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The Pakistan Credit Rating Agency Limited
Press Release

Date
07-Sep-21

Analyst
Afnan Iqbal
afnan.iqbal@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 Assigns Initial Broker Management Rating to AL Habib Capital Markets (Pvt.) Limited

Rating Type Broker Management
Current
(07-Sep-21)
Action Initial
Long Term BMR2+
Short Term -
Outlook Stable
Rating Watch -

The Broker Management Rating of AL Habib Capital Markets (Pvt.) Limited ("AHCML" or "The Company") reflects the Company's association with a well-established bank which is one of the dominant players in the banking sector industry. The rating incorporates the Company's strong sponsor support, sound governance framework, seasoned management team, and well established compliance protocols. The Company has well developed organizational structure to manage its operations and implemented appropriate policies to protect the client's interest. The Company has established rigorous protocols regarding risk assessment by implementing KYC, CDD, AML and CFT which bodes well for the rating. The IT infrastructure allows full integration of the front and back office functions, allowing generation of real time reports. The Company has an in-house internal audit department, which monitors implementation of the policies and procedures of AHCML. Audit Committee further ensures an effective control environment. The topline of the Company, commensurate with trading volumes of stock exchange index, reflected an upturn and rose by 1.3times YoY. The average traded volumes during CY20 registered an upward trajectory and improved by ~95% to ~209mln shares (CY19: ~107mln) depicting an increased participation in the equity market led by increasing investor confidence in the country’s economic rebound and the global COVID-19 vaccine rollout. The Company successfully managed to maintain its market share to average ~2.5%. Due to low leveraging, capitalization indicators are considered strong. The Company has proprietary investments, hence exposed to some market risk. The Net Capital Balance of the Company clocked in at ~PKR 240mln with an equity base of ~PKR 347mln at-end CY20. The topline of the Company is concentrated in the equity brokerage income. The bottom-line of the Company also improved to ~PKR 30mln during CY20 (CY19: ~PKR -11mln).
The ratings are dependent on the management's ability to retain its market share and diversification of revenue to improve its competitive position in the brokerage industry. Retention of key personnel, adherence to regulatory requirements, and sustainability of profitability will remain imperative from ratings perspective.

About the Entity
AL Habib Capital Markets (Pvt.) Limited, “AHCML or The Company” is a licensed TREC holder of Pakistan Stock Exchange and was incorporated under the Companies Ordinance 1984 in 2005 as private limited company. Bank AL Habib Limited (BAHL) is the major shareholder of AHCML, accounting for two‐third of the ownership. The remaining one‐third is held by Habib Family, friends and associates. The CEO, Mr. Aftab Q. Munshi possesses diversified experience in capital markets. He is serving on the Board of Directors of AHCML as Chief Executive since its incorporation. Mr. Munshi served with the Jahangir Siddiqui Group for almost 12 years in multiple roles. He headed their Equity Operations for about five years.

The Company's operating revenue is mainly concentrated in equity brokerage. During CY20 the equity brokerage revenue contributed ~74% to the total revenue. AHCML may have assets under custody of up to 25 times of net worth.

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.