The Pakistan Credit Rating Agency Limited
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Afnan Iqbal

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PACRA Maintains Broker Management Rating of Arif Habib Limited

Rating Type Broker Management
(16-Dec-22 )
(17-Dec-21 )
Action Maintain Maintain
Long Term BMR1 BMR1
Short Term - -
Outlook Stable Stable
Rating Watch - -

Arif Habib Limited (“AHL” or the “Company”) is mainly engaged in the provision of equity brokerage and advisory services. The leading position of the Company emanates from its established branches and strong control environment. AHL has an in-house internal audit department which directly reports to the Audit Committee. Internal audits are also performed at the group level which further ensures rigorous internal controls. Moreover, separate departments are in place to oversee the risk management and compliance function. AHL has developed and implemented comprehensive guidelines and policies across the Company. A rigorous framework of limits is applied to control risk across multiple transactions and products. Clients are provided with up-to-the-mark services in the form of mobile and web-based trading, access to traders, research reports and in-house customer services. AHL has established its branch network in different cities to ensure an ongoing relationship with the customers and for grievances resolution. AHL has a formal Information Technology (IT) policies and procedures manual in place to govern day-to-day IT operations. The IT department performs a full backup on a daily basis while the backup process is also validated on a monthly basis. A comprehensive Business Recovery Plan safeguards the Company’s vital records and ensures the ability of the Company to function effectively in the event of a severe disruption to normal operating procedures. The management team comprises seasoned professionals with proper departmentalization and defined roles. AHL has a robust governance framework backed by a board of 7 members including 4 non-executive and two independent directors. The assigned rating takes into account the Company’s association with astute sponsors ‘Arif Habib Group'. Contrary to the performance witnessed in FY21, the revenue from equity brokerage and advisory declined by ~31% YoY in FY22. Exposure to market risk has increased due to a significant addition to the proprietary book. The Company has an equity base of ~PKR 5bln at end-Jun’22.
Going forward, the rating is dependent on upholding a strong control framework while effectively managing risks, particularly associated with proprietary investment book. Meanwhile, sustainability and improvement in profitability from core income and maintaining market share are critical.

About the Entity
Arif Habib Limited is a financial services company, a subsidiary of Arif Habib Corporation, listed on the Pakistan Stock Exchange. The company is engaged in equity trading, equity research, money market, forex, and commodities trading and has a very strong brand name. AHL also provides investment banking & advisory services to a large scale of clientele. AHL operates from multiple branches across Pakistan, including the Head office based in Karachi, Pakistan. AHCL holds ~63%, and General Public hold ~25%. AHCL is the holding company of Arif Habib group.

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.