first women bank l · first women bank limited (fwbl), ... hbl, abl, nbp and ubl jointly hold...
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The Pakistan Credit Rating Agency Limited
FIRST WOMEN BANK LIMITED
NEW
PREVIOUS
REPORT CONTENTS
[APR-16]
[JUN-15]
1. RATING ANALYSES
Long-Term A- BBB+ 2. FINANCIAL INFORMATION
Short-Term A2 A2
3. RATING SCALE
Outlook Stable Positive 4. REGULATORY AND SUPPLEMENTARY
DISCLOSURE
APRIL 2016
BANKING The Pakistan Credit Rating Agency Limited
FIRST WOMEN BANK LIMITED
RATING REPORT CONTENTS PAGE
1. Summary Report 1
Detailed Report:
Profile 2
Ownership 2
Governance 2
Management 3
Risk Management 3
Business Risk 4
Funding and Capital 5
ANNEXURES
2. BoD Annexure I
3. Management Annexure II
4. Financials III
5. Standard Rating Scale IV
6. Disclosure V
April 2016 www.pacra.com
BANKING The Pakistan Credit Rating Agency Limited
Profile &Ownership First Women Bank Limited (FWBL), established in 1989, is a commercial bank
focused towards facilitation of women’s financial needs.
FWBL mainly provides borrowing facilities to entities which are i) 50% owned by women, ii) wherein a woman is the Managing Director and iii) women employees dominate more than 50% of the workforce.
The bank operates through a network of 42 branches spread over 24 cities as at end-Dec15.
The sponsors of the bank are GoP with 80% holding while MCB, HBL, ABL, NBP and UBL jointly hold remaining 20%.
Governance The overall control of the bank currently vests in a six-member board of directors
which include the President and five NEDs.
The board comprises qualified and experienced professionals with sound industry knowledge and extensive banking acumen.
The Board is expected to be reconstituted to four representatives of GoP, one each from HBL and MCB and one Director representing the three other stakeholders i.e. ABL, UBL and NBP.
Mr. Mudassir H. Khan is the new Chairman of the Board and holds the position Group Chief – Commercial & Retail in NBP.
Management The senior management team at FWBL comprises seasoned personnel; however,
majority has brief experience at their current positions.
Ms. Tahira Raza was appointed as President and CEO of FWBL in Apr-14.
She has 41 years of experience in banking and has previously been associated with FWBL as one of the founding executive in 1989.
Risk Management FWBL’s total assets registered a considerable growth of 14% during CY15
predominantly a facet of higher earning assets.
Increase in earning assets reflects the bank’s positive growth strategy given continuing optimization of related funding structure.
The bank’s advances to deposit ratio (ADR) declined to 53% at end-CY15 (CY14: 63%) as a high proportion of funds brought in have been channeled towards government securities.
Top-20 advances (including government exposure) concentration surged considerably to 92% (Dec14: 71%; Dec13: 74%).
Asset Quality During CY15, FWBL’s overall asset quality deteriorated considerably on account of
higher infection in textile and construction sector
Moreover, loan loss coverage has dropped to 68% (end-CY14: 75%); thus net NPLs have risen.
Business Risk Significant growth in non-markup income (up by 459% YoY) attributable largely to
gain on sale of investments strengthened the revenue base.
Significantly low provisioning expense augmented the bank’s bottom-line. Hence, the bank reported a net profit of PKR 26mln (CY14: loss of PKR 500mln).
Going forward, FWBL plans to maintain size of its loan portfolio, improve quality of exposures, work on recoveries and strengthen treasury operations.
Financial Risk Deposit base remained tilted towards interest rate sensitive (saving and time) deposits
which constitute ~76%.
Top-20 depositors’ concentration increased marginally to 35% (end-CY14: 28%).
However, increased investment in government securities has improved the overall liquidity position
Post equity injection, FWBL is MCR compliant with a CAR of 40%.
RATING RATIONALE
The ratings primarily reflect strong
association of FWBL with the
Government of Pakistan (GoP) - the
major shareholder - demonstrating
continued commitment and support.
Subsequent to injection of equity of PKR
1bln in FY15, GoP has injected another
PKR 1bln in FY16 as committed. The
bank thus has met MCR of PKR 3bln.
During CY15, the bank has witnessed
bottom-line profitability; however, this
was mainly a result of gains in treasury
operations. The bank's high cost
operational structure and provision
expense on increasing non-performing
loans continued to drag the performance.
