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The Pakistan Credit Rating Agency Limited

Date
30-Jun-2017
Analysts
Rai Umar Zafar
rai.umar@pacra.com

Ahmed Sheikh
ahmed.sheikh@pacra.com

+92-42-35869504
www.pacra.com
Applicable Criteria

  • Asset Manager Rating Methodology (Jun 16) [View]

Related Research

  • Sector Study | Asset Management (Apr 17) [View]
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PACRA Maintains Entity Ratings of MCB-Arif Habib Savings and Investments Limited
 Rating Type Entity
Current
(30-Jun-2017)
Previous
(11-Mar-2016)
 Action Maintain Maintain
 Long Term AA- AA-
 Short Term A1+ A1+
 Outlook Stable Stable
 Rating Watch - -

The ratings reflect MCBAH’s strong potion in the domestic Asset Management industry augmented by its robust retail base, strong sponsor support, improved organization structure, and technology advancement. Movements in the management team and relative lag in catching on industry volume patterns led to a loss in system share in AUMs, consiquently reducing the profitability of the company. Under Mr. Muhammad Saqib Saleem, the CEO, the new management has taken initiative to balance its focus on operational and fund management side. This strategic clarity and ensuring action should improve AUMs profile and fund performance; hence, profitability. Continuous improvement in the overall operating platform along with the diversified fund slate will help in growing the AUM base. The managements plan to supplement income through government securities investments, well guided TORs and prudent investment framework provide comfort. The sustained improvement in profit lends more than adequate support to cash flow as well as low leveraged capital structure result in low financial risk. The ratings incorporate MCBAH’s association with two prominent business conglomerates of Pakistan – Nishat & Arif Habib groups.

The rating is dependent on the company's ability to strengthen its market standing by capitalizing on the self and group distribution platform. At the same time, stability of the quality human resource and consistent fund performance – at par or better than peers – will bode well for the company.
About the Entity
MCBAH is a subsidiary of MCB Bank Limited (MCB). MCB holds majority stake (51%) in the company, followed by Arif Habib Corporation Limited (30%). The company is managing fourteen open end mutual funds and two pension schemes with AUMs of ~ PKR 47bln at end-Apr17. MCBAH also manages a SMA portfolio of ~ PKR 24bln. MCB, the fourth largest bank in Pakistan in terms of asset size and branch network, has a very strong financial position, evidenced by a long-term entity rating of AAA by PACRA. Arif Habib Corporation is the holding company for Arif Habib Group with interests in the financial and industrial sectors.

MCBAH is currently managing fourteen open-end funds and two pension funds with cumulative assets under management of PKR 48.6bln at end-May 17. MCBAH’s net profit declined by 13% (9MFY17: PKR 153 million) on account of declined in fee based income by 7% (9MFY17: PKR 497 million) and increasing Admin and Operational expenses.

The eight members BoD comprises the CEO, two representatives from MCB, two representatives from AHG and three independent members. Mian Muhammad Mansha - Chairman MCB - serves as the Chairman on the board. Mr. Nasim Beg - a representative of AHG - acts as the Vice Chairman. The CEO Mr. Saqib Saleem, holds profound experience in the domestic mutual fund industry. He is supported by a team of qualified and experienced professionals.
The primary function of PACRA is to evaluate the capacity and willingness of an entity to honor its obligations. Our ratings reflect an independent, professional and impartial assessment of the risks associated with a particular instrument or an entity. PACRA's comprehensive offerings include instrument and entity credit ratings, insurer financial strength ratings, fund ratings, asset manager ratings and real estate gradings. PACRA opinion is not a recommendation to purchase, sell or hold a security, in as much as it does not comment on the security's market price or suitability for a particular investor.
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