JCR-VIS Credit Rating Company Limited has reaffirmed the entity ratings of First National Bank Modaraba (FNBM) at 'A+/A1' (Single A Plus/A One). Outlook on the medium to long term rating is 'Stable'. The ratings incorporate implicit support of National Bank of Pakistan (NBP) through National Bank Modaraba Management Company Limited, a wholly owned subsidiary of NBP.
Over the years, FNBM has maintained a low infection rate. In the absence of any sizeable investment portfolio, the modaraba's strong collection history has allowed it to timely service its obligations. Furthermore, FNBM has sufficient backup credit lines that have been utilised from time to time.
Given equity constraints, growth has remained compromised. Apart from internal factors, the phenomenon is also attributable to a difficult lending environment where a prudent approach is necessary to maintain sound asset quality. The proposed equity injection of Rs 500 million by NBP will remain critical to fuel growth and allow the modaraba to leverage its position as an active market player.
Profitability indicators improved in FY10 due to better spreads on the back of a favourable pricing strategy amidst rising interest rate regime. The initiative to bring independent members on board is likely to improve oversight and strengthen the internal control mechanism.-PR