Cognizant of the matter, the management
targets volumetric growth in deposits and
advances. The management is focusing to
reduce its funding cost; thereby
improving its spreads. Meanwhile, given
recent capital compliance, the
management has resources and clarity
available to implement its business plan.
KEY RATING DRIVERS The ratings are dependent on the bank's ability to achieve bottom-line break-even on a sustainable basis. Successful execution of the business strategy, while improving efficacy of the risk management framework to improve asset quality - which is currently suppressed - remains important.
FIRST WOMEN BANK LIMITED (FWBL) April 2016 www.pacra.com
The Pakistan Credit Rating Agency Limited BANKING
1. PROFILE 1.1 First Women Bank Limited (FWBL) was established in 1989. The bank Mandate to provide focuses on catering to women at all levels of economic activity; micro, SME and financial services corporate. As per bank’s current policy guidelines, FWBL mainly provides and business borrowing facilities commercial and development purposes. The commercial avenue support to women is open to all without discrimination while the development avenue focuses on
42 branches spread women to promote a) financial inclusion, and b) socio-economic empowerment of over Pakistan women. The bank offers various credit products to address specific needs of women.
1.2 FWBL also provides non-traditional banking services to develop entrepreneurial skills of women. These services include: (i) identification, advice and consultation services on investment in valuable projects for potential women entrepreneurs. These particular services help with aspects of: credit management, trade services, legal counseling, tax consultancy and marketing, (ii) trainings for development of managerial and technical skills of women entrepreneurs, and (iii) identifying and developing markets for products of women entrepreneurs. 1.3 FWBL operates through a network of 42 branches spread over 24 cities nationwide as at end-Dec15. The bank maintains online connectivity for all its branches, providing basic online banking and ATM services to its customers. 1.4 The external auditor of FWBL – M. Yousuf Adil Saleem & Company is a reputable firm of chartered accountants, who expressed an unqualified opinion on the bank’s financial statements for the year ended December 31, 2014.
2. OWNERSHIP Owned by Federal
Government, and large commercial banks
Government ownership gradually increasing
2.1 FWBL has been FWBL | Ownership Structure as at end-Mar16
constantly going through
changes in its ownership
Mar-16 Mar-15
structure in recent past.
The Ministry of Finance GoP through Ministry of Finance 80.2% 72.2%
(MoF) injected PKR Muslim Commercial Bank (MCB) 6.6% 9.3%
1,000mln each as capital
Habib Bank Limited (HBL) 6.6% 9.3%
in FY15 and FY16.
Allied Bank Limited (ABL) 2.2% 3.1%
Thus, MoF’s shareholding
National Bank of Pakistan (NBP) 2.2% 3.1%
has increased to 80.2%,
up from 72.2%, post United Bank Limited (UBL) 2.2% 3.0%
equity injection. The rest Total 100% 100%
of the shareholding is
divided among the five big commercial banks (NBP, HBL, MCB, UBL and ABL). 3. GOVERNANCE 3.1 The overall control of the bank currently vests in a six-member board of Change in directors which include the President and five NEDs. MoF is the major stakeholder. composition of All the directors represent shareholders banks and currently none of the directors is board independent. However, the governance structure of the bank is expected to change 4 independent with changing shareholding structure. The Board is expected to be reconstituted to board members to four representatives of GoP, one each from HBL and MCB and one Director be inducted in representing the three other stakeholders i.e. ABL, UBL and NBP. During the year, CY16 the board has gone through three major changes as new representatives of UBL, MCB and NBP have joined the board. A brief profile of the board is enclosed in Annexure-I.
3.2 The expertise of the board in terms of industry knowledge and banking acumen is extensive because majority of the members are practicing bankers and heads of various departments with intimate understanding of the banking sector in Pakistan, and as such, are well placed to advise the management on its strategic direction. The bank is undergoing a paradigm shift with respect to strategy and successful implementation of the formulated business plan would be contingent to BoD’s effectiveness. 3.3 The board has formulated three committees namely, i) Audit Committee, ii)
FIRST WOMEN BANK LIMITED (FWBL) Page 2 of 5 April 2016 www.pacra.com
The Pakistan Credit Rating Agency Limited BANKING
Human Resource & Compensation Committee, and iii) Risk Management Committee. Going forward, governance function is likely to strengthen with expected change in BoD composition. This would improve strategy formulation and risk management.
