Press Release
Date: 31-Mar-22
PACRA Assigns Initial Broker Fiduciary Rating to EFG Hermes Pakistan Limited

Rating Details Rating Type BFR
Dissemination Date Current (31-Mar-22 )
Action Initial
Rating BFR 2+
Outlook Stable
Rating Watch -

Rating Rationale Factor Comment
Ownership Majority shares are owned by EFG Hermes Frontier Holdings LLC with ownership stake of ~51%.
Governance The board is comprised of seven members. There are 4 non-executive directors and 2 independent directors. While a female director is also present.
Management and Client Services Management team consist of seasoned professionals reporting to their respective heads at group level. Client servicing is considered strong.
Internal Controls and Regulatory Compilance Internal audit is performed at the group level. Dedicated risk management and compliance department are also present.
Business Sustainability Brokerage income improved by ~40% YoY at end-Dec'21. The profitability stood at ~PKR 29mln for CY21 (SPLY: ~PKR 1.6mln).
Financial Sustainability The liquid capital balance stood at ~PKR 854mln at end-Dec'21. There are no proprietary book investments as per Company policy.

Key Rating Drivers Listed in 2008, EFG Hermes Pakistan Limited ("EFGH" or "The Company") as a foreign broker has local footprint in the country. EFGH primarily provides equity brokerage service to HNWI's, Institutions and Foreign clientele. Room exists for product diversification. Going forward, the Company plans to enhance the retail clientele by introducing a customized mobile-app with user friendly interface. Hiring of additional resources for the technological developments is also under consideration. The Company has performed in line with the market in CY21, whereby the brokerage revenue has improved as compared to previous years. The losses have been turned into profit this year; however, the equity warrants fresh injection. Market risk is reduced due to Company's policy of not investing in proprietary book. The rating takes into account strong management and client servicing supported by an in-house research department, online trading, mobile-app and customer service department. The rating signifies a strong control framework as the policies are aligned at the group level. Separate risk management and compliance further strengthens the control environment. The assigned rating incorporates the Company's strong governance framework emanating from its association with the Egyptian Financial Group having access to emerging and frontier markets. Going forward, sustainability and improvement in core revenue and profitability remains critical. Meanwhile, upholding strong internal controls, retention of key management and diligent monitoring of risk is important.

About the Entity
Legal Structure Listed
Year of Establishment 27-Sep-99
Type of License Trading and Self-clearing
Majority Ownership EFG Hermes Frontier Holdings LLC | ~51%

Regulatory Disclosures Analyst Applicable Criteria Related Research
Afnan Iqbal

Methodology | Broker Fiduciary Rating | Jan-21

Sector Study | Brokerage & Securities | Jan-22

Disclaimer This press release is being transmitted for the sole purpose of dissemination through print/electronic media. The press release may be used in full or in part without changing the meaning or context thereof with due credit to PACRA. The primary function of PACRA is to evaluate the capacity and willingness of an entity to honor its obligations. Our ratings reflect an independent, professional and impartial assessment of the risks associated with a particular instrument or an entity. PACRA opinion is not a recommendation to purchase, sell or hold a security, in as much as it does not comment on the security's market price or suitability for a particular investor.