PACRA Maintains Broker Management Rating of Habib Metropolitan Financial Services Limited

Habib Metropolitan Financial Services Limited (“HMFSL” or “the Company”) is a public limited company primarily providing equity brokerage services to individuals and leading financial institutions. Since Oct’23, the KSE-100 Index has experienced a surge in investor interest, with the index breaching historic high levels continuously and breaching the 86k mark for the first time during Oct’24. The market P/E ratio is still considerably low, and the index is expected to grow further. Of particular note is the country’s policy rate decision, and the expected rate cuts during FY25 shall give rise to fresh buying as investors shift the focus from fixed income to the equity market. While FY24 has had good results for the brokerage industry, political and economic stability are key factors to uphold investor interest during FY25. The rating incorporates the business acumen of the primary sponsors, Habib Metropolitan Bank Limited, the experienced management team, and the availability of a client services platform with research reports available to customers. The governance framework is considered satisfactory; however, the inclusion of independent directors with relevant experience would strengthen corporate governance. The organizational structure is lean and commensurate with the scale of operations. The Company operates through its office located in Karachi. HMFSL has an in-house 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 market risk is limited, as HMFSL does not maintain any proprietary trading books. The brokerage revenue of HMFSL increased by 122% to ~PKR 26mln during 1HCY24 compared with ~PKR 12mln during 1HCY23. While the surge in revenue is attributable to market uptick, inflation increased the cost of doing business, eroding profitability margins. The Company reported a net loss of PKR ~14mln in 1HCY24 compared to a net loss of ~PKR 15mln in SPLY. There has been a substantial increase of ~24% in administrative expenses. The Company has an adequate equity base of ~PKR 298mln at the end of Jun’24 as compared to the equity of ~PKR 308mln in Dec’23.
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
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 more than 521 branches in more than 207 cities across Pakistan at end-June'24. The Company has three directors on the board. The CEO, Mr. Ather Husain Medina is a qualified professional with extensive work experience of over 29 years in the financial sector and has worked with well-known companies.