Pakistan Credit Rating Agency Limited affirms ratings of First Punjab Modaraba

Lahore, March 19, 2014 (PPI-OT): The Pakistan Credit Rating Agency Limited (PACRA) has affirmed the long-term and short-term entity ratings of First Punjab Modaraba (FPM) at “BBB” (Triple B) and “A3″ (A Three), respectively. These ratings denote low expectation of credit risk and an adequate capacity for timely payment of financial commitments.

FPM’s ratings reflect its strong association with the Bank of Punjab (BoP) – a bank majority owned by the Government of Punjab. This support is demonstrated in the form of provision of subsidized funding line through which most of Modaraba’s assets are being funded.

At the same time, the bank has instituted higher integration of modaraba’s key functions into bank’s respective departments. These initiatives are expected to help FPM in achieving break-even. The Modaraba’s standalone performance is constrained owing to sizeable non-earning assets coupled with subdued business activities resulting in continuous losses.

This while eroding the equity base has severely deteriorated the risk absorption capacity of FPM. Being cognizant of the situation, the management has geared up recovery efforts. The organizational structure has been realigned in line with focused business functions. However, the management’s strategy to return to core profitability by building good quality asset book, while mobilizing additional funds, remains challenging.

The ratings are dependent on continuing financial and operational support of the parent institution. Any weakening in the support from BoP would carry negative implications for the ratings.

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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