Habib Metropolitan Financial Services Limited | BMR

CREDIT RATING REPORT | Oct-25

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Rating History
Dissemination Date Rating Outlook Action Rating Watch
23-Oct-25 BMR2 Stable Maintain -
25-Oct-24 BMR2 Stable Maintain -
27-Oct-23 BMR2 Stable Maintain -
28-Oct-22 BMR2 Stable Maintain -
29-Oct-21 BMR2 Stable Initial -
About the Entity

Habib Metropolitan Financial Services Limited ('HMFSL' or the 'Company') was incorporated in 2007 as a public limited company under the Companies Act, 2017 and commenced its operations in 2008. Habib Metropolitan Bank Limited (HMBL) is the parent company of HMFSL. HMBL currently operates with an expanding nationwide network of more than 521 branches in more than 207 cities across Pakistan at end-June'25. The Company has three directors on the board. The CEO, Mr. Ather Husain Medina is a qualified professional with extensive work experience of over 32 years in the financial sector and has worked with well-known companies.

Rating Rationale

Habib Metropolitan Financial Services Limited ('HMFSL' or 'the Company') is a public limited company primarily providing equity brokerage services to individuals and leading financial institutions. The equity market has witnessed a significant surge in investor interest during FY25, repeatedly touching historic highs. Despite this rally, valuations remain relatively attractive, indicating room for further upside. A notable catalyst has been the reduction in the policy rate at the start of FY25, which prompted a shift in investor preference from fixed-income instruments to equities, fueling fresh buying momentum. This environment has created a favorable backdrop for the brokerage industry, with higher trading volumes, increased retail participation, and enhanced transaction-based revenues. While FY25 has been a strong year for the sector, sustaining investor confidence beyond FY25 will hinge on political stability, macroeconomic resilience, and the continuation of market-friendly policies. The rating incorporates the business acumen of the primary sponsors, Habib Metropolitan Bank Limited, the experienced management team, and the availability of a client services platform with research reports available to customers. The governance framework is considered satisfactory; however, the inclusion of independent directors with relevant experience would strengthen corporate governance. The organizational structure is lean and commensurate with the scale of operations. The Company operates through its office located in Karachi. HMFSL has an in-house internal audit department, which strengthens the Company's control framework. The Company has established rigorous protocols regarding risk assessment by implementing KYC, CDD, AML, CFT, and whistleblowing policies. The market risk is limited, as HMFSL does not maintain any proprietary trading books. The brokerage revenue increased by ~72% to ~PKR 45mln as at Jun'25, as compared to ~PKR 26mln in SPLY. However, operating costs pressured a net loss of PKR ~7.7mln in 1HCY25 compared to a net loss of ~PKR 14.5mln in SPLY. There has been an increase of ~8% in administrative expenses. The Company has an adequate equity base of ~PKR 326mln at the end of Jun’25 as compared to the equity of ~PKR 298mln in Jun’24.

Key Rating Drivers

Going forward, the rating is dependent on the management's ability to increase and retain its market share and diversification in revenue base to improve its competitive position in the brokerage industry. Simultaneously, it is imperative to uphold strong internal controls, retention of key management personnel, and diligently monitor risks.

REPORT CONTENTS
  1. Rating Analysis
  2. Financial Summary
  3. Rating Scale
  4. Regulatory Disclosure

Habib Metropolitan Financial Services Limited | BMR

rating analysis

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Ownership
Ownership Structure

Habib Metropolitan Financial Services Limited (HMFSL) is a wholly owned subsidiary of Habib Metropolitan Bank Limited (HMBL). The company was incorporated in 2007 as a public limited company under the Companies Ordinance, 1984 (now Companies Act, 2017) and commenced operations in 2008.


Stability

HMFSL benefits from the financial and operational strength of its parent entity, Habib Metropolitan Bank Limited (HMBL), which has been in commercial banking since 1992. Following its merger with Habib Bank AG Zurich’s Pakistan operations in 2006, HMBL now operates through an extensive branch network of 550+ branches across 200+ cities in Pakistan (as of June 2025), providing a stable foundation for HMFSL’s business.


Business Acumen

HMFSL maintains a close institutional relationship with Habib Metropolitan Bank Limited, which is owned and managed by the Habib family. With over 75 years of experience in banking, the group is recognized as one of the pioneers in Pakistan’s financial sector, bringing deep industry expertise and a strong reputation to HMFSL’s operations.


