The Pakistan Credit Rating Agency Limited
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Hassaan Ahmad

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PACRA Maintains Broker Management Rating of Trust Securities & Brokerage Limited

Rating Type Broker Management
(19-Sep-23 )
(20-Sep-22 )
Action Maintain Initial
Long Term BMR2+ BMR2+
Short Term - -
Outlook Stable Stable
Rating Watch - -

Trust Securities & Brokerage Limited (“TSBL” or “the Company”) is a public listed company primarily providing the services of equity brokerage to HNWIs and corporates/institutional clients, with an additional presence in commodity brokerage. The rating incorporates the business acumen of the primary sponsor, experienced management team, and the availability of a client services platform with research reports available to customers. The governance framework is considered strong. The Company has a well-developed organizational structure to manage its operations. The assigned rating also takes into account sound internal controls, primarily attributed to the presence of a dedicated risk management department within the Company, with adequately documented and disseminated internal policies. Moreover, TSBL has opted to outsource its internal audit department, which strengthens the Company's control framework. The Company has established rigorous protocols regarding risk assessment by implementing KYC, CDD, AML, CFT, and whistleblowing Policies. The transition of auditors from category ‘B’ to SBP’s approved ‘A’ category list has significantly enhanced oversight. The IT infrastructure allows full integration of the front and back-office functions, allowing the generation of real-time reports. The market risk is minimal due to the Company’s limited investment in equity securities amounting to ~PKR 27mln. The average market share of TSBL during 9MFY23 stands at ~2%. The brokerage revenue of TSBL declined by 29% during 9MFY23 compared with 9MFY22 whereas market volumes declined by 33% during the same period, indicating that TSBL performed in line with the market. The Company reported a PAT of ~PKR 22mln when compared to the net loss of ~PKR 14mln during SPLY. This improvement can be attributed primarily to a reduction in operating expenses as well as an increase in other income. The Company has a low-leveraged capital structure. The Company has an adequate equity base of ~PKR 312mln at end-Mar’23 (SPLY: ~PKR 289mln).
Going forward, the ratings are dependent on the management's ability to increase and retain its market share and diversification in revenue base to improve its competitive position in the brokerage industry. Simultaneously, it is imperative to uphold robust internal controls, retention of key management personnel, and diligently monitor risks.

About the Entity
Trust Securities & Brokerage Limited holds a TREC license from the Pakistan Stock Exchange and is also a member of the Pakistan Mercantile Exchange Limited. The Company was established in 1993, but the current owners took over in 2017. Mr. Junaid Shehzad Ahmed, with a wide-ranging business presence in both Pakistan and overseas, primarily owns the company. The board of directors consists of seven members, including two independent directors, three non-executive directors, and two executive directors. Mr. Abdul Basit, who has been with TSBL for the past 28 years, serves as the CEO and possesses expertise in various areas such as corporate, business, company laws, as well as SECP and NCCPL rules and regulations.

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.