4 MANAGEMENT 4.1 The senior management team at FWBL comprises seasoned personnel with QUALITY brief experience at their current positions. The organization is structured along Experienced CEO functional lines with the various department heads, along with the management Quality human committees, reporting directly to the President. resource brought in 4.2 The government appointed Ms. Tahira Raza as President and CEO of FWBL at senior positions in Apr-14. Ms. Raza was previously CRO & Group Chief Risk Management at NBP. Three management She has over four decades of experience in banking and has previously been committees in place associated with FWBL as one of the founding executives in 1989.
4.3 The bank has twelve divisions, the heads of which report directly to the President. These include i) Finance & Planning, ii) Treasury, iii) Risk, iv) Credit, v) Operations, vi) Administration, vii) Human Resource, viii) Marketing, ix) Compliance, x) Information Technology, xi) Business Development and xii) Legal. The heads of the internal audit and inspection department report directly to the audit committee of the board. The bank has been inducting senior level executives in the last two years to strengthen its management team. A brief profile of the senior management is enclosed in Annexure- II. 4.4 The bank has formed five management committees, i) Executive Committee (EC), ii) Asset and Liability Management Committee (ALCO), iii) Fraud and Forgery Committee, iv) Credit Committee, and v) IT Steering Committee.
5 RISK 5.1 FWBL has a hierarchal risk management framework in place, where branch MANAGEMENT officers are responsible for screening out various risks associated with the facilities
Risk management and award internal credit rating based on FWBL’s defined parameters.
hierarchy in place
Obligor rating being implemented
Increasing trend in NPLs
Low market risk
5.2 Credit Risk: The bank manages its credit risk through various policies, checks and balances. The evaluation of credit proposals are managed by three committees (Regional, Executive and Credit Risk Management), each having specific discretionary powers identified through type of financing (funded or non-funded), margin requirements and the maximum tenure of transaction. The bank has in place, Internal Credit Risk Rating Policy specifying detailed criteria for lending to Corporates, SMEs and Consumers. Separate scoring scales are used for assessing the nature of risks involved in a particular transaction. The Credit Administration Department (CAD) ensures proper documentation and compliance of loan requests as per SBP and bank’s policies. CAD monitors the bank’s credit portfolio on a regular basis to ensure that associated risks remain within the defined parameters. All collaterals are approved by the head office, while for facilities above PKR 1mln, the branch manager is required to conduct the physical inspection of the collateral. Furthermore, a centralized control for SME transactions, in the form of an independent credit assessment is carried out by the Credit Department. 5.3 FWBL’s total assets registered a considerable growth of 14% during CY15 predominantly a facet of higher earning assets. Meanwhile, net non-earning assets declined YoY (CY15: 10%; CY14: 13%) as opposed to the trend prevalent in the previous periods, reducing the drag on earning profile of the bank. The increase in earning assets reflects the bank’s positive growth strategy post optimization of related funding structure in CY14; thus deposit
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The Pakistan Credit Rating Agency Limited BANKING
base has increased on YoY basis. However, the bank’s advances to deposit ratio (ADR) declined to 53% at end-CY15; CY14: 63%) as a high proportion of funds brought in have been channelled towards government securities; a facet of the bank’s cautious lending stance. Top-20 advances concentration (including government exposure) surged considerably to 92% (Dec14: 71%; Dec13: 74%). Government exposures represented 45% in overall advances at end-CY15 (CY14: 33%). 5.4 .Asset quality and accumulated provisions: During CY15, FWBL’s overall asset quality deteriorated considerably on account of higher infection in textile and construction sector exposures. Moreover, loan loss coverage has dropped to 68% (end-CY14: 75%);
(PKR mln) CY15 CY14 CY13 Gross Advances 9,253 9,401 9,669 NPLs 1,895 1,411 763 Provisions 1,278 1,051 402 NPLs/Gross Advances (%) 20.5 15.0 7.9 Provisions/NPLs (%) 67.7 74.9 53.2 Net NPLs/Equity (%) 22.9 15.9 20.9
thus net NPLs have risen. However, fresh equity injection in 1QCY16 will reduce potential drag of un-provided NPLs on equity. 5.5 Market Risk: The bank’s
FWBL - Investment Mix
investment portfolio mainly
100% 15,000
comprises government securities 90% 13%
13,500
(99%). T-bills represented
39%
80% 47% 12,000
majority 86% in overall portfolio
70%
10,500
mln
at end-CY15 (CY14: 55%) while 60% 9,000
investment in PIBs represented 50% 7,500
PK
R
87%
40% 6,000
13% of the portfolio (end-CY14:
61%
30% 4,500
49%). Thus exposure of the bank
53%
20%
3,000
to interest rate risk remains 10% 1,500
limited. 0% 0
CY13
CY14
CY15
5.6 Operational Risk: The
PIBs T-Bills Total (RHS)
bank’s core-banking application, Auto Banker-II continued ensures efficient information measure are now in place to limit unwanted access. The software also includes an audit trail that records a log of activities to improve monitoring. The bank is now able to offer real time access to account information to its customers. This should improve the overall efficiency of the bank.