Financial Strength

HMFSL’s sponsors possess substantial financial strength, with Habib Metropolitan Bank Limited’s equity standing at PKR 126bln as of June 2025. HMBL holds a AA+ credit rating, assigned by PACRA, reflecting its strong financial position. Given its sizeable net worth and growing operations, HMBL is well-positioned to provide financial support to HMFSL as its business expands.


Governance
Board Structure

HMFSL's board comprises three non-executive directors, all representing Habib Metropolitan Bank Limited (HMBL). The inclusion of independent directors can be seen as a step toward enhancing governance practices, strengthening oversight, and bringing diverse strategic insights, which will positively impact the ratings perspective.


Members’ Profile

The board possess the necessary skills and experience required for capital markets. The board members, on-average, possess more than 30 years of experience in the field of finance and capital markets.


Board Effectiveness

During 1HCY25, two board meetings were conducted and attended by majority of the board members. The board is always provided with MIS pack prior to the meeting and the meeting discussions are properly documented in the form of minutes. However, due to the size of the board, board-level committees have not been formed as per the industry best practice.


Financial Transparency

The financial statements of the Company for the CY24 has been audited by KPMG Taseer Hadi and Company; 'A' category and a satisfactory QCR rated firm. The auditors have issued an unqualified opinion on the financial statements.


Management
Management Team

The management of HMFSL possess necessary experience and qualifications to manage the Company's operations efficiently. Mr. Ather Husain Medina, the CEO, is a qualified professional with extensive work experience of over 32 years in the financial sector among reputed Financial Institutions.


Organizational Structure

The Company has a lean organizational structure to manage its operations and appropriate policies to protect the clients interest. HMFSL has made a significant addition to its organizational structure, with the launch of its online sales department to capture retail clients. The Company operates through the Head Office located in Karachi. All of the Departmental Heads reports to the CEO . However, the internal auditor reports directly to the Board.


Client Servicing

HMFSL regularly publishes reports on market strategy, economy, daily news and market updates. HMFSL has provided direct links to relevant institutions and departments on their website. Moreover, various channels, including a mobile app and online trading platforms, are available to execute and monitor the transactions.


Complaint Management

HMFSL has established Customer Complaint Policy to provide guidance to both customers and staff on the manner in which HMFSL receives and manages complaint. Customers can lodge complaint via call, email or by speaking directly to Manager Operations.


Extent Of Automation / Integration

HMFSL has comprehensive and effective IT arrangement to deal with dynamic technological environment prevailing in the capital markets arena. HMFSL has a dedicated online platform for its customers.


Continuity Of Operations

HMFSL has established a recovery plan for all essential infrastructure elements, systems, networks, and key business activities. The business continuity plan provides a framework for business departments if a major incident occurs, causing disruption to pre-defined critical services.


Risk Management Framework

The Company has an in-house internal audit department, which monitors implementation of the policies and procedures of HMFSL. Presence of an Audit Committee would have been helpful for an effective control environment and compliance with reporting standards.


Regulatory Compliance

Compliance Department ensures regular monitoring of controls and systems, which ensures all functions are in-line with the applicable policies and procedures. Research analyst policy has also been formulated. The Head of Compliance, Mr. Usman Shakeel has over 11 years of relevant experience.


Business Sustainability
Business Risk

HMFSL benefits from the financial and operational strength of its parent entity, Habib Metropolitan Bank Limited (HMBL), which has been in commercial banking since 1992. Following its merger with Habib Bank AG Zurich’s Pakistan operations in 2006, HMBL now operates through an extensive branch network of 521 branches across 207 cities in Pakistan (as of Dec 2024), providing a stable foundation for HMFSL’s business.


Business Profile

Habib Metropolitan Financial Services Limited (HMFS or the Company) was incorporated on September 28, 2007, as a public limited company and commenced operations on March 6, 8. HMFS is a wholly owned subsidiary of Habib Metropolitan Bank Limited (HMBL), with its ultimate holding entity, Habib Bank AG Zurich, headquartered in Switzerland. The Company holds a Trading Rights Entitlement (TRE) Certificate from the Pakistan Stock Exchange Limited (PSX), authorizing it to operate in the capital markets.


Revenue and Profitability Analysis

The top line concentration of HMFS mainly consist of brokerage revenue. During 1HCY25, HMFSL earned a brokerage revenue of ~PKR 45mln as compared to SPLY ~PKR 26mln. The Company recorded a loss after tax of ~PKR 7.7mln (SPLY ~PKR 14mln).


