Pakistan Credit Rating Agency Limited upgrades entity ratings of Mobilink Microfinance Bank

Lahore, August 05, 2016 (PPI-OT):The Pakistan Credit Rating Agency Limited (PACRA) has upgraded the long-term and short-term entity ratings of Mobilink Microfinance Bank Limited (Mobilink Bank) to ‘A’ (Single A) [previous: A-], and ‘A1’ (A One) [previous: A2], respectively. These ratings denote a low expectation of credit risk emanating from a strong capacity for timely payment of financial commitments.

The ratings reflect association of Mobilink Microfinance Bank (formerly known as Waseela Microfinance Bank) with a leading global telecom group – Vimplecom – and with Pakistan’s largest cellular operator – Mobilink. In line with the Group’s strategy, microfinance operations have been re-branded to align it with broad business objectives of the telecom business. Ensuing synergies are likely to strengthen the bank’s penetration in target markets. The bank would remain focused to reinforce its branchless banking (BB) brand (renamed as JazzCash); concerted efforts are underway to tap potential of M-wallet accounts. This is expected to positively impact cost structure going forward.

Regarding microfinance business, the bank is aggressively building its loan book. So far, overall asset quality is good. Amid competition, deposit mobilization remains a challenge; however, deposits from BB operations maintained their contribution in overall deposit base. The parent company has injected funds (PKR 1.3bln) to create room in existing capital base in line with the targeted growth in lending portfolio. The process of issuance of capital is underway. Branch banking operations have achieved breakeven in 1HCY16, resulting in positive bottom-line on entity-wide basis. Owing to on-going focus on growth, profitability is likely to improve.

Given competitive landscape, effective execution of business strategy and cohesiveness in management team remain important while maintaining the overall risk profile of the bank. The ratings are dependent on the bank’s ability to sustain improving trend in its market position while ensuring stable growth in newly built revenue streams. Given growing loan book, related risks mainly credit quality need close monitoring.

For more information, contact:
Hammad Rashid
Analyst
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
Email: hammad.rashid@pacra.com
Web: www.pacra.com

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