PACRA maintain the Entity Ratings of Apna Microfinance Bank

Apna Microfinance Bank is one of a few MFBs that faced the challenges posed by COVID-19, weakening in the macroeconomic fundamentals and unprecedented inflation. The bank took a major hit in the last two years. However, it was able to publish its audited financial statements for 2022 and 2023. The management of Apna Bank made significant efforts to curtail and contain the negative consequences of portfolio restructuring. During CY23, the Bank reported a loss after tax amounting to PKR 3.59bln (CY22: 4.49 bln). One of the primary contributors to this loss is the provision charge amounting to PKR 1.3 billion during the year. This provision primarily relates to portfolios classified by the regulator. As of year-end Dec'23, on account of accumulated losses amounting to PKR 10.97bln (negative PKR 7.38bln), the Bank has reported negative net assets amounting to PKR 6.64bln (CY22: PKR 4.05bln). The net investments stood at PKR 1.25bln (Dec'22: PKR 2.46bln). The net advances of the Bank stood at PKR 6.59bln as of the end Dec'23 (Dec'22: 8.35bln). The Bank's Advances-to-deposit ratio was reported at 51.7% (CY22: 53.4%). The Bank remained non-compliant with MCR and CAR requirements. The sponsors have demonstrated their unwavering commitment to rescuing the Bank. During CY'23, the sponsors injected PKR 1bln. Additionally, they have issued a formal letter of support to the Bank, pledging to provide additional funding this year. This will be done in two tranches; PKR 500mln each. The paid-up capital of the bank will also be enhanced. The management has devised and is implementing a detailed plan of action to overcome the financial and operational difficulties faced by the Bank. The key elements of the strategy are a) Commitment by the sponsors and Injections on further equity b) Increasing secured advances portfolio (100% Gold backed and against salary) c) Recovery of non-performing advances d) Reducing cost of deposits and e) Optimization of operations and reduction of costs by closing the loss-making branches. Considering above mention equity injection significantly reduced NPLs’ provisioning and reduction in discount rate management expects net profit on a monthly basis, full-year profitability not much later. There is a cautionary approach on the lending side and the liquidity is well preserved.
Going forward, the management has developed and executed a recovery and restructuring strategy for the portfolio, successfully recovering a significant portion of non-performing advances. They are optimistic about future recoveries, which will lead to provision reversals and enhanced financial positions. Turnaround can be achieved by further equity injection and building up performing assets to generate income for the bank in upcoming years. Compliance with CAR is essential, going forward. Besides, turning loss into profitability is imperative.

About the Entity
Apna Microfinance Bank, listed on Pakistan Stock Exchange, was established under the Microfinance Institution Ordinance 2001. It started operations in 2005. Apna is a small-tier player in Pakistan’s microfinance sector with ~2.7% share as of Dec’23 in terms of GLP. The Bank has 106 business locations comprising 105 branches and 1 service centers. The overall control of the company vests in a nine-member board. Mr. Muhammad Akram Shahid is the Chairman of the board. Mr. Wajahat Malik is serving as the President and CEO of the bank. He is assisted by a team of experienced professionals, long associated with the company. RSM Avais Hyder Liaquat Nauman & Co. Chartered Accountants are the external auditors of the company. The auditor has reported material uncertainty related to events and conditions which may cast significant doubts on the Bank's ability to continue as a going concern.