Rating Details	Rating Type	BFR
	Dissemination Date	Current (17-May-23 )	Previous (13-Jun-22)
	Action	Maintain	Initial
	Rating	BFR 3+	BFR 3+
	Outlook	Stable	Stable
	Rating Watch	-	-

Rating Rationale	Factor	Comment
	Ownership	The Company is a wholly-owned subsidiary of Habib Metropolitan Bank Limited a prominent financial institution.
	Governance	The board is comprised of three non-executive directors. All of whom represent Habib Metropolitan Bank Limited.
	Management and Client Services	The Company has a lean organizational structure with a qualified and experienced management team. The Company provides client services as per the industry practices, including the facility of dedicate
	Internal Controls and Regulatory Compliance	Well-defined policies are in place pertaining to key risk areas compliance and the internal audit department ensures implementation.
	Business Sustainability	Primary source of revenue originates from equity brokerage which leaves room for product diversification.
	Financial Sustainability	At end-Dec22, LCB stood at ~PKR 277mln, while the equity stood at ~PKR 326mln.

Key Rating Drivers

Habib Metropolitan Financial Services Limited ("HMFS" or the "Company") is a public unlisted company principally engaged in the business of equity brokerage. The assigned rating incorporates a qualified and experienced management team and a client services platform with the facility of online trading and quality research available to customers. The rating incorporates adequate internal control structure supported by an independent compliance department while the presence of internal auditor is well noted. The Company has established rigorous protocols regarding risk assessment by implementing KYC, CDD, AML, CFT, and whistle blowing policies. The Company has no proprietary trading book hence, less exposed to market risk. The rating reflects the Company's association with a growing bank which has a dominant presence in trade finance. The governance framework is considered adequate. Formation of board level audit and risk management committee’s and the inclusion of independent director with relevant experience would strengthen corporate governance. Due to the dismal market performance in CY22, the topline has declined by ~34% compared to CY21. However, in terms of volumes traded, HMFS has performed relatively well with a fall of ~37% in volumes compared to ~51% of the market. The equity took a hit due to losses suffered on the back of decline in topline and increase in administrative expenses. The rating takes comfort from a low leveraged capital structure. Going forward, sustainability of market share and improvement in topline with a focus on cost control will remain critical for the assigned rating.

About the Entity
	Legal Structure	Public Limited
	Year of Establishment	28-Sep-07
	Type of License	Trading and Self-clearing
	Majority Ownership	Habib Metropolitan Bank Limited

Regulatory Disclosures	Analyst	Applicable Criteria	Related Research
	Afnan Iqbal afnan.iqbal@pacra.com +92-42-35869504 www.pacra.com	Methodology | Broker Fiduciary Rating | Jan-23	Sector Study | Brokerage & Securities | Jan-23

Disclaimer

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