First Habib Modaraba (“the Modaraba”) has been established as a Non-Banking Islamic Financial Institution. The Modaraba is listed on the Pakistan Stock Exchange, denoted by the trading symbol “FHAM”.

The Modaraba was established in 1985 as a perpetual, multipurpose modaraba, operating in accordance with the principles of Islamic Shari’a. Its core operations primarily comprise Islamic-mode leasing, alongside other Shari’a-compliant financing activities. Habib Metropolitan Modaraba Management Company (Pvt.) Limited serves as the Management Company of the Modaraba.

First Habib Modaraba is a perpetual, multipurpose Shariah-compliant Modaraba engaged in providing asset-based financing and leasing solutions to individuals and corporates. Established in 1985, the Modaraba operates under the principles of Islamic Shariah and offers financing through Ijarah, Murabaha and mainly Musharakah arrangements. Its portfolio is primarily focused on vehicles, plant & machinery, solar system, generators, office equipment and other productive assets, with financing structured to meet the investment and working capital requirements of its customers. The Modaraba also offers Musharakah-based Certificates of Musharakah (CoM) as a source of funding, while Diminishing Musharakah is primarily utilized for financing vehicles and plant & machinery. Through its Ijarah Diminishing Musharaka business, the Modaraba provides leasing facilities against identified assets and earns rental income over the contractual tenure, whereas Murabaha and Musharakah arrangements generate income through Shariah-compliant profit-sharing and sale-based structures. The Modaraba serves customers across multiple sectors of the economy, including pharmaceuticals, services, food and allied, manufacturing and other business segments. Its operations are supported by established credit assessment, approval and monitoring mechanisms, with financing decisions guided by the credit profile of the customer, nature of the underlying asset and overall risk considerations. As of FY26, the Modaraba serves a customer base of 2,101 customers.

The Modaraba’s major shareholding is held by H4 Management (Pvt.) Limited, with a stake of ~56.15%, which was previously known as Habib Management (Pvt.) Limited. Habib Metropolitan Modaraba Management Company (Pvt.) Limited, the Modaraba’s Management Company, holds ~10% of the share capital, while Habib Metropolitan Bank Limited holds ~4.43%. The remaining shareholding is distributed among individuals, corporates, financial institutions and other shareholders.

The Modaraba is focused on expanding its business scale and financial asset base through a measured and sustainable growth strategy. While the Modaraba intends to increase the size of its financing portfolio, its expansion plans remain anchored by a prudent approach towards customer selection, sectoral exposure and overall portfolio quality. In this regard, the Modaraba aims to deepen its presence in existing business segments while gradually entering new sectors with sound financing potential. The strategy also includes broadening the customer base by targeting financially sound and established customers, particularly across segments where the Modaraba can leverage its existing expertise and relationships. Alongside conventional business expansion, the Modaraba is exploring opportunities in the digital lending space as part of its broader technology-led initiatives. The Modaraba intends to leverage digital platforms and technological capabilities to streamline customer acquisition, improve accessibility of financing solutions and enhance the efficiency of its financing processes. The digital strategy remains at an exploratory stage, with implementation expected to be undertaken in a measured manner. Overall, the Modaraba’s growth strategy is aimed at increasing market presence and diversifying its business franchise while maintaining appropriate controls over credit risk and portfolio quality.

Aside from Habib Metropolitan Bank Limited, the sponsor holds a strategic stake in various sectors. The ownership of Habib Metropolitan Bank has proven beneficial for the Modaraba, achieving numerous milestones and establishing a strong position in the sector, demonstrating robust sponsor acumen.

Habib Metropolitan Bank Limited is the sponsor of the Modaraba and provides the Modaraba with the backing of an established banking group. As of CY25, the sponsor had an asset base of over PKR 1,658bln and advances exceeding PKR 514bln. The Bank maintains a well-established franchise and diversified operations, providing a supportive platform for the Modaraba’s business and funding requirements. The sponsor’s scale and established presence in the financial sector remain important strengths in supporting the Modaraba’s overall profile.

The Modaraba’s Board of Directors comprises seven members, including two Independent Directors, three Non-Executive Directors and one Executive Director, who also serves as the CEO of the Modaraba, along with a female director. The Board comprises seasoned professionals with extensive experience in banking, finance and related fields, providing relevant expertise for the oversight and strategic direction of the Modaraba. The presence of independent and non-executive representation, alongside executive management, provides a balanced structure for Board oversight and decision-making.

