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Pakistan Credit Rating Agency Limited (PACRA) has maintained the long-term and short-term entity ratings of Pak Libya Holding Company (Private) Limited [PLHC] at AA- (Double A minus) and A1+ (A one plus) respectively with a "Positive" outlook.
The ratings are mainly characterized by sovereign ownership, adequate standards of governance, and relatively conservative risk appetite. The company’s advances book and deposit base reflected a growth YoY. The net-markup income witnessed a dip YoY. However, the recent five months of CY23 have recorded an improvement in income. The declining trend illustrated by NIMR is attributable to a huge contribution of markup expense (CY22: PKR 8.1bln; CY21: PKR 2.3bln) from borrowings and deposits. The investments portfolio was tilted toward government securities like investing in T Bills, and PIBs; enhanced tactical allocation in accordance with current market conditions. Non-markup income of the Company reflected a sizeable decline including realized loss on securities. Consequently, the bottom line got a major hit and recorded net losses of PKR 306mln. The Company has managed to steer out of challenges and has recorded net profits in 5MCY23. The company’s non-performing advances increased in CY22; need to be managed prudently. There has been another challenge regarding non-compliance with MCR. The management is confident in meeting MCR through organic profitability. The company’s capital adequacy sizably declined to
14.2% (CY21: 24%). During 1QCY23, the company’s net profitability reflected a positive position standing at PKR 238mln attributable to controlled non-markup expenses coupled with no losses against the securities. During CY22, JVFI’s advances recorded sizable growth of 122% (CY22:19.1bln, CY21:8.6bln). The Investment book is majorly vested in government papers given investment’s security has witnessed growth. Hence, the industry’s major reliance is on non-core operations for the generation of income. The industry’s deposit base recorded marginal growth (CY21: PKR 29bln, CY20: PKR 27bln). The equity base of the industry witnessed attrition by 4%. Going forward, to compete with other financial institutions (commercial banks primarily), the industry players need to identify niches along with building relatively unique products and services. Otherwise, JVFIs may get marginalized.
A positive outlook reflects consistent efforts by the management to stabilize the revenue stream and attain a sustained profit stream from diversified operations. Meanwhile, sustaining asset quality is also essential for the ratings.