Press Release

VIS Reaffirms Entity Ratings of Pak Oman Investment Company Limited

Karachi, June 24, 2019: VIS Credit Rating Company Limited has reaffirmed the entity ratings of Pak Oman Investment Company Limited (POIC) at ‘AA+/A-1+’ (Double A Plus/A-One Plus). The long term rating of ‘AA+’ signifies high credit quality, protection factors are strong. Risk is modest but may vary slightly from time to time because of economic conditions. The short-term rating of ‘A-1+’ signifies highest certainty of timely payment; short-term liquidity, including internal operating factors and/ or access to alternative sources of funds, is outstanding and safety is just below risk free Government of Pakistan’s short-term obligations. Outlook on the assigned ratings is ‘Stable’ Outlook. The previous rating action was announced on June 27, 2018.

The assigned ratings incorporate POIC’s joint venture shareholding structure, with shares equally held by the Government of Pakistan and the Sultanate of Oman through their respective finance ministries. Sovereign ratings of Sultanate of Oman have been reaffirmed at ‘BB/B’ by an international rating agency in 2019; however, the outlook has been revised from stable to negative due to weak fiscal indicators. VIS expects support from the sponsors to continue in future in case a need arises.

The ratings further factor in modest growth witnessed in the financing portfolio with quantum of gross advances increasing to Rs.21.1b (2017: Rs. 19.7b) at end-2018. Improvement in loan quality continues to remain priority of the management with gross infection decreasing further in 2018 on account of reduction in NPLs. Going forward; pressure may be witnessed on asset quality indicators in view of the prevailing macroeconomic environment. However, management has adopted a consolidation approach to focus on loan quality and has enhanced monitoring of its existing exposures to curtail any adverse impact on infection ratios. Maintaining asset quality indicators remains a key rating driver, going forward.

During the outgoing year, volumetric growth in earning assets contributed positively to the topline. However, sizeable reduction in income from investments on account of maturity of government securities contributed to lower net interest income. Moreover, non-markup income also declined owing to lower dividend income and gain on securities, thereby translating to a lower operating profit. Management’s effort on recoveries yielded reversals almost double the size of the preceding year, which resulted in higher net profitability in 2018. Overall liquidity profile is considered manageable in view of adequate liquid assets in relation to deposits and borrowings, and regulatory compliant Liquidity Coverage Ratio (LCR) and Net Stable Funding Ratio (NSFR). Overall capitalization indicators remain sound in view sizeable cushion in Capital Adequacy Ratio (CAR) vis-à-vis the regulatory requirement.

For further information on this rating announcement, please contact the undersigned (Ext: 201) or Narendar Shankar Lal (Ext: 203) at 35311861-70 or fax to 35311872-3.

Javed Callea

VIS Entity 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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