Press Release

VIS Assigns Positive Outlook to Entity Ratings of House Building Finance Company

Karachi, May 13, 2019: VIS Credit Rating Company Limited has maintained the entity ratings of House Building Finance Company (HBFC) at ‘A/A-1’ (Single A/A-One). Outlook on the assigned ratings has been revised from ‘Stable’ to ‘Positive’. The long-term rating of ‘A’ signifies good credit quality; Protection factors are adequate. Risk factors may vary with possible changes in the economy. The short-term rating of ‘A-1’ indicates high certainty of timely payment; Liquidity factors are excellent and supported by good fundamental protection factors. Previous rating action was announced on May 14, 2018.

The revision in rating outlook reflects increase in management stability, improvement in asset quality and projected enhancement in financial profile with growth in advances portfolio. Ratings will remain dependent on continuing trend in asset quality improvement and sustaining recovery from non-performing portfolio. The assigned ratings continue to factor in sovereign ownership of HBFC, with Government of Pakistan holding entire stake in the company directly and indirectly through State Bank of Pakistan. Ratings also reflect strong capitalization and healthy liquidity profile of HBFC. The company has recently mobilized fixed-rate funding line from Pakistan Mortgage Refinance Company Limited of up to Rs.3.6b with a tenor of 20 years.

Disbursements depicted growth in 2018; however, portfolio growth remained stagnant on account of sizeable recoveries. In the ongoing year, the company launched a new scheme called ‘Ghar Pakistan’ to cater to house financing needs of modest and low-income population. This, along with planned launch of several other new products, operational reorganization and resolution of staffing issues, are expected to contribute to increase in pace of lending and aid in achieving targets envisaged in the business plan. Overall control framework has witnessed improvement with implementation of credit scoring mechanism and ongoing migration to automated loan management system as part of digitization initiative.

The company posted lower profitability in 2018 primarily on account of higher administrative expenses; planned hiring is expected to augment administrative expenses for the ongoing year. Future direction of earnings will be a function of quantum of disbursements and credit quality of the same, recovery from non-performing portfolio and level of administrative expenses. Quality of fresh lending at projected higher levels of disbursements will be an important rating driver, going forward.

For further information on this rating announcement, please contact the undersigned (Ext: 201) or Mr. Talha Iqbal (Ext: 213) at 021-35311861-71 or fax to 021-35311872-3.

Javed Callea

Applicable Rating Criteria: Government Supported Entities (June 2016)

Information herein was obtained from sources believed to be accurate and reliable; however, VIS Credit Rating Company Limited (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.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.VIS is not an NRSRO and its credit ratings are not NRSRO credit ratings.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 2019 VIS Credit Rating Company Limited . All rights reserved. Contents may be used by news media with credit to VIS .

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