Financial Sustainability
Credit Risk

For the assessment of client's creditworthiness, the Company has formulated detailed KYC/CDD policies. Limits have been defined, which are strictly monitored. The exposure limits as a whole and on individual basis are monitored and any shortfalls are immediately reported to senior management for prompt action.


Market Risk

HMFSL does not operate any proprietary book hence, it has protected itself from the risk arising from volatility in the equity markets. The Company does not plan to trade proprietary book in the near future.


Liquidity Profile

The liquidity profile of HMFS is adequate. The Company has reported current assets of ~PKR 622mln in 1HCY25 as compared to current liabilities of ~PKR 357mln.


Financial Risk

At end-June'25, the Liquid Capital Balance (LCB) of the Company stood at ~PKR 200mln (SPLY: ~PKR 179mln). The Company has an equity base of ~PKR 326mln at end June'25 as compared to the SPLY ~PKR 298mln.
 
 

Oct-25

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Habib Metropolitan Financial Services Limited | BMR

financial summary

(PKR mln)

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Jun-25
6M		 Dec-24
12M		 Dec-23
12M		 Dec-22
12M
Management Audited Audited Audited
A. BALANCE SHEET
1. Finances 0 0 0 0
2. Investments 143 142 96 99
3. Other Earning Assets 111 134 80 80
4. Non-Earning Assets 430 326 330 308
5. Non-Performing Finances-net 0 0 0 0
Total Assets 684 603 506 487
6. Funding 2 61 5 7
7. Other Liabilities (Non-Interest Bearing) 356 209 192 155
Total Liabilities 358 269 197 162
Equity 326 334 308 326
B. INCOME STATEMENT
1. Fee Based Income 45 79 34 32
2. Operating Expenses (65) (116) (97) (64)
3. Non Fee Based Income 17 41 47 32
Total Opearting Income/(Loss) (3) 4 (16) 0
4. Financial Charges (1) (1) (1) (1)
Pre-Tax Profit (5) 3 (17) (0)
5. Taxes (3) (7) (3) (3)
Profit After Tax (8) (4) (20) (4)
C. RATIO ANALYSIS
1. Cost Structure
Financial Charges / Total Opearting Income/(Loss) 33.3% -4.6% 174.8% 174.8%
Return on Equity (ROE) -2.4% -15.8% -2.3% -2.3%
2. Capital Adequacy
Equity / Total Assets (D+E+F) 47.6% 60.9% 66.8% 66.8%
Free Cash Flows from Operations (FCFO) / (Financial Charges + Current Maturity of Long Term Debt + Uncovered Short Term Borrowings) 12.0% -5680.1% -1783.2% -1783.2%
3. Liquidity
Liquid Assets / Total Assets (D+E+F) 91.1% 69.7% 52.9% 52.5%
Liquid Assets / Trade Related Liabilities 175.2% 267.6% 275.0% 172.1%
4. Credit & Market Risk
Accounts Receivable / Short-term Borrowings + Advances from Customers + Payables to Customers 0.0% 77.3% 112.3% 29.5%
Equity Instruments / Investments 2.1% 21.2% 0.0% 0.0%

Oct-25

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Habib Metropolitan Financial Services Limited | BMR

rating scale

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Oct-25

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Habib Metropolitan Financial Services Limited | BMR

