December 29, 2023 (M): Pakistan Credit Rating Agency Limited (PACRA) has maintained entity ratings of HBL Microfinance Bank at "A+" for long term and "A1" for short term with a stable outlook forecast, latest press release issued by PACRA showed.
The ratings assigned to the HBL Microfinance Bank underpin the Bank's affiliation with Aga Khan Development Network and Habib Bank Limited (HBL), one of the largest banks in the country.
The bank has been able to devise a sound strategy and establish a strong footprint over the years.
The bank is categorized among top-notch microfinance banks currently.
As per management representation at the end of September 2023, the bank secured a market share of 23% in the microfinance sector in terms of deposits and 19% in terms of GLP.
The gross advances clocked in at Rs97.78 billion at the end of September 2023 as against the end of September 2022’s Rs79.58bn, and the end of December 2022’s Rs87.85bn.
The recent growth recorded in the GLP is a result of enhanced outreach secured by the bank.
The same growth pattern is projected in the future as well; wherein the need to curb infection remains vital.
Non-performing loans stood at Rs2.94bn (3.0%) as per reviewed accounts at end of September 2023 as against the end of September 2022’s Rs2.69bn (3.4%), and the end of December 2022’s Rs2.14bn (2.4%).
Funding is majorly fueled through deposits where high contribution arises from the demand deposits.
As per management representation, HBL Microfinance Bank has the largest deposit base in the industry amounting to Rs118.89bn at the review period as against SPLY’s Rs98.27bn, and the end of December 2022’s Rs116.06bn.
The bank is the largest provider of Housing Finance in the Microfinance Banking Sector and one of the largest contributors from the microfinance industry in the Government Mark-up Subsidy Scheme.
The markup income clocked in at Rs23.72bn during 9MCY23, as compared to 9MCY22’s Rs17.14bn, and CY22’s Rs24.06bn, depicting sizable growth of 38%, attributable to enhanced micro-credit loan.
The sustainability and improvement in fee and commission income have been supplementing the profitability.
The bank's higher provisioning expense in 9MCY23 is attributable to the increased specific provisioning.
However, due to an increase in markup and non-markup expenses, the bank's bottom line stood at Rs782 million during 9MCY23, compared to Rs801m in 9MCY22, and Rs1.225bn in CY22.
Capital Adequacy Ratio was recorded at around 15.3% as of the review period, compared to end of December 2022’s 16.4%.
HBL has invested Rs4bn in equity in the past 3 years, along with providing a subordinated debt in 2020 amounting to Rs2bn, this depicts HBL’s commitment as a sponsor and faith in the performance and growth of HBL Microfinance Bank Ltd.
An increase in the equity base provides a cushion in the risk absorption capacity of the bank.
The bank is in the process of issuing Tier II TFC of Rs1.5bn to strengthen the CAR.
As per management representation, the impact of COVID-19 and flood-related losses are already well covered, and the watchlist accounts are not sizeable enough to create a significant impact.
The CAR of the bank meets the regulatory requirement and the management is confident to augment it further through internal generation and issuance of T2 capital.
The ratings are dependent upon the bank’s ability to aptly combat the emerging risks under the current scenario to keep its business and financial risk profile intact.
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Posted on: 2023-12-29T10:28:41+05:00
