. Bahria Town is a privately owned real-estate development company which owns, develops, and manages properties across Pakistan. It is the leading private real estate company in the country. The major ownership of BTPL is held by Chairman & CEO Mr. Malik Riaz Hussain.
EIBL’s board (BoD) comprises seven members including the CEO. The board included two independent directors. All other members are non-executive members except the CEO. Ms. Zainab Malik is the Chairperson of the board, the only representation of the sponsoring family. She carries experience of corporate governance during her period of directorship for last 7 years over different companies. The CEO, Mr. Naveed Amin, possess an experience of 30 years including financial sector work experience. Mr. Naveed Amin has recently resigned from the post of CEO but he will continue until first week of May. The future CEO of the company is yet to be decided.

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.