Analyst
Muhammad Usman Ameer
usman.ameer@pacra.com
+92-42-35869504
www.pacra.com
Applicable Criteria
Related Research
PACRA Maintains the Rating of Mobilink Microfinance Bank Limited | PPTFC | Dec-22
Rating Type | Debt Instrument | |
Current (02-Aug-24 ) |
Previous (02-Feb-24 ) |
|
Action | Maintain | Maintain |
Long Term | A- | A- |
Short Term | - | - |
Outlook | Stable | Stable |
Rating Watch | - | - |
The bank's ratings are fortified by its association with Veon, a premier global telecom group spanning over six countries, and Jazz, the largest cellular operator in Pakistan. The bank's sponsor has displayed unwavering commitment by offering technical collaboration and financial backing, allowing the bank to penetrate its target markets with greater efficiency. The bank's business model prioritizes both core and branchless banking, utilizing the sponsor's network and brand name, JazzCash, to accelerate growth in the branchless banking sphere via mobile wallet accounts. At end-Dec23, the bank captured a 19% (end-Dec22: 13%) market share in the microfinance industry's gross loan portfolio. During 1QCY24, the bank's net markup income enhanced to PKR 9bln (1QCY23: PKR 5.2bln). The fee and commission income increased to PKR 3.2bln (1QCY23: PKR 1.6bln) mainly comprising income from branchless banking. Consequently, the PAT increased to PKR 501.5mln (1QCY23: PKR 257.6mln). At end-Dec23, the CAR of the bank reported at 16.2% (end-Dec22: 15.7%). Going forward, the improvement in the CAR is considered crucial.
The bank's ratings are contingent upon its capacity to effectively mitigate emerging risks under the prevailing circumstances to preserve its business and financial risk profile.
About
the Entity
Mobilink Microfinance Bank Limited, a nationwide microfinance bank, was established in 2012. The bank is a subsidiary of Veon Microfinance Holdings B.V, one of the largest telecom groups worldwide. Jazz, the bank's super-agent in branchless banking, is also owned by VEON. The Board of Directors is composed of seven members, including five non-executive directors, one independent director, and the CEO. Mr. Haaris Mahmood Chaudhary is the interim CEO of the bank, who has over 21 years of experience in the banking sector. Mr. Haaris leads a skilled and experienced management team.
About
the Instrument
Mobilink Microfinance Bank Limited has issued Rated, Privately Placed Listed/ DSLR, Unsecured, Tier II Term Finance Certificates (TFC) of PKR 2bln to contribute towards the bank’s Tier II capital for complying with the Minimum Capital Requirements (MCR) and Capital Adequacy Ratio (CAR) requirement prescribed by the SBP. The instrument has a tenor of 7 years from the date of issue. The profit is being paid semi-annually in arrears at the rate of 6MK+210bps p.a on the basis of the outstanding principal amount. The Bank has paid the third semiannual markup payment in May 2024. The principal of TFC shall be redeemed in four equal installments commencing from the end of 66th from the issue date. The issuer may call the TFCs, in parts or in full, after five years from the issue date on the principal redemption date, thereafter, subject to prior approval from the State Bank. Further, the call option is exercisable if MMBL's MCR, LR, and CAR requirements are in compliance with the requirements prescribed by SBP. As per the lock-in clause requirement for tier II issues, neither profit nor principal would be payable (even at maturity), if such payment will result in a shortfall in the Bank's MCR, leveraged ratio, or CAR or results in an increase in any existing shortfall in MCR, LR or CAR. The TFC will be subject to a loss absorbency clause, upon the occurrence of a point of Non-Viability event, SBP may fully or permanently convert the TFCs into common shares of the Bank.