The Board is chaired by Mr. M. Shams Izhar, who brings over 37 years of professional experience in the banking sector, with expertise in corporate governance and risk management. He has also contributed to the development of the banking industry in Pakistan through his participation in the sub-committee of the Pakistan Banks’ Association and a working group of the State Bank of Pakistan. Mr. Saeed Uddin Khan has over 40 years of senior management experience spanning conventional and Islamic banking across various banks and financial institutions. He has served as CEO of HBL Modaraba and Head of Islamic Banking at two banks. He also served as President & CEO of a microfinance bank in Pakistan for nearly six years. He currently works as an independent business consultant. Mr. Usman Nurul Abedin brings around 46 years of experience in banking and finance, with particular expertise in treasury operations and international branch banking. He served Habib Metropolitan Bank for ~32 years in senior management positions and has extensive experience in credit risk management, policy formulation, administration and banking operations. Prof. Dr. Irum Saba has over 20 years of experience spanning regulatory affairs, research, training and academia, with a particular focus on Islamic finance. She has served as Director of the Centre for Excellence in Islamic Finance (IBA) and is Chairperson of the Islamic Capital Market Committee of the Securities and Exchange Commission of Pakistan. She has also received recognition both nationally and internationally for her contributions to the Islamic finance industry. Mr. Murtaza Ahmed Ali brings over 35 years of experience across finance, operations, sales and marketing, management and business leadership. He currently serves as CEO of Allied Rental Services Limited and Allied Transport and Logistics Limited, bringing practical experience in business management and corporate operations. Mr. Riaz Abdul Rehman is a senior management professional with over 35 years of experience in consulting and audit across a diverse range of sectors, including financial services, family-owned businesses, automotive, oil & gas, pharmaceuticals, cement, textiles and media. He qualified from EY Ford Rhodes in 1993 and has held senior leadership positions, including Country Leader – Audit & Assurance, with extensive exposure to audit, advisory and financial management.

The Board has established two Board-level committees, namely; the Audit Committee and Human Resource and Remuneration Committee, chaired by independent directors. The Board's performance is mandated by SECP Regulations and offers supervisory efficacy, as evidenced by the holding of periodic meetings.

M/s. BDO Ebrahim and Co. Chartered Accountants, the external Auditor of the Modaraba has expressed an unqualified opinion on the Modaraba’s financial statements for FY26.

A lean organization has been implemented by the Modaraba, with reporting lines ultimately converging towards the CEO of the Modaraba, the Internal Audit department being an exception as it reports directly to the Audit Committee

The Modaraba is led by Mr. Shoaib Ibrahim as Chief Executive Officer, who brings over two decades of experience in the Non-Banking Islamic Financial Institutions sector. He has also served as Chairman of the NBFI and Modaraba Association, providing him with extensive industry exposure and sector knowledge. Mr. Tehsin Abbas serves as the Chief Financial Officer and Company Secretary and brings around three decades of experience with the Modaraba, providing strong institutional knowledge and familiarity with its financial and operational functions. The management team comprises experienced professionals with long-standing association with the Modaraba, supporting continuity in its operations and management.

The Modaraba has established a comprehensive Code of Conduct, setting high standards for conduct and compliance with various stakeholders. Three Management Committees oversee operations: Credit, Market Investment, and Assets & Liability Management holding regular meetings for operational discussions.

The Modaraba has an in-house developed ERP-based Management Information System (ERP-I), which provides an integrated platform for managing and monitoring key business functions. The system covers Finance, Human Resources, Financing, General Ledger (GL), customer-related processes, management reporting and other operational functions. MIS reporting is structured across daily, weekly and monthly frequencies, enabling management to monitor key operational and financial indicators on a timely basis. The ERP provides a centralized platform for data management and process execution, facilitating information flow across various departments and reducing reliance on standalone systems. The integration of core functions supports consistency of data, timely reporting and improved visibility of business activities, thereby facilitating management oversight and decision-making. The system also incorporates role-based access controls, with user privileges aligned with respective responsibilities. Segregation of Duties (SoD) is embedded within critical processes to limit the risk of unauthorized transactions and inappropriate access. User access and SoD are subject to periodic review, with exceptions identified through established IT controls and addressed accordingly.

The Modaraba has in-house developed ERP-based MIS (ERP-I) for efficient and timely reporting. Current MIS can be classified into three categories based on periodicity–Daily, Weekly and Monthly.