6 BUSINESS RISK 6.1 During CY15, FWBL’s net interest margin posted a nominal growth of 3%
Operating profit (CY14: 5%) on the back of higher earning assets while spreads declined marginally.
achieved Significant growth in non-markup income (up by 459% YoY) attributable largely to
Low provisioning gain on sale of investments further strengthened the revenue base. Despite increase in
expense vs. last operating expenses, the bank was able to book pre-provision operating profit after
year recording losses in the previous FWBL | Spreads
60% growth in two years. Furthermore, ,
12%
10.6%
advances planned in 6.2 FWBL aims to grow the 9.6%
10% 8.2%
CY16 size of its loan portfolio, while
38% growth in focusing to improve quality of its 8%
6.5%
6.3%
bottom-line exposures. Meanwhile, the bank 6% 5.0%
planned in CY16 would strengthen its treasury 4%
Net profit booked in operations. Moreover, the
CY15 management expects recoveries 2%
from its non-performing book. 0%
CY13 CY14 CY15
The management’s initiatives are
Average Yield on Earning Assets Average Cost of Funds Average Spreads
expected to bring improvement in
FIRST WOMEN BANK LIMITED (FWBL) Page 4 of 5
April 2016 www.pacra.com
The Pakistan Credit Rating Agency Limited BANKING
bottom-line performance; however, success in this regard is yet to be seen. To mobilize deposits, the bank would enhance its product portfolio to cater to the needs of its niche clientele. Key challenges include (i) asset quality, and (iii) funding structure.
7 FUNDING &
CAPITAL Majority of funding
dominated by deposits
Capital – crosses PKR 3bln in CY16
Compliant with capital requirements
Healthy CAR
7.1 Funding: FWBL had
shed off its costly deposits in FWBL - Funding Mix
100% 5,000
CY14. In CY15 the bank picked 90% 18% 23%
24% 4,500
up pace in low cost
deposit 80% 4,000
70%
11% 3,500
mobilization; resultantly overall
40%
22%
60%
3,000
deposits increased at end-CY15. 50% 2,500
40% 2,000
The bank mobilized sizeable 30% 42%
54% 64% 1,500
20%
1,000
amount in Savings category to
10% 500
fund growth in assets. Thus, 0% -
CY13 CY14 CY15
deposit base remained tilted
Demand Time Savings Borrowings from FIs
towards interest rate sensitive
(saving and time) deposits which
constitute ~76%. Top-20
depositors’ concentration increased marginally to 35% (end-CY14: 28%).
7.2 Liquidity: The bank’s Asset and Liability Committee (ALCO) monitors the liquidity position on a regular basis. The treasury function manages liquidity risk under ALCO’s guidance. Increased investment in government securities has improved the overall liquidity position. The same is reflected in liquid assets-to-total deposits and borrowings ratio (CY15: 63%, CY14: 49%, CY13: 57%). 7.3 Capital Adequacy: Subsequent to the change in minimum capital requirement for FWBL from
FWBL - Risk Absorption Capacity
PKR 10bln to PKR 3bln, State
Bank of Pakistan (SBP) has 32,000 35%
28,000
30%
raised the minimum capital
24,000
25%
adequacy ratio requirement to
m l n
20,000
20%
18% until paid-up capital and P K R
16,000
15%
12,000
reserves of the bank reach PKR
10%
8,000
6bln. This step taken by SBP
5%
4,000
would help in avoiding 0 0%
CY13 CY14
CY15
deterioration in risk profile of the
bank. This revision is only Equity Total Assets
applicable as long as the bank
Equity / Total Assets (RHS)
CAR (RHS)
remains a public sector entity. MoF has injected PKR 1,000mln in two tranches in FY16 to bridge the MCR deficit of FWBL. Therefore, the bank has successfully met the MCR in 1QCY16 augmented by profit booked during the year. FWBL’s CAR has increased by virtue of fresh capital injection (41% at end Dec-15).
