PACRA Maintains the Rating of Mobilink Microfinance Bank Limited | PPTFC | Dec-22

Mobilink Microfinance Bank Limited's ratings (or the "Bank") 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. As of 9MCY24, the Bank captured a market share of 18% in the microfinance industry's gross loan portfolio (CY23: 19%). During 9MCY24, the Bank's net markup income inclined to PKR 29.9bln (9MCY23: PKR 17.5bln), primarily driven by PKR 11bln rise in markup earned on advances, of which PKR 10bln stemmed from markup income on nano loans. The incline in markup income on nano loans was fueled by a 1.74 times expansion in nano loans portfolio, reaching PKR 17.85bln in 9MCY24 (9MCY23: PKR 6.52bln). The fee and commission income of the Bank increased to PKR 10.1bln (9MCY23: PKR 6.8bln) mainly due to the rise of PKR 3.5bln in income from branchless banking. Resultantly, the profit after tax surged by 74%, reaching PKR 1.4bln for the period ended 9MCY24 (9MCY23: PKR 0.82bln). At the end of 9MCY24, the CAR of the Bank reported at 15.94% (CY23: 16.2%). 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 was appointed as CEO of the Bank on Jan 15, 2025, who has over 21 years of experience in the banking sector. Mr. Haaris leads a skilled and experienced management team.

About the Instrument
The Bank has issued Rated, Privately Placed Listed, Unsecured, Tier II TFC ("TFC") of PKR 2bln on Nov 23, 2022. The TFC has a tenor of 7 years with the rate of 6MK+210bps p.a. 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 SBP. 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 principal of TFC shall be redeemed in four equal installments commencing from May 23, 2028. The Bank paid the 4th semiannual markup payment on Nov 23, 2024 amounting to PKR 233mln.