Press Release

VIS Upgrades Management Quality Rating of Faysal Asset Management Limited

Karachi, June 24, 2019: VIS Credit Rating Company Ltd. has upgraded the Management Quality Rating (MQR) of Faysal Asset Management Limited (FAML) to ‘AM3+’ (AM-Three Plus) from ‘AM3’ (AM-Three). The rating signifies asset manager exhibiting good management characteristics. Outlook on the assigned rating has been revised from ‘Rating Watch - Developing’ status to ‘Positive’. The previous rating action was announced on March 19, 2018.

The rating upgrade derives strength from the recent equity injection of Faysal Bank Limited (FBL) in FAML. In November 2018, FBL acquired majority stake of 99.99% in FAML. As a result, all strategic plans and decision making emanate from a single dedicated sponsor. Improvement in organizational structure and control framework along with inductions in management team have been observed; further changes in this regard will be monitored over time.

Total Assets Under Management (AUMs) amounted to Rs. 9.5b (FY18: Rs. 7.9b; FY17: Rs. 7.8b) at end-May 2019. FAML would need to build up AUMs to achieve operational breakeven which is currently yielding an attrition in equity. The company may require recapitalization if operational breakeven is not achieved this year. Change in rating outlook takes into account the support of FBL for ensuring operational and financial viability of the asset management company.

FAML has developed a revised marketing strategy for expanding its distribution outreach; this expansion is expected to result in significant growth in AUMs; the same will be tested over time. FAML’s access to it sponsor’s branch network and resource utilization will also play a vital role in this regard. During the period under review, funds’ performance compared favorably to peers for its larger funds. With changes at senior management level, improvement in performance metrics is expected, going forward. The company also plans to develop a full-fledged in house research department along with strengthening its investment management team. Corporate governance framework is also considered sound with adequate Board oversight. Ratings and outlook are dependent upon planned achievement of operational breakeven. Growth in AUMs and shortfall in performance would, therein, also impact assigned ratings.

For further information on this rating announcement, please contact Mr. Javed Callea (Ext: 201) or Ms. Muniba Khan (Ext: 215) at 021-35311861-71 or fax to 021-35311872-3.

Atiq Anwar Mahmudi

Applicable Rating Criteria: Asset Management Companies (March 2016)

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