FIRST WOMEN BANK LIMITED (FWBL) Page 5 of 5 April 2016 www.pacra.com
ANNEXURE - I The Pakistan Credit Rating Agency Limited
Profile – Board of Directors: First Women Bank Limited at end Dec-15
Name of BoD
Participation
Association
Sr. Representation
Occupation Key Experience
Committees with the
Members
Committees
Board
Board
(Year)
Mudassir Hussain SEVP & Group
Khan
Chief,
Overall experience of 26
Chairman
National Bank Chairman
1 Commercial & Years N/A 4/4 2015*
Limited Board FWBL
[BSEE], [MBA] Retail Banking
DoB:Oct 19, 1964 Group,NBP
41 years Experience in
Tahira Raza Banking Sector
Previously served as
[MBA Banking &
Executive
2
FWBL
President/ CEO
SEVP, CRO & Head
9/9
7/7
2014
Finance],[BSC]
Director
Risk Management Group.
DoB:Apr 22, 1953
Founding executives of
FWBL.
Member
NaheedIshaq 31years of working Board &
experience.
Member
3 [M.A. Economics]
MoF Deputy Economic 7/7
2012
Adviser – GoP
She has served with the
BHRCC, 9/9
DoB: May 24, 1957
Ministry of Finance BAC &
BRMC
Ms. Nausheen Member
Ahmad
Company
Habib Bank
Board &
[LLM – University
Secretary & Head
Overall 33Years of
4
Limited
Chairman
6/6
7/7
2014
of London, Bar at
Legal Division-
experience
BHRCC
Law] HBL
DoB: July 29, 1960
25 Years of experience in
Asif Saeed Sindhui SEVP & Chief the energy & financial Member Board,
UBL Bank
sectors & banking
Chairman BAC,
5 B.Com & FCA Financial Officer, 3/3 4/4 2015
Limited industry in Member
UBL
DoB: Sept 1, 1966 Pakistan,Australia & BRMC
UAE.
Malik Abdul Member
Waheed Board,
[M.A.Economics]
Chairman
MCB Bank
SEVP & Advisor
48 years of banking
6
BRMC,
1/1
N/A
2015
\D.A.I.B.P
Limited to the Chairman
experience.
Member BAC,
DoB: March 22,
Member
1945 BHRCC
*Mr. Mudassir was associated with FWBL in 2014 as nominee Director from HBL. Subsequent to his resignation from HBL, he was nominated from NBP.
Approved Composition of Board Sub-Committees in Board Meetings.
Board Audit Committee (BAC) Board Human Resource Committee (BHRC) Board Risk Management Committee (BRMC)
UBL – Chairman HBL_ Chairman MCB – Chairman MCB – Member MoF – Member UBL – Member MoF – Member MCB – Member MoF – Member
FIRST WOMEN BANK LIMITED (FWBL) April 2016 www.pacra.com
The Pakistan Credit Rating Agency Limited ANNEXURE-II
Profile – Senior Management: First Women Bank Limited as at end Dec-15
Sr.
Name
Designation
Reporting
Experience (Since)
With the
At current
#
Line Overall
bank
position
Tahira Raza Board of
1 [MBA Banking & Finance]
President & CEO 1975
2014 2014
Directors
DoB:Apr 4, 1953
Faisal Sarhindi
Chief Financial Officer &
[FCA, CISA]
2
*Officiating Company President
1997 2015
2015
DoB: Nov 6 1975
Secretary
Wajahat Aziz Qureshi Treasurer & Head
3 [MBA(Finance),
President 1996 2014
2014
Business Development
MSc(Investment Banking)]
Muhammad Saleem Shaffi
4
[MBA]
Head of Operations
President
1987
2015
2015
DoB: Jul 12, 1968
Kashif Karimi
[MBA, MS Information
5
Head of Information
President
1996
2015
2015
System]
Technology
DoB: May 28, 1973
Naushaba Shahzad Head of Credit & Risk
6 [MSc; Statistics; MBA]
President 1992 1992
2012
Management
DoB: Mar 27,1967
Mehwish Khan Board of
7 [ACCA; CIA; B.Sc]
Head of Audit 2004
2007 2012
Directors
DoB:Jun1, 1980
Ayesha Menai Head of Human
8 [MBA] President 1987 2014 2014
Resources
DoB: December 29 1962
Zarina Sial
9 [DAIBP; MA Economics] Head of Compliance President 1997 1997 2012
DOB: Sep 29, 1973
Yasmin Rizvi
[MBA, MSC]
10 Head CAD President 1993 1993 2011
DoB: Mar 1, 1971
*Mr. Faisal Jan Sarhindi took over the charge of Officiating Company Secretary effective from 1st Feb 2016.
