JCR-VIS Reaffirms Entity Ratings of House Building Finance Company Limited

Karachi, May 14, 2018 (PPI-OT): JCR-VIS Credit Rating Company Limited has reaffirmed the entity ratings of House Building Finance Company Limited (HBFCL) ‘A/A-1’ (Single A/A-One). Outlook on the assigned ratings is ‘Stable’. Previous rating action was announced on June 02, 2017.

The assigned ratings incorporate sovereign ownership of HBFCL, with Government of Pakistan holding entire stake in the company directly and indirectly through State Bank of Pakistan. Ratings also reflect strong capitalization and healthy liquidity profile of HBFCL. Board members comprise professionals having experience in the financial sector. However, ratings are constrained by staff turnover and gaps at senior management level, weaknesses in control infrastructure, high infection levels in the portfolio and subdued lending activity.

Advances, on both, gross and net basis, registered a marginal decline in FY17. Similar to preceding year, pace of lending remained restrained on account of staff turnover at both operational and senior management level. Currently, management is working to fill gaps in senior management. Moreover, a new business plan has been developed, aimed at growth in volumes while remaining focused on meeting housing finance needs of modest and low-income groups. Instead of only relying on walk-in customers, the company is now providing bulk financing to institutions. With significant unmet housing demand in Pakistan, improved financial risk profile and a revamped business plan, the team will have the necessary platform to pursue growth.

Post debt-equity swap in 2017, the company posted a positive bottom line for the first time in three years. Future direction of earnings will be a function of quantum of disbursements and credit quality of the same, recovery from non-performing portfolio and level of administrative expenses. Quality of fresh lending at projected higher levels of disbursements will be an important rating driver, going forward.

For more information, contact:
CFA
JCR-VIS Credit Rating Company Limited
VIS House, 128/C,
25th Lane off Khayaban-e-Ittehad,
Phase VII, DHA, Karachi
Tel: +92-21-35311861-72
Fax: +92-21-35311873
Email: sobia@jcrvis.com.pk