PACRA Assigns Broker Entity Ratings to AL Habib Capital Markets (Pvt.) Limited

Al Habib Capital Markets (Pvt.) Limited ('AHCML' or the 'Company') is primarily engaged in the provision of equity brokerage while income from MTS and MFS also aids the topline. In CY24, Pakistan's stock market rebounded, which can be attributed to favorable factors such as low market P/E multiples, declining interest rates, and improving macroeconomic indicators. This resurgence restored investor confidence and boosted trading volumes, creating a positive outlook for the brokerage industry. The trend continued throughout CY24 with the KSE-100 index constantly breaching historic highs during the year. CY25 is expected to remain positive for the brokerage industry; however, key factors such as political stability and sustained improvement in macroeconomic indicators remain key. Effective marketing strategies enabled the Company to take advantage of the market uptick, with the brokerage revenue of AHCML surging by ~83% during 9MCY24. As a result, AHCML converted its loss during 9MCY23 to a profit after tax of ~PKR 24mln during 9MCY24. Market risk is limited, with the proprietary investment book of the Company constituting ~28% of the equity at end-Sep'24. Furthermore, market risk is negligible as the Company invests its excess funds in PIBs. AHCML maintains a leveraged capital structure, with leveraging standing at ~31% at end-Sep'24. The Company has an adequate equity base of ~PKR 416mln as at end-Sep'24. The Company's ownership lies with Bank Al-Habib (the 'Bank') and the Habib family. The business acumen and financial strength of the primary sponsor contributes positively to the ratings. Representation of the Bank on the board is well noted and strengthens the governance framework; however, inclusion of independent representation on the board may improve oversight framework further. AHCML has a well-developed organizational structure with a qualified and experienced management team. The presence of a separate internal audit department enhances the control environment. The Company intends to enhance its technological infrastructure to streamline the onboarding process for retail clients. Additionally, management's plan to expand its geographic reach shall significantly contribute to increasing the Company's market share.
Going forward, sustainability of market share, revenue, and profitability will remain imperative, while upholding strong internal controls and risk management framework is critical. Further, retention of key management personnel and continued sponsor support remains important.

About the Entity
AL Habib Capital Markets (Pvt.) Limited, “AHCML or The Company” is a licensed TREC holder of Pakistan Stock Exchange and was incorporated under the Companies Ordinance 1984 in 2005 as private limited company. Bank AL Habib Limited (BAHL) is the major shareholder of AHCML, accounting for two‐third of the ownership. The remaining one‐third is held by Habib Family, friends and associates. The Company has six directors on the board including CEO and Chairman. The CEO, Mr. Aftab Q. Munshi possesses diversified experience in capital markets. He is also on the Board of Directors of AHCML as Chief Executive since its incorporation.