PACRA Maintains Entity Ratings of Pak-Libya Holding Company (Pvt.) Limited
JVFIs are largely engaged in providing credit lines on turf common to commercial banks. JVFI’s can only draw fixed deposits. This enhances their cost of funding. Key reliance on treasury function funded through borrowings from money market. Their ratings are mainly characterized by sovereign ownership, adequate standards of governance, and relatively conservative risk appetite. Advances of the Company and Investments recorded growth. Positive Outlook reflects that the Company has sustained its decent performance. However, net-markup income declined by 15.0% on account of low monetary policy rate for major period of CY21. Overall decent net-markup income is attributable to enhanced income stream from investments like trading in Govt. securities, specifically investing in PIBs; enhanced tactical allocation in accordance with current market conditions. Non-markup income of the Company has declined largely on account of major chunk of capital gain booked in previous year. Consequently, bottom-line witnessed a major dent. Another critical milestone is achieved regarding Kamoke Energy Limited (KEL), where the non-performing assets have been sold. The proceeds shall assist in resolving liquidity and other short-term and medium-term issues. There had been another challenge regarding non-compliance of MCR. Pak Libya has received full amount of last tranche in CY21 from Ministry of Finance (MoF). Subsequent to full payment by Ministry of Finance (MoF), the Company’s paid-up capital (net of losses) rose to PKR 6.1bln to meet MCR requirements. The company’s capital adequacy remained stagnant around 24.0%. During CY21, JVFI’s advances recorded sizable growth (CY21: 22%, CY20: 17%). Investment book majorly vested in government papers given investment’s security has witnessed growth. Hence, industry’s major reliance is on non-core operations for generation of income. The industry’s deposit base recorded marginal growth (CY21: PKR 29bln, CY20: PKR 27bln). Equity base of the industry witnessed attrition by 4%. Going forward, to compete with other financial institutions (commercial banks primarily), the industry players need to identify niche along with building relatively unique products and services. Otherwise, JVFIs may get marginalized.
Consistent efforts by the management to stabilize revenue stream and attain sustained profit stream from diversified operations remain vital. Meanwhile, sustaining asset quality is also essential for the ratings.
Pak Libya Holding Company (Pvt.) Limited (Pak Libya) was established as a joint stock company in October 1978. The Company is equally owned by the Government of Islamic Republic of Pakistan, represented through State Bank of Pakistan (SBP) and Ministry of Finance (MoF), and the Government of Libya, represented through Libyan Foreign Investment Company (LAFICO). The overall control vests with six-member board of directors including MD/CEO, DMD and four non-executive directors having equal representation from both governments. Company’s MD/CEO, Mr. Khurram Hussain carries financial sector experience of more than 30 years.