The Pakistan Credit Rating Agency (PACRA) has maintained the long-term rating at “A+” (Single A plus), and the short-term rating at “A1” (A One) of First Dawood Investment Bank Limited (FDIB). These ratings denote a low expectation of credit risk emanating from a strong capacity for timely payment of financial commitments.

The ratings of secured TFCs of PKR 345mln has also been maintained at “AA-” (Double A minus). This rating denotes a very low expectation of credit risk emanating from a very strong capacity for timely payments of financial commitments.

FDIB’s ratings reflect the bank’s sound asset quality and strong risk absorption capacity augmented by substantial amount of unrecognised reserves. While the improved profitability during FY06 was mainly an outcome of higher returns on equity investments, the ratings recognize the management’s ongoing efforts at expanding and diversifying the revenue base through focusing on fee-based investment banking activities. Although contribution of fee-based income is showing a rising trend, given the increasing competition in the sector, it will take some time before a reasonable and stable revenue stream from these avenues could emerge.

About the TFC Issues: FDIB has fully redeemed the first tranche of its TFCs of PKR 253mln in September 2006. The bank currently has in issue TFCs worth PKR 345mln, issued in July2002. The instrument carries interest at 175bps + the SBP discount rate with a floor of 12.25% and a ceiling of 16.25%, payable semi-annually. The instrument is of a perpetual nature and have a call and put option exercisable at the end of every five years from the date of issue. The TFCs are secured by way of registered charge over all present and future assets and receivables of FDIB with a margin of 20%.

About the bank: Dawood Leasing Company Limited, operating since 1995, was converted into First Dawood Investment Bank (FDIB) in 2004. Since then the company has undergone a paradigm shift, with investment banking gradually displacing leasing as the management’s core focus, with further expansionary plans in the pipeline. At the same time, the management is also pursuing diversification in funding operations by emphasizing on other long-term assets. FDIB, listed on the Karachi stock exchange, is sponsored by a branch of the reputable Dawood family, which is one of the leading business groups in Pakistan.