PACRA Maintains Entity Ratings of NRSP Microfinance Bank Limited

NRSP was facing challenges, as the majority of the players came under pressure due to multiple factors. The management in conjunction with the support of the key sponsors chalked out a plan to steer the bank out of the problem zone. Although the problems persist, the bank has travelled a long distance and expects to close the calendar year in a much-improved position compared to last year. NRSP Bank has been serving an increasing number of customers and has cementing its position in the industry with ~6.4% share in the total gross loan portfolio as of Jun'23. The GLP of the bank stood at ~PKR 32bln at the end of Sept'23. The bottom line of the Bank increased drastically, depicting a profit of ~PKR 546mln at the end of Sept'23 compared to a (loss in Sept'22 of ~PKR 2,525mln). The Major sponsor, NRSP (Parent Co) injected ~PKR 1bln in NRSP bank in Feb'23 and promised to invest more with other sponsor's of NRSP Bank. A new equity injection Plan amounting to PKR 3.5bln is under discussion with the Board and sponsors.
Under that plan, Proparco also confirmed the grant of Euro 0.195mln under their technical assistant program. The proposed equity injection would support the bank in future growth prospects.
The equity of the company stood at ~PKR 1.66bln as of Sept'23 compared to ~PKR 92mln at the end of Dec'22, the increase in equity of the bank is due to the injection of equity by the NRSP (Parent Co). The Bank is continuously struggling to comply with CAR requirements. The CAR of the bank stood at ~ (-6.5%) at the end of Sept'23 compared to ~(-11.5%) in Jun'23 and ~(-13.2%) at the end of Dec'22. The bank expects to cover a significant gap by the end of this year on the negative side of CAR. The management is projecting to cover the remaining distance from the legal requirement by the end of next year, based on their own performance. Alongside this, a capital injection plan is being worked out, by virtue of which the bank would be soliciting significant capital injection from its sponsors. There is express commitment from key sponsors.
NRSP Microfinance Bank constitutes a GLP of PKR ~31.92bln in 9MCY23 (CY22 PKR ~32.3bln). GLP includes the NPL of PKR 2.8bln in 9MCY23 (CY22 PKR ~5.16bln). The bank shows efficiency in collecting its Non-performing loans as it decreases by 45.74%. The Cash and bank balances increased by ~6% to PKR ~1,928mln in 9MCY23 (PKR1,819mln CY22).
This is important to note that the provision charged by the bank has drastically reduced by ~70% changing the company's table to profits. The sponsor has reassured their support, both in technical and financial forms, to the bank historically with an expression of explicit intention from NRSP to provide financial support in the form of capital injection, as and when required.
The ratings are dependent upon the bank’s ability to steer out of the current challenges while improving the risk profile.

About the Entity
NRSP Microfinance Bank Limited was incorporated as a public limited unlisted Company in October 2008 under Section 32 of the repealed Companies Ordinance, 1984 (now Companies Act 2017). The Bank obtained a license from SBP on February 18, 2009, to operate nationwide as a microfinance bank under Microfinance Institutions Ordinance, 2001. The Bank was established to mobilize funds for providing microfinance banking and related services to low-income, underserved and marginalized segments of society for mitigating poverty and promoting social welfare through providing access to financial markets at the micro level. NRSP (Parent Co) is a majority shareholder with a shareholding of ~57%. Other institutional shareholders include the International Finance Corporation (IFC), PROPARCO, and Acumen Fund USA.