Press Release

Ratings of The First MicroFinanceBank Limited

Karachi, April 30, 2018: JCR-VIS Credit Rating Company Limited (JCR-VIS) has reaffirmed entity ratings assigned to The First MicroFinanceBank Limited (FMFB) at ‘A+/A-1’ (Single A Plus/A-One). The previous rating action was announced on October 31, 2017. Outlook on the assigned rating is ‘Stable’.

The ratings assigned to FMFB take into account its association with Habib Bank Limited (HBL) - the largest commercial bank in Pakistan - along with Aga Khan Development Network and other international finance institutions. The ratings also derive strength from ongoing improvement in the operating performance exhibited by sustained asset quality indicators, rationalized operating expenses and increased profitability providing positive momentum to bank’s internal capital generation. Moreover, the ratings incorporate bank’s prospective approach towards growth reflected by ongoing initiatives towards enhanced digitalization and strengthening of core functions.

The growth manifested in bank’s microcredit portfolio outpaced growth of microfinance sector, hence market share, in terms of gross loan portfolio, improved by end-FY17. Product suite was enhanced with the introduction of three new products during the outgoing year, with the aim of serving the untapped market segments and reducing product concentration risk. The sectoral portfolio concentration, albeit declined, remained predominated by agri and livestock segments; the management intends to maintain the current mix, going forward. With gradual progression of clients to successive loan cycles, average loan size and average disbursement size increased. Further, the bank has managed to improve its client retention. On a timeline basis, overall asset quality indicators remained one of the lowest among peer microfinance banks; demonstrating modest credit risk emanating from loan portfolio.

Deposits remained the prime source of funding for the bank at end-FY17. FMFB’s deposit base witnessed sizeable growth on a timeline basis primarily on account growth in fixed deposits mainly owing to launch of a TDR product for high net worth individuals. In line with the aforementioned, deposit concentration risk exhibited increase; granularity is, therefore, required with development of broader depositor base. The bank remains comfortably placed in terms of liquidity indicators, though declined, owing to presence of sizeable proportion of liquid assets, coupled with one of the lowest advances to deposit ratio recorded amongst peers. Commercial launch of 10 digital access channels was completed during the review period. The branchless banking operations are projected to contribute towards deposit base in FY18 onwards.

Growth in total markup bearing assets in line with increased market penetration and expansion in outreach positively reflected into bank’s bottom line. Operating Self Sufficiency was reported higher on the back of considerable increase in core income and rationalization of operating expenses. Retention of profits, in turn, resulted in augmentation of capital base. The bank’s Capital Adequacy Ratio (CAR) remained well above the minimum regulatory requirement, signifying the bank’s capacity to increase its risk weighted assets.

For further information on this rating announcement, please contact the undersigned at 021-35311861-70 or Mr. Maimoon Rasheed at 042-35723411-13.

Faryal Ahmad Faheem
Deputy CEO

Applicable rating criterion: Micro Finance Institutions (May 2016)

Information herein was obtained from sources believed to be accurate and reliable; however, JCR-VIS Credit Rating Company Limited JCR-VIS does not guarantee the accuracy, adequacy or completeness of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information.JCR-VIS, the analysts involved in the rating process and members of its rating committee do not have any conflict of interest relating to the rating(s)/ranking(s) mentioned in this report.JCR-VIS is not an NRSRO and its credit ratings are not NRSRO credit ratings.JCR-VIS is paid a fee for most rating assignments. This rating/ranking is an opinion and is not a recommendation to buy or sell any securities. Copyright 2018 JCR-VIS Credit Rating Company Limited. All rights reserved. Contents may be used by news media with credit to JCR-VIS.

JCR-VIS Credit Rating Company Limited