regulatory disclosure

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  1. Rating Team Statements
    1. Rating is just an opinion about the creditworthiness of the entity and does not constitute a recommendation to buy, hold, or sell any security of the entity rated or to buy, hold, or sell the security rated, as the case may be. (Chapter III; 14-3-(x))
    2. Conflict of Interest
      1. The Rating Team or any of their family members have no interest in this rating (Chapter III; 12-2-(j))
      2. PACRA, the analysts involved in the rating process, and members of its rating committee and their family members do not have any conflict of interest relating to the rating done by them (Chapter III; 12-2-(e) & (k))
      3. The analyst is not a substantial shareholder of the customer being rated by PACRA [Annexure F; d-(ii)]
      4. Explanation: for the purpose of the above clause, the term "family members" shall include only those family members who are dependent on the analyst and members of the rating committee.
  2. Restrictions
    1. No director, officer, or employee of PACRA communicates the information acquired by him for use for rating purposes to any other person, except where required under law to do so. (Chapter III; 10-(5))
    2. PACRA does not disclose or discuss with outside parties or make improper use of the non-public information which has come to its knowledge during a business relationship with the customer. (Chapter III; 10-7-(d))
    3. PACRA does not make proposals or recommendations regarding the activities of rated entities that could impact a credit rating of the entity subject to rating. (Chapter III; 10-7-(k))
  3. Conduct of Business
    1. PACRA fulfills its obligations in a fair, efficient, transparent, and ethical manner and renders high standards of services in performing its functions and obligations. (Chapter III; 11-A-(a))
    2. PACRA uses due care in the preparation of this Rating Report. Our information has been obtained from sources we consider to be reliable, but its accuracy or completeness is not guaranteed. PACRA does not, in every instance, independently verify or validate information received in the rating process or in preparing this Rating Report. (Clause 11-(A)(p))
    3. PACRA prohibits its employees and analysts from soliciting money, gifts, or favors from anyone with whom PACRA conducts business. (Chapter III; 11-A-(q))
    4. PACRA ensures before the commencement of the rating process that an analyst or employee has not had a recent employment or other significant business or personal relationship with the rated entity that may cause or may be perceived as causing a conflict of interest. (Chapter III; 11-A-(r))
    5. PACRA maintains the principle of integrity in seeking rating business. (Chapter III; 11-A-(u))
    6. PACRA promptly investigates in the event of misconduct or a breach of the policies, procedures, and controls, and takes appropriate steps to rectify any weaknesses to prevent any recurrence, along with suitable punitive action against the responsible employee(s). (Chapter III; 11-B-(m))
  4. Independence & Conflict of Interest
    1. PACRA receives compensation from the entity being rated or any third party for the rating services it offers. The receipt of this compensation has no influence on PACRA’s opinions or other analytical processes. In all instances, PACRA is committed to preserving the objectivity, integrity, and independence of its ratings. Our relationship is governed by two distinct mandates: i) rating mandate - signed with the entity being rated or issuer of the debt instrument, and ii) fee mandate - signed with the payer, which can be different from the entity.
    2. PACRA does not provide consultancy/advisory services or other services to any of its customers or their associated companies and associated undertakings that are being rated or have been rated by it during the preceding three years, unless it has an adequate mechanism in place ensuring that the provision of such services does not lead to a conflict of interest situation with its rating activities. (Chapter III; 12-2-(d))
    3. PACRA discloses that no shareholder directly or indirectly holding 10% or more of the share capital of PACRA also holds directly or indirectly 10% or more of the share capital of the entity which is subject to rating or the entity which issued the instrument subject to rating by PACRA. (Chapter III; 12-2-(f))
    4. PACRA ensures that the rating assigned to an entity or instrument is not affected by the existence of a business relationship between PACRA and the entity or any other party, or the non-existence of such a relationship. (Chapter III; 12-2-(i))
    5. PACRA ensures that the analysts or any of their family members shall not buy, sell, or engage in any transaction in any security which falls in the analyst’s area of primary analytical responsibility. This clause, however, does not apply to investments in securities through collective investment schemes. (Chapter III; 12-2-(l))
    6. PACRA has established policies and procedures governing investments and trading in securities by its employees and for monitoring the same to prevent insider trading, market manipulation, or any other market abuse. (Chapter III; 11-B-(g))
  5. Monitoring and Review
    1. PACRA monitors all the outstanding ratings continuously, and any potential change therein due to any event associated with the issuer, the security arrangement, the industry, etc., is disseminated to the market immediately and in an effective manner after appropriate consultation with the entity/issuer. (Chapter III; 17-(a))
    2. PACRA reviews all the outstanding ratings periodically on an annual basis. Provided that public dissemination of annual review and in an instance of change in rating will be made. (Chapter III; 17-(b))
    3. PACRA initiates an immediate review of the outstanding rating upon becoming aware of any information that may reasonably be expected to result in downgrading of the rating. (Chapter III; 17-(c))
    4. PACRA engages with the issuer and the debt securities trustee to remain updated on all information pertaining to the rating of the entity/instrument. (Chapter III; 17-(d))
  6. Probability of Default
    1. PACRA’s Rating Scale reflects the expectation of credit risk. The highest rating has the lowest relative likelihood of default (i.e., probability). PACRA’s transition studies capture the historical performance behavior of a specific rating notch. Transition behavior of the assigned rating can be obtained from PACRA’s Transition Study available at our website. (www.pacra.com) However, the actual transition of rating may not follow the pattern observed in the past. (Chapter III; 14-3(f)(vii))
  7. Proprietary Information
    1. All information contained herein is considered proprietary by PACRA. Hence, none of the information in this document can be copied or otherwise reproduced, stored, or disseminated in whole or in part in any form or by any means whatsoever by any person without PACRA’s prior written consent.

Oct-25

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