Final PR
The Pakistan Credit Rating Agency Limited

Jhangeer Hanif

Saliha Sajid

Applicable Criteria

  • Methodology | Non-Banking Finance Companies (Jan 17) [View]
  • Correlation between long-term and short-term rating scale (Jun 17) [View]

Related Research

  • Sector Study | Modaraba & NBFCs (Mar 17) [View]
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PACRA Maintains Entity Ratings of First Habib Modaraba
 Rating Type Entity
 Action Maintain Maintain
 Long Term AA+ AA+
 Short Term A1+ A1+
 Outlook Stable Stable
 Rating Watch - -

The ratings reflect FHM’s strong business profile emanating from healthy asset base, sound asset quality and sustained profitability. The asset yield has declined; FHM has managed to cushion its impact by rationalizing cost of funding- hence slight dilution in spreads. Furthermore, overall profitability has also been maintained through enhancement of financing asset size. Liquidity is being well maintained by investing in government securities. FHM managed to sail through its devised strategy to beef-up its business volumes to maintain its bottom-line performance by maintaining its asset quality. FHM’s capital provides strong support to the funding structure of the Modaraba, equally aided by Certificates of Musharika (CoM). Overall capital structure shows an inclination towards leveraging. Going forward, the management, while continuing with its growth strategy, intends to expand its outreach to other areas of the country, especially those close to CPEC related projects and more focus would be on vehicle financing. The ratings take into account good management quality and strong control environment and also reaching others customers through different business model.

The ratings are dependent on the management's ability to sustain its competitive positioning while ensuring stable profitability. The ratings also depend upon keeping its financial profile intact. Any significant change in its risk profile may adversely impact the ratings.
About the Entity
First Habib Modaraba, established in 1985 and listed on Pakistan Stock Exchange, is a perpetual, multi-purpose Modaraba engaged in Islamic modes of financing, mainly Diminishing Musharaka and Ijarah financing. Habib Metropolitan Modaraba Management Company (Pvt.) Limited (HMMML) (wholly owned subsidiary of Habib Metropolitan Bank) is a new management company of FHM. HMMML hold 10% stake in Modaraba, while the remaining shareholding is same.

The board consist of four members and currently one position is vacant. All board members are non-executive except the CEO. All the board members have a vast experience of banking and finance. The CEO, Mr. Muhammad Shoaib Ibrahim, Ex-Chairman of NBFI and Modaraba Association has been associated with the Modaraba since its inception. He is supported by experience team members.
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.