April 30, 2020 (PPI-OT)

Following is the text of press release issued by The Pakistan Credit Rating Agency Limited (PACRA)

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The ratings capture sustained risk profile of Apna Microfinance Bank ("the bank"). Sponsors' committed efforts to arrest shortfall in minimum CAR benchmark is witnessed through persistent equity injections (CY19: PKR~350mln, CY18 PKR~400mln). However, Bank's CAR stands at 12% as at Dec'19 (Dec'18:~9%) which is still below the regulatory benchmark of 15%. Though gradually improving, it still is a concern. The bank's credit delinquency has diluted in substance, as is witnessed from its NPL ratio of ~5% as at End-Dec'19 (End-Dec'18:~13%). This is achieved on the backdrop of cleansing a major chunk of the old portfolio (prior Nov-16), adopting a cautious approach towards fresh lending and building a finer recovery mechanism.

Recovery cycle indicates an average of quarterly outstanding receivables, as asserted by the management. Auditor opinion is currently qualified for the bank and is expected to continue until the old loan portfolio clears out in totality. The ratings take into account sponsors' cognizance in this regard. Financial risk profile is demonstrated by grown liquidity, and comfortable Advances-to-deposits ratio (ADR), while profitability remains thin. Bearing the prevalent economic environment, cost rationalization is one of the key challenges to the bank in keeping its margins intact.

Additionally, building up a stable and diverse deposit base is fundamental to fuel the momentum of growth. Under the current scenario, the nationwide lockdown due to the global pandemic - Covid-19, is certain to cast a significant impact on the whole microfinance industry. The key risks culminating from the current crisis are (i) loss of recovery (ii) halt in fresh disbursement and (iii) probable liquidity stretch. Though SBP's Relief Packages have come handy to the sector in protecting the credit quality of the players, the out-turn of the situation, and its relative impact on the risk profiles of industry players, is yet to unfold in the days to come.

The ratings are dependent upon the bank's ability to aptly combat the emerging risks under the current scenario in order to keep its business and financial risk profile intact. The ratings are also placed under "Watch" to monitor challenges arising from COV-19 outbreak. Compliance with CAR is essential, going forward. Besides, improved profitability is imperative.

For more information, contact:AnalystThe Pakistan Credit Rating Agency Limited (PACRA)Awami Complex, FB1, Usman Block New Garden Town,Lahore - PakistanTel: +9242 586 9504 -6Fax: +9242 583 0425Email: hammad.rashid@pacra.comWeb: www.pacra.com

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© Pakistan Press International, source Asianet-Pakistan