FIRST WOMEN BANK LIMITED April 2016 www.pacra.com
The Pakistan Credit Rating Agency Limited PKR mln First Women Bank Limited 31-Dec-15 31-Dec-14 31-Dec-13 BALANCE SHEET CY15 CY14 CY13 A. FINANCES
1. Loans, Cash Credits and Running Finances 7,355 7,790 8,902 2. Net Investment in Finance Lease - - - 3. Bills Discounted and Purchased 3 200 4
Advances 7,359 7,990 8,906 4. Debt Instruments - net - - 6
Total Finances 7,359 7,990 8,912 B. OTHER EARNING ASSETS
1. Deposits with Banks 142 515 676 2. Lending to Financial Institutions - - 1,039 3. Investments
a. Government Securities 10,960 7,288 7,431 b. Equity Investments (Incl. Mutual Funds) 101 11 21 c. Fixed Income Mutual Funds/Preference Shares 6 2 - 11,067 7,301 7,452
Other Earning Assets 11,209 7,815 9,167
C. TOTAL EARNING ASSETS (A+B) 18,568 15,806 18,079 D. FIXED ASSETS / INTANGIBLE ASSETS 337 383 288 E. NON-EARNING ASSETS
1. Cash and Bank Balances 1,096 1,189 1,173 2. Deferred Tax 264 321 164 3. Others 471 733 700 4. Net Non-Performing Advances
a. Non-Performing Advances 1,895 1,411 763 b. Accumulated Provisions (Prudential Specific) (1,278) (1,051) (402) c. Accumulated Provisions (Prudential General) (5) (6) (4) d. Accumulated Provisions (General) - - - 612 355 358
5. Net Non-Performing Debt Instruments
a. Non-Performing Debt Instruments 14 13 9 b. Accumulated Provisions (Diminution in Value of Debt Instruments) (14) (13) (9) - - - Non-Earning Assets 2,442 2,598 2,395 F. TOTAL ASSETS 21,347 18,787 20,761 G. CUSTOMER DEPOSITS
1. Customer Deposits
1. Demand 3,657 3,093 3,210 2. Savings 9,775 7,263 7,685 3. Time 1,730 2,992 7,343 15,162 13,347 18,238
2. Deposits from Financial Institutions 2 102 100 Total Deposits 15,163 13,449 18,338 H. BORROWINGS
1. SBP Refinance 53 66 50 2. Financial Institutions 2,780 2,437 - 3. Sub-ordinated Loan / TFCs - - -
Borrowings 2,832 2,503 50 I. OTHER LIABILITIES (Non-Interest Bearing)
1. Deferred Tax Liability - - - 2. Bills Payable 103 112 152 3. Others 414 511 587
Other Non-interest Bearing Liabilities 518 623 739 J. EQUITY
1. Share Capital 2,894 2,494 1,494 2. Advance against shares - - - 3. Reserves:
a. Statutory Reserve 295 295 295 b. Capital Reserves - - - c. Revenue Reserves - - - d. Unappropriated Profit (490) (552) (77) (195) (257) 218
Equity 2,699 2,237 1,712 K. SURPLUS/(DEFICIT) ON REVALUATION
1. Revaluation of Investments 22 (140) (150) 2. Revaluation of Fixed Assets 112 115 73
Surplus/(Deficit) on Revaluation 134 (25) (77)
L. TOTAL LIABILITIES & EQUITY 21,347 18,787 20,761
The Pakistan Credit Rating Agency Limited First Women Bank Limited INCOME STATEMENT 31-Dec-15 31-Dec-14 31-Dec-13 CY15 CY14 CY13
1. Interest / Mark up Earned 1,516 1,798 1,838 2. Interest / Mark up Expensed (819) (1,118) (1,188) 3. NET INTEREST / MARK UP REVENUE (NIMR) 698 681 649 4. Other Operating Income
a. Fees, Commission, Brokerage 39 35 30 b. Dividend Income 20 9 11 c. Income from Dealing in Foreign Currencies 29 11 30 d. Realized and Unrealized Gains/(Loss) on Sale of Investments 296 7 40 e. Others 13 9 7
397 71 117
5. TOTAL NET REVENUE 1,095 752 766 6. Other Income / (Loss) 12 12 18
1,107 763 784 7. NON-INTEREST/MARK UP EXPENSES
a. Personnel Expenses (423) (370) (420) b. Other Non-interest/Mark Up Expenses (424) (416) (414)
(847) (786) (834)
8. PRE-PROVISION OPERATING PROFIT 260 (22) (50) 9. PROVISIONS
a. Provision for Loan Losses /write offs
