Pakistan Industrial Credit & Investment Corporation Limited (PICIC)

The Pakistan Credit Rating Agency Limited	Press Release
a
Rating Action Lahore: (03-July-2006)

PACRA Maintains Ratings of Pakistan Industrial Credit & Investment Corporation Limited (PICIC)

Analyst
Muhammad Usman Majeed
(+92-42-586 9504)
usman@pacra.com

Disclaimer
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The Pakistan Credit Rating Agency (PACRA) has maintained the long-term and short-term entity ratings of Pakistan Industrial Credit & Investment Corporation Limited (PICIC) at “AA” (Double A) and “A1+” (A One Plus) respectively. The ratings denote a very low expectation of credit risk and a very strong capacity for timely payment of financial commitments. These ratings remain on RatingWatch pending outcome of the expected merger with PICIC Commercial Bank Limited.

PICIC’s ratings reflect the Corporation’s maintained risk absorption capacity supported by well diversified income streams from stable and sustainable sources, and the largely maintained relative positioning among the larger financial sector entities. Though having made substantial contribution to the Corporation’s profitability in recent years, income from capital market operations will remain vulnerable to volatility risk emanating from fluctuations in the stock market. The renewed focus on core business operations is expected to lend further stability to the income stream. At the same time, the sustainability of PICIC’s performance trends is contingent on the ability to improve spreads on lending operations as these remain considerably lower than those of commercial banks. The proposed merger with PICIC Commercial Bank Limited (PCBL) is expected to redress this relative disadvantage. However, the terms of merger and the timing of its consummation remain to be finalized. At this stage, therefore, Corporation’s prospects are clouded by a degree of uncertainty. Consequently ratings remain on RatingWatch.

About the corporation: Pakistan Industrial Credit & Investment Corporation Limited (PICIC) was established in 1957. Being the largest DFI in the country in terms of total assets and a branch network of 45 as of 1Q06, the Corporation’s primary activities encompass term financing for industrial and commercial activities, merchant banking operations, capital market operations, leasing and consumer financing. PICIC engaged in asset management consequent to the acquisition of management rights of ICP mutual funds – Lot ‘B’ and ICP SEMF (subsequently renamed as PICIC Investment Fund and PICIC Growth Fund respectively). These are now being managed through a new Asset Management Company wholly owned by the Corporation. PICIC also ventured into the general insurance business by forming PICIC Insurance Limited, a wholly owned subsidiary, wherein the Corporation has recently resolved to reduce its holding to 30% and distribute the remaining 70% among PICIC’s existing shareholders in order to comply with the SBP specified pre-conditions for the proposed merger with its other subsidiary, PCBL. Among the shareholders, public sector corporations have the strongest presence followed by the general public and private institutions.

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