November 30, 2018 (MLN): Pakistan Credit Rating Agency (PACRA) has maintained entity ratings of SME Leasing Limited at ‘B+’ for long term and ‘B’ for short term, with a ‘negative’ outlook forecast.
SME Leasing Limited is majorly owned by SME Bank Limited (long-term rating “CCC” with negative outlook by PACRA), and maintains a weak business and financial profile given higher quantum of non-performing portfolio, deteriorating equity base due to business losses, inadequate funding profile, and low liquidity.
In the recent period since 2015, the company is following a cautious approach; thus gradual reduction in losses is targeted. Although contained, higher operational expenses remained a drag and resultant losses caused equity erosion.
According to the press release issued by PACRA, the management’s efforts to curtail the operational losses are important to continue. Meanwhile, improvement in asset quality is crucial. Fresh injection of funds would be required to strengthen the company’s business profile; this would also have positive implication on the ratings. However, any material deterioration in existing risk profile of the company would negatively impact the ratings.
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