Security Investment Bank Limited

Transcription

1 JCR-VIS Credit Rating Company Limited Technical Partner IIRA, Bahrain JV Partner CRISL, Bangladesh Rating Report RATING REPORT REPORT DATE: July 10, 2015 RATING ANALYSTS: Waqas Munir, FRM Moiz Badshah RATING DETAILS Latest Rating Previous Rating Rating Category Longterm Shortterm Longterm Shortterm Entity BBB+ A-2 A- A-2 Rating Outlook Stable Stable Outlook Date July 7, 15 August 08, 14 COMPANY INFORMATION Incorporated in 1991 Non-Banking Finance Company Key Shareholders (with stake 5% or more): Key group of individuals 59.6% Public individuals 26.6%% External auditors: Muniff Ziauddin& Co. Chartered Accountants Chairman of the Board: Mr. Haji Jan Muhammad Chief Executive Officer: Mr. Hanif Yousuf APPLICABLE METHODOLOGY(IES) JCR-VIS Entity Rating Criteriahttp:// Page 1

2 JCR-VIS Credit Rating Company Limited Technical Partner IIRA, Bahrain JV Partner CRISL, Bangladesh Rating Report OVERVIEW OF THE INSTITUTION Incorporated in 1991, SIBL is listed on all the three stock exchanges of Pakistan. The bank is licensed to carry out investment finance services under the NBFCs Rules. RATING RATIONALE As per Non-Banking Finance Companies (NBFCs) regulations, companies undertaking business of investment finance were required to have a minimum capital of Rs. 1b by June 30, In relation to this requirement, (SIBL) is currently short by Rs m. The NBFCs Reform Committee had proposed that minimum capital requirement for investment finance institutions be fixed at Rs. 300m for the time being and enhanced to Rs. 600m by June 16 and further to Rs. 1b by June 18. Further developments in lieu of the regulatory regime are awaited. As per the recently developed business plan, the bank aims to expand its business in the coming years by generating funding through deposits, credit lines from commercial banks while private placement of TFCs will also be explored. In terms of funds deployment, SIBL plans to extend its financing activities to non-associated undertakings. Additionally, the management also plans to offer car financing on Murabaha basis. Counterparty assessment tools will need to be developed to undertake the planned expansion in credit activities. Moreover, resources with the required skill set may need to be inducted for business expansion. Given the challenges faced by the overall NBFC sector, successful execution of the business plan would be tested over time. So far, SIBL had maintained a conservative lending stance with financing extended only to associated companies belonging to cable and electric goods sectors. With offloading of PIBs during FY14, there was a notable change in the investment mix while investment portfolio also declined; these PIBs were sold at a loss of Rs. 15.7m. Investment in equities and equity related mutual funds continue to remain limited. Income from investments represented 60% (FY13: 66%) of total revenues in FY14 and include dividend income which increased to Rs. 22.3m (FY13: Rs. 0.9m) on account of final dividend received from the winding up of SIBL Exchange Company (Pvt.) Ltd; a non-recurring revenue. With higher revenues and reduced financing cost, profit before tax increased to Rs. 14.5m (FY13: Rs. 5.1m). Accounting for taxation, profit stood at Rs. 12.2m during FY14 (FY13: Rs. 3.4m). Profit levels are expected to normalize in the on-going year. Given that asset base is mainly funded by equity, overall liquidity profile of the institution is considered sound. As such, there are no major borrowings outstanding which may trigger liquidity call. Given the bank s reduced holding of government securities which are used as collateral for repo borrowings, quantum of such borrowings is expected to remain minimal. Moreover, funding generated under deposits remained limited with deposits mainly pertaining to related parties. Recently there was a change at the helm of the organization. Mr. Hanif Yousuf has been appointed as the CEO of the organization. Mr. Yousuf is an experienced banker and has held senior level positions in various local and foreign financial institutions. There was no turnover at other senior management positions. Management may consider expediting the up gradation of the IT system which is outdated; a finding also reported by the external auditors. Page 2

3 FINANCIAL SUMMARY Appendix I (amounts in PKR 000 s) BALANCE SHEET DEC 31, 2014 DEC 31, 2013 DEC 31, 2012 Long Term Investments 26, , , Short Term Investments 29, , , Short Term Financing 212, , , Cash & Bank Balances 54, , , Total Assets 546, , , Borrowings - 176, , Deposits 21, , , Net Worth 516, , , INCOME STATEMENT DEC 31, 2014 DEC 31, 2013 DEC 31, 2012 Net Mark-up Income 49, , , Non-Markup Income 1, , , Operating Expenses 36, , , Profit Before Tax 14, , , Profit After Tax 12, , , RATIO ANALYSIS DEC 31, 2014 DEC 31, 2013 DEC 31, 2012 Cost of funding (%) 11.4% 8.6% 11.2% Markup Spreads (%) 3.9% 4.02% 1.1% Efficiency (%) 71.38% 86.54% 93.99% ROAA (%) 1.71% 0.38% 1.44% ROAE (%) 2.43% 0.70% 2.86%

4 ISSUE/ISSUER RATING SCALE & DEFINITIONS Appendix II

5 REGULATORY DISCLOSURES Name of Rated Entity Sector Type of Relationship Purpose of Rating Rating History Instrument Structure Statement by the Rating Team Probability of Default Disclaimer Appendix III Non-Banking Finance Company Solicited Entity Rating Medium to Rating Rating Date Long Term Short Term Outlook Rating Action RATING TYPE: ENTITY 8/11/2014 A- A-2 Stable Downgrade 6/28/2013 A A-2 Negative Reaffirmed 6/29/2012 A A-2 Negative Maintained 6/30/2011 A A-2 Stable Maintained 7/13/2010 A A-2 Negative Maintained N/A JCR-VIS, the analysts involved in the rating process and members of its rating committee do not have any conflict of interest relating to the credit rating(s) mentioned herein. This rating is an opinion on credit quality only and is not a recommendation to buy or sell any securities. JCR-VIS ratings opinions express ordinal ranking of risk, from strongest to weakest, within a universe of credit risk. Ratings are not intended as guarantees of credit quality or as exact measures of the probability that a particular issuer or particular debt issue will default. Information herein was obtained from sources believed to be accurate and reliable; however, JCR-VIS does not guarantee the accuracy, adequacy or completeness of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information. JCR- VIS is not an NRSRO and its ratings are not NRSRO credit ratings. Copyright 2015 JCR-VIS Credit Rating Company Limited. All rights reserved. Contents may be used by news media with credit to JCR-VIS.