JCR-VIS reaffirms entity ratings of House Building Finance Company Limited at A/A-2

Karachi, June 12, 2014 (PPI-OT): JCR-VIS Credit Rating Company Limited has reaffirmed the entity ratings of House Building Finance Company Limited (HBFC) at ‘A/A-2’ (Single A/A-Two). HBFC is the premier specialized house financing institution in the country. It has the largest market share providing house financing services to lower income groups. The company’s shares are jointly held by the Ministry of Finance (MoF) and the State Bank of Pakistan (SBP).

SBP is also the major lender to the institution, with credit lines made available by SBP having been guaranteed by the Government of Pakistan (GoP). The ratings assigned to HBFC take into account its unique positioning whereby the shareholder/creditor/guarantor to credit lines are various arms of the GoP or itself; notwithstanding the weak risk absorption capacity of the institution with non-performing loans being 1.3x the company’s equity base.

With restricted lending activities whereby only partial recovery proceeds in any given year have been utilized for fresh disbursements, gross loan portfolio has depicted a declining trend over the last 5 years. Meanwhile, the company has accumulated a sizeable portfolio of marketable securities; liquid assets in relation to borrowings, including payables to SBP, stood at 70% at end FY13.

The ratings continue to be placed under ‘Rating Watch-Developing’ status due to the company’s on-going negotiations with SBP and MoF pertaining to the shortfall vis-à-vis the minimum capital requirement and the status of SBP’s credit lines.

Given the strategic nature of the institution, it may reasonably be expected that mechanism for pay back of credit lines will take into account the financial viability of the institution itself as these credit lines are the primary source of funding for HBFC.

For more information, contact:
Ms. Sobia Maqbool
CFA
JCR-VIS Credit Rating Company Limited
Tel: at 021-35311861-70
Fax: +9221 35311872-3

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