Total assets of NBFCs grew by ~41.6% YoY to PKR ~5,635bn in FY25 (FY24: PKR ~3,978bn), primarily led by ~45.2% growth in mutual funds and plans, supported by the strong performance of the PSX, which delivered a ~60.5% return during the year, as well as the relatively favorable tax treatment of income funds compared with bank deposits. The sector's asset base continued to expand, reaching PKR ~6,844bn as of 6MFY26 (6MFY25: PKR ~6,204bn). Going forward, while geopolitical uncertainty may weigh on investor sentiment, demand for professionally managed savings and investment products is expected to remain supportive. However, changes in the interest-rate environment could influence asset allocation, with higher deposit yields potentially encouraging a shift toward interest-bearing instruments. Mutual funds and plans remained the dominant segment, accounting for ~66.3% of total NBFC assets in 6MFY26, followed by discretionary/non-discretionary portfolios at ~14.5% and Non-Banking Microfinance Companies at ~6.0%.

As of 9MFY26, the Modaraba sector had a total asset base of ~PKR 68.6bln and an aggregate equity base of ~PKR 21.5bln. With total assets of PKR 40.3bln, the Modaraba accounted for ~59% of the sector’s asset base, while its equity of PKR 6.0bln represented ~29% of the sector’s total equity. The sizeable share of sector assets reflects the Modaraba’s established scale and significant market presence within the Modaraba industry.

The Modaraba maintained a steady financing franchise during FY26, with total disbursements reaching PKR 21.8bln, reflecting continued activity across its customer base. Income from advances declined marginally by ~2.4% YoY to PKR 4,851mln (FY25: PKR 4,972mln), despite the stable level of disbursements. The financing portfolio remained diversified across sectors, with notable exposure to Pharmaceuticals, Services, and Food & Allied, supporting a balanced portfolio mix. Income from investments and other earning assets also declined by ~20% to PKR 126mln (FY25: PKR 158mln). Consequently, total income declined by ~8.1% YoY to PKR 1,724mln (FY25: PKR 1,876mln), primarily reflecting lower income contribution from both advances and other earning assets.

During FY26, the Modaraba reported PAT of PKR 747mln (FY25: PKR 901mln), reflecting a ~17% YoY decline. The lower profitability was primarily attributable to the decline in total income amid the prevailing lower interest rate environment, which moderated yields on the Modaraba’s earning assets. Nevertheless, the Modaraba remained profitable, supported by recurring income generated from its financing portfolio.

The Modaraba considers sustainability an integral part of its business philosophy and has remained committed to promoting responsible and efficient business practices since inception. Its sustainability framework encompasses key areas including Shariah governance, environmental responsibility, community development, and inclusive growth. These principles are embedded across its operations and support the Modaraba’s focus on responsible business conduct and long-term value creation. The Modaraba’s strong risk management framework further supports prudent business growth, with financing primarily extended to customers with established credit profiles and sound repayment capacity.

The Modaraba credit risk is primarily managed through a comprehensive credit policy, which is pre-approved by the Board of Directors (BoD). Net provisioning against slow /non-performing advances/Equity were 15.5% in FY26 from ~1 7.3% SPLY. The Modaraba’s gross financing/funding posted at ~109% in FY26 from ~118.7% in FY25 indicating a sound trend.

The Modaraba has developed a comprehensive investment policy that contains provisions for the activities of the overall investment portfolio as well as per scrip exposure. The Modaraba's investment portfolio continues to be dominated by highly rated entity investments. The Modaraba's has a clear focus on its primary operations of financing, which is clearly visible through their Investments/Equity ratio that stood at ~6% during FY26.

The Modaraba primarily mobilizes funding through Certificates of Musharakah (CoMs), issued across 3-month, 6-month, and 1-year tenors. The funding profile remains tilted towards shorter-tenor CoMs, with the 3-month maturity constituting the predominant portion of the portfolio, providing flexibility in managing funding requirements and pricing in a changing rate environment. Total funding increased to PKR 33,269mln in FY26 from PKR 27,119mln SPLY, supporting the expansion of the Modaraba’s financing portfolio. The liquidity position, however, remained somewhat constrained, with the Liquid Assets-to-Total Funding ratio declining to ~2.9% in FY26 from ~3.3% SPLY. The Modaraba continues to monitor its liquidity position through the management of funding maturities and available liquid resources.

The Modaraba maintained a sound capital structure, with CAR standing at ~16% in FY26 (FY25: ~17%). While the ratio moderated marginally during the year, it remained at a comfortable level, providing an adequate capital buffer against the risk associated with its asset base. The Modaraba’s equity base strengthened to PKR 6,261mln in FY26 from PKR 5,784mln in FY25, reflecting an ~8.2% YoY increase and further supporting its capital position.