i. Specific provision (229) (649) (164) ii. General provision - (2) (4) iii. Bad debts directly written off - (0) -
b. Provision for Diminution in Investments 4 7 (4) c. Provision against lending to financial institutions - - -
(225) (644) (172)
10. PRE-TAX PROFIT 34 (666) (222) 11. Taxes 19 166 16
12. NET INCOME 53 (500) (206) 13. Unappropriated Profit / (Loss) Brought Forward (552) (77) 123 14. Adjustments 6 22 6 (493) (555) (77) 15. Appropriations
a. Statutory Reserve - - - b. Capital Reserve - - - c. Revenue Reserve 3 3 - d. Contingency Reserve / Other Reserves - - - e. Reserve for Issue of Bonus Shares - - - f. Cash Dividend - - -
3 3 -
16.Unapprpopriated Profit / (Loss) Carried Forward (490) (552) (77) 0.0 - (0.0)
The Pakistan Credit Rating Agency Limited First Women Bank Limited 31-Dec-15 31-Dec-14 31-Dec-13 RATIO ANALYSIS CY15 CY14 CY13 A. PERFORMANCE
1. ROE 2.2% -25.3% -11.4% 2. ROA 0.3% -2.5% -1.0% 3. Provision Expense / Pre Provision Profit 86.8% -2874.5% -343.6% 4. Personnel Expenses-to-Total Net Revenue 38.6% 49.2% 54.8% 5. Cost-to-Total Net Revenue 77.4% 104.6% 108.8% 6. Cost-to-Total Net Revenue (net of capital gains) 106.0% 105.5% 114.8% 7. Other Operating Income / Total Net Revenue 36.3% 9.4% 15.3% 8. Other Operating Income (net of capital gains) / Total Net Revenue 9.2% 8.5% 10.1% 9. Taxes / Pre-Tax Profit -55.9% 24.9% 7.3%
10. Net Non-Earning Assets / Assets net of Non-Interest Liabilities 10.9% 13.0% 9.7% 11. Net NPLs / CFR [NPLsnetofProv/Open Tier-1] /CFR 11.45 -0.71 -1.74
B. CAPITAL ADEQUACY 1. Equity / Total Assets 12.6% 11.9% 8.2% 2. Adjusted Equity (including revaluation impact) / Total Assets 13.3% 11.8% 7.9% 3. Free Capital / Adjusted Assets 7.4% 6.7% 4.5% 4. Capital Adequacy Ratio as per SBP 40.1% 29.1% 20.1%
- Tier I CAR 38.7% 29.0% 20.0% - Tier II CAR 1.4% 0.1% 0.0%
5. Equity/Risk Weighted Assets 39.6% 30.4% 21.3% 6. Equity/Total Balance Sheet Assets and Off Balance Sheet Assets 12.6% 11.9% 8.2% 7. Capital Formation Rate (Internal Capital generation) 2.3% -28.0% -10.4% 8. Augmented Tier-I [Tier-1 * (1 + CFR)] 39.6% 20.9% 17.9%
C. FUNDING & LIQUIDITY 1. Liquid Assets / Deposits and Borrowings 62.7% 49.1% 56.7% 2. Finances / Deposits 52.6% 62.5% 50.8% 3. Advances / Deposits 52.6% 62.5% 50.8% 4. Finances (net of Refinance) / Deposits 52.2% 62.0% 50.6% 5. Finances / Deposits and Borrowings 44.3% 52.7% 50.7% 6. Finances / Total Assets 37.3% 44.4% 44.6% 8. Government Securities / Total Assets 51.3% 38.8% 35.8% 9. Time Deposits / Total Customer Deposits 11.4% 22.4% 40.3% 10. Borrowings from Financial Institutions/Lending to FIs (times) 19.6 4.9 0.1 11. CASA deposits / Total Customer Deposits 88.6% 77.6% 59.7% 12. Liquid Assets/ Unfunded Exposure 930.7% 1539.7% 1938.9% 13. IDR ratio 73.0% 54.7% 40.9%
D. LOAN LOSS COVERAGE 1. Non-Performing Advances / Gross Advances 20.5% 15.0% 7.9% 2. Non-Performing Finances/Gross Finances 20.6% 15.1% 8.0% 2. Loan Loss Provisions / Non-Performing Advances 67.7% 74.9% 53.2% 3. Loan Loss Provisions* / Non-Performing Advances 67.5% 74.5% 52.6% 4. Net Non-Performing Advances / Equity 22.7% 15.9% 20.9% 5. Net Non-Performing Advances / Adjusted Equity 21.6% 16.0% 21.9%
E. INTERMEDIATION EFFICIENCY 1. NIMR (Net Interest/Mark-up Revenue) / Avg. Assets 3.5% 3.4% 3.0% 2. Asset Yield [Interest Earned/Average (Earning Assets-Equity Investments)] 8.9% 10.6% 9.6% 3. Cost of Funds [Interest Expensed / Average (Deposits + Borrowings)] 4.8% 6.5% 6.3% 4. Spread 4.0% 4.1% 3.3%
