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The Pakistan Credit Rating Agency Limited
Press Release

Date
24-Dec-20

Analyst
Madiha Sohail
madiha.sohail@pacra.com
+92-42-35869504
www.pacra.com

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Disclaimer
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 the Broker Management Rating of EFG Hermes Pakistan Limited.

Rating Type Broker Management
Current
(24-Dec-20)
Previous
(27-Dec-19)
Action Maintain Maintain
Long Term BMR2+ BMR2+
Short Term - -
Outlook Stable Stable
Rating Watch - -

The rating reflect EFG Hermes Pakistan Limited's ("EFG Hermes" or "The Company") association with an international financial services group “EFG Hermes” having access to emerging and frontier markets. The Company has carved its footprint in thirteen countries across four continents, spanning 35 years of growth. The assigned rating incorporate company’s adequate market share, well built governance structure and satisfactory operating profitability. The rating also reflect presence of experienced management at helm, satisfactory risk management and internal control framework and compliance with regulatory affairs. Following the recent boom in traded volumes of stock exchange, the core revenue of the Company remained buoyant and the Company maintained its market share at ~3%. The Company does not maintain proprietary investments hence, less exposed to market risk. The mechanism of risk assessment, complaint management procedures, fortnightly MIS reports and adequate customer services provide comfort to the rating. Further, appointment of ‘A’ category auditors and establishment of two board level committees augurs well for insightful monitoring. The Net Capital Balance of the company clocked in at ~PKR 370mln with an equity base of ~PKR 138mln as at end Sep'20 whereas, the net profit after tax and net equity of the Parent Company stood at ~EGP 426mln and ~EGP 13.6bln. The topline of the EFG Hermes Pakistan lacks diversification in revenue stream and concentrated to the equity brokerage income which clocked in at ~PKR 128mln at end Sep’20 (SPLY: ~PKR 70mln). The Company earned profit amounting to ~PKR 0.49mln during 3QCY20 (3QFY19: ~PKR 56.6mln loss).
The rating are dependent on maintenance of rating benchmarks. Retention of key personnel, improvement in customer servicing tools and maintaining strong controls will remain vital. Meanwhile, growth in brokerage business, strengthening of internal controls and diligent monitoring of risks will remain critical.

About the Entity
EFG Hermes Pakistan Limited, a public listed company, is licensed under Securities Brokers (Licensing and Operations) Regulations, 2016, as a securities broker and provides securities research and brokerage services to institutional and individual clients. It is also engaged in investment banking activities. The Company is 51% owned by EFG Hermes Frontier Holdings LLC, which is a wholly owned subsidiary of EFG Hermes Holding S.A.E. EFG Hermes has presence in the Middle East and North Africa (MENA) region and specializes in asset management, securities brokering, investment banking, private equity and research. EFG Hermes is the first foreign investment bank and securities broker to have physical presence in Pakistan. The Company operates from its head office based in Karachi, Pakistan. Mr. Saad Iqbal is CEO of the Company. The Company has thirteen board members, including the CEO, of which four are independent. The board meets on quarterly basis to review the business performance.

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.