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VIS Maintains Entity Ratings of Pak Oman Microfinance Bank Limited

Karachi, May 06, 2022 (PPI-OT): VIS Credit Rating Company Limited (VIS) has maintained the entity ratings of Pak Oman Microfinance Bank (POMBL) at ‘A-/A-2’ (Single A minus /Single A-Two). The outlook on the assigned ratings has been revised from ‘Rating Watch-Developing’ to ‘Stable’ status. The long-term rating of ‘A-’ signifies good credit quality with adequate protection factors. Risk factors may vary with possible changes in the economy. The short-term rating of ‘A-2’ indicates good certainty of timely payment, sound liquidity factors supported by good fundamental protection factors and small risk factors. Access to capital markets is good. The previous rating action was announced on April 30, 2021.

Revision in rating outlook incorporates achievement of planned growth in advances portfolio, recovery in profitability metrics and asset quality indicators and improvement in governance and control framework. Assigned ratings of POMBL reflect shareholding change whereby 100% ownership stake has been acquired by LOLC Asia Pvt Limited from Sultanate of Oman and Pak Oman Investment Company Limited. LOLC Asia Pvt Limited is a wholly owned subsidiary of LOLC Group Sri Lanka which is one of the biggest and diversified conglomerates having investments in various industries including financial services, insurance, manufacturing, trading, plantation, renewable energy, and leisure. While POMBL would continue to derive technical support from the group, given the current economic condition in Sri Lanka, ratings remain sensitive to support from the group.

With recovery in the global economy post COVID-19, pace of disbursements escalated in the second half of 2021 with the gross loan book registering a healthy growth. Nevertheless, market share remains low at 1.4% (2020: 0.8%). Asset quality indicators compare favourably relative to peers with improvement recorded in infection ratios, however given strong portfolio growth, maintenance of asset quality indicators over time will remain important for ratings, going forward.

Ratings also take into account improvement in profitability metrics on the back of portfolio enhancement and increasing spreads. Further support was provided by higher fee and commission income earned and income generated from recoveries against written-off portfolio. From a ratings perspective, sustainability and augmentation of profitability metrics will remain a key rating driver.

Advances growth over time have been funded through increase in institutional deposit base. Given the projected increase in deposit base and borrowings along with advances growth, maintaining adequate liquidity profile in relation to the same is considered important for ratings. Going forward, management envisages improvement in profitability profile of the bank on account of projected increase in spreads, operational efficiencies and uptick in disbursements, post digitalization. Capitalization profile remains sound as Capital Adequacy Ratio (CAR) remains comfortably above the regulatory requirement. Room for growth in risk weighted assets remains considerable. Achievement of projected plans will remain important from a ratings perspective.

For more information, contact:
Director Compliance and Rating Analytics,
VIS Credit Rating Company Limited
VIS House, 128/C, 25th Lane off Khayaban-e-Ittehad,
Phase VII, DHA, Karachi, Pakistan
Tel: +92-21-35311861-72
Fax: +92-21-35311873
Email: bilal@jcrvis.com.pk
Website: https://www.vis.com.pk/