Press Release
Date: 17-May-23
PACRA Maintains Broker Fiduciary Rating of Habib Metropolitan Financial Services Limited

Rating Details Rating Type BFR
Dissemination Date Current (17-May-23 ) Previous (13-Jun-22)
Action Maintain Initial
Rating BFR 3+ BFR 3+
Outlook Stable Stable
Rating Watch - -

Rating Rationale Factor Comment
Ownership The Company is a wholly-owned subsidiary of Habib Metropolitan Bank Limited a prominent financial institution.
Governance The board is comprised of three non-executive directors. All of whom represent Habib Metropolitan Bank Limited.
Management and Client Services The Company has a lean organizational structure with a qualified and experienced management team. The Company provides client services as per the industry practices, including the facility of dedicate
Internal Controls and Regulatory Compliance Well-defined policies are in place pertaining to key risk areas compliance and the internal audit department ensures implementation.
Business Sustainability Primary source of revenue originates from equity brokerage which leaves room for product diversification.
Financial Sustainability At end-Dec22, LCB stood at ~PKR 277mln, while the equity stood at ~PKR 326mln.

Key Rating Drivers Habib Metropolitan Financial Services Limited ("HMFS" or the "Company") is a public unlisted company principally engaged in the business of equity brokerage. The assigned rating incorporates a qualified and experienced management team and a client services platform with the facility of online trading and quality research available to customers. The rating incorporates adequate internal control structure supported by an independent compliance department while the presence of internal auditor is well noted. The Company has established rigorous protocols regarding risk assessment by implementing KYC, CDD, AML, CFT, and whistle blowing policies. The Company has no proprietary trading book hence, less exposed to market risk. The rating reflects the Company's association with a growing bank which has a dominant presence in trade finance. The governance framework is considered adequate. Formation of board level audit and risk management committee’s and the inclusion of independent director with relevant experience would strengthen corporate governance. Due to the dismal market performance in CY22, the topline has declined by ~34% compared to CY21. However, in terms of volumes traded, HMFS has performed relatively well with a fall of ~37% in volumes compared to ~51% of the market. The equity took a hit due to losses suffered on the back of decline in topline and increase in administrative expenses. The rating takes comfort from a low leveraged capital structure. Going forward, sustainability of market share and improvement in topline with a focus on cost control will remain critical for the assigned rating.

About the Entity
Legal Structure Public Limited
Year of Establishment 28-Sep-07
Type of License Trading and Self-clearing
Majority Ownership Habib Metropolitan Bank Limited

Regulatory Disclosures Analyst Applicable Criteria Related Research
Afnan Iqbal

Methodology | Broker Fiduciary Rating | Jan-23

Sector Study | Brokerage & Securities | Jan-23

Disclaimer This press release is being transmitted for the sole purpose of dissemination through print/electronic media. The press release may be used in full or in part without changing the meaning or context thereof with due credit to PACRA. 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 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.