PACRA Maintains Entity Ratings of Pakistan Kuwait Investment Company (Pvt.) Limited
JVFIs are largely engaged in providing credit lines on turf common to commercial banks. However, limited growth in advances, over last many years, is evident of conservative risk appetite of these institutions. Key reliance on treasury function funded through borrowings from money market. 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. COVID-19 is an ongoing challenge. While it has taken a toll on many businesses, its ramifications are still unfolding. The proactive measures taken by the regulators and other concerning bodies have mitigated the potential damages much anticipated from this pandemic. As a result, the JVFIs industry remained protected and posted record profits. Vigilance is required as the loan repayment cycle remains amid variants of the pandemic continue to re-emerge.
PKIC's deposit base enhanced to PKR 2.8bln as at end-Dec20. Also, advances recorded sizable growth where infection was contained at historical figure. Net markup income of the Company increased by 55% YoY to PKR 2bln on the back of higher investments in government securities and increase in lending portfolio which includes advances financed by low cost funding. The build-up of strategic equity investments in different companies provides a strong and stable income stream in the shape of dividends. Net profits are the main function of dividend income. Total Assets of the Company increased to PKR 107bln as of December 31, 2020 compared to PKR 66bln at the end of last year. Treasury policy allows weighted average duration of investment portfolio up to three years 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.
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.
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.