The Pakistan Credit Rating Agency Limited
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Afnan Iqbal

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PACRA Assigns Initial Broker Management Rating to Habib Metropolitan Financial Services Limited

Rating Type Broker Management
(29-Oct-21 )
Action Initial
Long Term BMR2
Short Term -
Outlook Stable
Rating Watch -

Habib Metropolitan Financial Services Limited ("HMFSL" or the "Company") is a public unlisted company principally engaged in securities brokerage of both: ready and futures market. The Broker Management Rating reflects the Company's association with a well-established bank which is one of the dominant players in the banking sector. The rating incorporates the Company's sponsor support, experienced management team and a client services platform with quality research available to customers. The governance framework is considered sound; however, formation of board level audit and risk management committee’s and inclusion of independent director with relevant experience would strengthen corporate governance. The Company has an adequate organizational structure to manage its operations. The assigned rating also takes into account sound internal controls with adequately documented and disseminated internal policies. The appointment of auditors from SBP’s approved ‘A’ category list has strengthened the transparency. The Company has established rigorous protocols regarding risk assessment by implementing KYC, CDD, AML, CFT and whistle blowing policies. The IT infrastructure allows full integration of the front and back-office functions, allowing generation of real time reports. The Company has an in-house internal audit department, which ensure implementation of the policies and procedures of HMFSL. The Company has no proprietary trading book hence, less exposed to market risk in its own right. The average market share of HMFSL during FY21 stands at ~1.5%.; however, the brokerage income which clocked in at ~PKR 39mln for 9MCY21, lacks product diversification. The bottom-line of the Company improved to ~PKR 9.5mln in CY20 (SPLY: ~PKR 3.9mln) and stands at ~PKR 5mln for 9MCY21. The Company has an equity base of ~PKR 346mln at end-Sep'21. The rating takes comfort from leverage free capital structure.
The ratings are dependent on the management's ability to increase and retain its market share and diversification of revenue base to improve its competitive position in the brokerage industry. Retention of key personnel, adherence to regulatory requirements and sustainability of profitability will remain imperative from ratings perspective.

About the Entity
Habib Metropolitan Financial Services Limited ("HMFSL" or the "Company") was incorporated in 2007 as a public limited company under the Companies Act, 2017 and commenced its operations in 2008. Habib Metropolitan Bank Limited (HMBL) is the parent Company of HMFSL. HMBL currently operates with an expanding nationwide network of 454 branches in 165 cities across Pakistan at end-Sep'21. HMFSL enjoys close institutional relationship with Habib Metropolitan Bank Limited. Habib family, having been involved in banking for over 75 years, is considered pioneers of introducing banking in Pakistan. The Company's Board comprises of four directors including CEO, three directors are non-executive and represent Habib Metropolitan Bank Limited on the Board. The Chairman of the Board is Mr. Khurram Shahzad. .All Board members have vast experience in financial sector industry. The CEO, Mr. Manzar Mushtaq holds a Bachelor Degree in Arts from Clark University, USA. He has rich experience expanding decades in the financial world.

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.