PACRA Maintains Entity Ratings of First Punjab Modaraba
The ratings reflect the sustained performance and continuous support of the sponsor (The Bank of Punjab). The Modaraba has witnessed improvement in its standalone business profile exhibited in its performance trend; achieving profitability is a key highlight over the last couple of years. The Modaraba managed to expand its earning assets, mainly lending book wherein vehicle financing contributed majorly. The key sponsor – The Bank of Punjab (BoP) – a bank majority owned by the Government of Punjab, continued its support in the form of a sustainable funding base. FPM needs to diversify its funding base. This is required to propel growth while providing internal generation of capital. The management is in the process of generating new avenues of funding. By management endeavors, the infected portfolio is gradually reducing and further efforts are being made for recoveries. During FY19 further recoveries, as planned, are likely to support Modaraba’s performance in the future. The management’s efforts in particular to build strong financing book are expected to yield sustainable results; however, materialization is contingent upon the timely implementation.
The ratings are dependent on relative positioning of the Modaraba in the sector and sustained asset quality of the new portfolio: achieving bottom line profitability is important. Meanwhile, any weakening in the financial profile or support from the sponsor could have negative implications.
First Punjab Modaraba (FPM), established in 1992, is a perpetual, multipurpose Modaraba, is listed on Pakistan Stock Exchange. Modaraba is engaged in financing through Ijarah, Morabaha and Diminishing Musharaka. Punjab Modaraba Services (Pvt.) Limited (PMSL), the wholly owned subsidary of The Bank of Punjab (BoP), is the management company of FPM. PMSL has ~39% stake in the modaraba.
BoD comprises six members including CEO of FPM. Majority represents the Bank of Punjab. Mr. Umer Iqbal Sheikh, Head of Islamic banking BoP, joined the board of FPM, whereas In Jan19, Mr. Khawaja Farooq Saeed, Independent Director, resigned from the board and the casual vacancy remains unfilled. Mr. Khalid Tirmizey, the deputy CEO of BOP, is the chairman of the board, having over 42 years of experience working at several leading commercial banks in the country. Mr Aamir Malik, CEO of Modaraba, has over 26 years of banking experience in different management positions, is supported by a adequate management team.