PACRA Assigns Preliminary Rating to U Microfinance Bank Limited – TFC – PKR 3,500 million

Lahore, January 05, 2021 (PPI-OT): The rating of the TFC reflects the coverage of the instrument through the security structure. Among other features of the security structure, 50% of the TFC’s amount will be secured against lien on government securities of a similar tenor. The security agent will have the right to en-cash proportionate amount from the pool to settle due payments, should the issuer not be in any eventuality, in a position to make the payment. U Microfinance Bank Limited (UMBL) is a fast growing player in the Microfinance Sector (End-Sep’20: 9.1% market share in total Gross Loan Portfolio).

The Bank’s ambitious growth strategy encompasses multi-faceted targets focused towards achieving growth in the retail banking segment, developing digital banking platform and building a wholesome treasury book. The Bank’s funding needs are primarily fostered through a growing deposit base, coupled with sizable borrowings. Sponsor support is reflected by way of subordinated debt intended to be convertible to Tier-I capital, in order to keep capital adequacy in check. Almost half of the Bank’s portfolio is gold backed as on Nov’20.

This provides a strong mitigant against potential credit risk. Pandemic (Covid-19) is a concern; its continuity would pose challenges. Average loan size of the Bank is on the higher side in relation to its peers on account of gold backed lending. The rating is dependent upon the Bank’s compliance with the agreed terms.

For more information, contact:
The Pakistan Credit Rating Agency Limited (PACRA)
Awami Complex, FB1, Usman Block New Garden Town,
Lahore – Pakistan
Tel: +9242 586 9504 -6
Fax: +9242 583 0425

Leave a Reply