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The Pakistan Credit Rating Agency Limited
Press Release

Date
21-Dec-19

Analyst
Sehar Fatima
sehar.fatima@pacra.com
+92-42-35869504
www.pacra.com

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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

PACRA Maintains Entity Ratings of Pakistan Kuwait Investment Company (Pvt.) Limited

Rating Type Entity
Current
(21-Dec-19)
Previous
(21-Jun-19)
Action Maintain Maintain
Long Term AAA AAA
Short Term A1+ A1+
Outlook Stable Stable
Rating Watch - -

Development Financial institutions (DFIs) largely operate on turf common to commercial banks. Limited depth in participation towards development of long gestation projects, low funding base and high competition become their key challenges. Joint Venture Financial Institutions are DFIs jointly conceived by the two sovereigns with primary objective of identifying and nurturing multiple development initiatives. Their ratings are mainly characterized by sovereign ownership, adequate standards of governance and relatively conservative risk appetite.
The ratings benefit from the company's strong financial profile emanating from sound risk absorption capacity and liquidity. Over the last one decade, JVFIs at large have been relying more on the non-core income attributable to limited outreach in the market. PKIC sustained its lending book owing to prudent lending and risk management approach. The management is cognizant of the opportunities and is contemplating an appropriate strategy. Nonetheless, the build-up of strategic equity investments in different companies provides a strong and stable income stream in the shape of dividends; hence, comforting the net profits. PKIC has the smallest advances book among the peers. The investment book is usually of significant size. It was second highest in Sep-19. Treasury policy allows weighted average duration of investment portfolio up to three years which is considered higher whilst dictates effective monitoring of yield curve for future strategy. The company has focused on treasury operations where it is enhancing its participation in money market. The liquidity profile of the institution remains comfortable with access to financial institutions to support its treasury and lending operations. Strong equity base and minimal drag of NPLs on equity is a positive. Going forward, the management, while continuing to prudently increase its advances book, would also focus on non-fund based revenue stream.


The ratings are dependent on the management's ability to sustain its financial profile while managing the associated risks. Management’s efforts to diversify its operations, finding a new niche for growth, while sustaining its profitability would remain critical.

About the Entity
Pakistan Kuwait Investment Company (Private) Limited was established in March 1979 as a joint venture between the Governments of Pakistan and Kuwait. It is equally owned by Government of Pakistan through the State Bank of Pakistan (SBP) and Government of Kuwait through Kuwait Investment Authority (KIA), representing their respective governments. The governments of Kuwait and Pakistan have been rated “Aa2 (Stable)” and “B3 (Stable)” respectively, by Moody’s in 2019. The overall control of the company vests with six-member board of directors including the CEO and five non-executive directors having equal representation from both governments. Mr. Mubashar Maqbool, Pak Kuwait’s MD, has diversified experience in Development, Commercial and Investment Banking and is associated with the company since March 2019. He has past track record in Corporate Banking, Corporate Finance, Project Financing, Commercial Banking, SME Banking as well as General Management. He is assisted by capable team.

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's comprehensive offerings include instrument and entity credit ratings, insurer financial strength ratings, fund ratings, asset manager ratings and real estate gradings. 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.