The Pakistan Credit Rating Agency Limited
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Afnan Iqbal

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PACRA Upgrades Asset Manager Rating of MCB-Arif Habib Savings and Investments Limited

Rating Type Asset Manager
(06-Oct-20 )
(08-Oct-19 )
Action Upgrade Maintain
AM Rating AM1 AM2++
Outlook Stable Positive
Rating Watch - -

The rating reflects the Company's positioning as one of the leading players in the AMC industry, supported by strong control environment, structured Investment processes, good governance framework and qualified management team. The rating upgrade takes into account improvement across key performance areas including investment management, fund performance, control framework and growth & diversity in assets under management. The rating reflects the sizable growth in AUMs of the Company, which have increased by ~50% at end Jun'20 on YoY basis. The growth momentum is expected to continue with management focusing on strengthening its digital presence and outreach. The Company is also managing one of the largest AUMs base under SMA segment and holds significant share of the investment advisory domain. The Company has segregated its Compliance and Risk Management function in line with the best practices to strengthen its control environment. The Company has a large retail customer base with improving granularity resulting in stable AUMs. With a comprehensive portfolio of fifteen open-end mutual funds and two voluntary pension schemes, the Company offers a wide range of products for its customers. The Company’s association with MCB Bank Limited – one of the largest commercial bank – and ensuing synergies have supplemented growth. The funds under management have shown consistent and good long term performance when compared to peers. The profitability of the Company has improved notably in FY20 on the back of improving revenue generation ability and declining sales and marketing expenses due to a shift towards digitization. The Company enjoys sound liquidity and has sufficient lines available, if need arises.
The rating is dependent upon the Company’s ability to sustain its market share and upholding strong investment processes and control environment. Meanwhile, consistent performance of funds compared to benchmark and peers is critical. Any sustained downturn in fund performance and/or significant loss in market share will impact the rating.

About the Entity
MCB-Arif Habib Limited Savings and Investments Limited (MCB-AH or the "Company") is a public listed company, regulated by the SECP. MCB-AH holds licenses for Asset Management, Investment Advisory and Pension Fund Management. MCB-AH was incorporated in 2000 as Arif Habib Investments Limited and subsequently merged with MCB Asset Management Company in 2011, with the objective of achieving synergies in asset management business and access to a wider distribution network. Pursuant to the merger, name of the Company was changed to MCB-Arif Habib Savings and Investments Limited. MCB-AH caters to both conventional and Shariah compliant clientele and is currently managing a diverse product slate of fifteen open end funds and two voluntary pension schemes. MCB-AH is also managing one the largest AUMs under SMA segment and holds significant position in the investment advisory domain.

The major shareholders of MCB-AH are MCB Bank Limited ~51%, Arif Habib Corporation Limited ~30% and Adamjee Insurance Company Limited ~8%. The general public holds remaining ~11% of the shares. MCB-AH's control vests in eight member board of directors, including the CEO. There are four non-executive directors, while three directors are independent. The AUMs (CIS & VPS) of MCB-AH increased to ~PKR 66bln at end Jun'20 (Dec'19: ~PKR 58bln). The AUM's under SMA stood at ~PKR 51bln at end Jun'20.

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.