Analyst
Muhammad Atif Chaudhry
Atif.Chaudhry@pacra.com
+92-42-35869504
www.pacra.com
Applicable Criteria
Related Research
PACRA Maintains the Entity Ratings of HBL Microfinance Bank.
Rating Type | Entity | |
Current (28-Dec-23 ) |
Previous (28-Dec-22 ) |
|
Action | Maintain | Maintain |
Long Term | A+ | A+ |
Short Term | A1 | A1 |
Outlook | Stable | Stable |
Rating Watch | - | - |
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 end-Sep23, 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 PKR 97.78bln at end-Sep23 (end-Sep22: PKR 79.58bln, end-Dec22: PKR 87.85bln). 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 PKR 2.94bln (3.0%) as per reviewed accounts at end-Sep 23 (end Sep'22: PKR 2.69bln (3.4%), end Dec'22: PKR 2.14bln (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 PKR 118.89bln at end-Sep23 (end-Sep22: PKR 98.27bln, end Dec'22: PKR 116.06bln). 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 PKR 23.72bln during 9MCY23 (9MCY22: PKR 17.14bln, CY22: PKR 24.06bln), 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 PKR 782mln during 9MCY23 (9MCY22: PKR 801mln, CY22: PKR 1,225mln). Capital Adequacy Ratio was recorded at ~15.3% as of end-Sep’23 (end-Dec22: ~16.4%). HBL has invested PKR 4bln in equity in the past 3 years, along with providing a subordinated debt in 2020 amounting to PKR 2bln, 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 PKR 1.5bln 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.
About
the Entity
HBL Microfinance Bank (HBL MfB) “the Bank”, was incorporated in 2002 as a nationwide microfinance bank, licensed by the State Bank of Pakistan. The Bank is majorly owned by Habib Bank Limited (HBL) (79.92%), followed by Aga Khan Agency for Microfinance (AKAM) (12.05%), Aga Khan Rural Support Programme (AKRSP) (4.46%), and Japan International Cooperation Agency (JICA) (3.57%). The Bank is a fast-growing microfinance bank currently operating with a nationwide network of 217 locations with its head office located in Islamabad. The CEO of the Bank is Mr. Muhammad Amir Khan. He has over three decades of experience in consumer and commercial banking.