F. GROWTH 1. Total Assets 13.6% -9.5% -7.8% 2. Risk weighted Assets -7.4% -8.5% -2.5% 3. Gross Finances -1.6% -2.8% 12.7%
Gross Advances -7.9% -10.3% 11.9% 4. Impaired Lending 34.3% 84.8% 24.6% 5. Investments 51.6% -2.0% 2.8% 6. Customer Deposits 13.6% -26.8% -5.0% 7. Equity 20.7% 30.7% -10.5%
G. OTHERS 42 41 41 1. No. of Branches 564 573 661 2. Staff Strength
540 573 661 Bank's own staff 24 0 0 Outsourced
The Pakistan Credit Rating Agency Limited
STANDARD RATING SCALES & DEFINITIONS
Credit rating reflects forward-looking opinion on credit worthiness of underlying entity or instrument; more specifically it covers relative
ability to honor financial obligations. The primary factor being captured on the rating scale is relative likelihood of default.
LONG TERM RATINGS SHORT TERM RATINGS
AAA Highest credit quality. Lowest expectation of credit risk. A1+: The highest capacity for timely
Indicate exceptionally strong capacity for timely payment of financial
commitments. repayment.
AA+ Very high credit quality. Very low expectation of credit risk. A1:.
AA Indicate very strong capacity for timely payment of financial commitments. A strong capacity for timely
This capacity is not significantly vulnerable to foreseeable events. repayment.
AA-
A+ High credit quality. Low expectation of credit risk. A2: A satisfactory capacity for timely
A The capacity for timely payment of financial commitments is considered
strong. This capacity may, nevertheless, be vulnerable to changes in repayment. This may be susceptible to
A- circumstances or in economic conditions. adverse changes in business, economic,
or financial conditions.
BBB+ Good credit quality. Currently a low expectation of credit risk.
BBB The capacity for timely payment of financial commitments is considered
adequate, but adverse changes in circumstances or economic conditions are
A3: An
BBB-
adequate capacity for timely
more likely to impair this capacity.
repayment. Such capacity is susceptible
BB+ Moderate risk. Possibility of credit risk developing. to adverse changes in business,
BB There is a possibility of credit risk developing, particularly as a result of economic, or financial conditions.
adverse economic or business changes over time; however, business or
BB- financial alternatives may be available to allow financial commitments to be
met. B: The capacity for timely repayment
High credit risk.
B+ is more susceptible to adverse changes in
B A limited margin of safety remains against credit risk. Financial business, economic, or financial
commitments are currently being met; however, capacity for continued conditions.
B- payment is contingent upon a sustained, favorable business, and economic
environment.
C: An inadequate capacity to ensure
CCC Very high credit risk.
timely repayment.
CC “CCC” Default is a real possibility. Capacity for meeting financial
commitments is solely reliant upon sustained, favorable business or
C economic developments. “CC” Rating indicates that default of some kind appears probable. “C” Ratings signal imminent default.
D Obligations are currently in default.
Rating Watch Alerts to the possibility of a rating change
subsequent to, or in anticipation of, a)
some material identifiable event and/or b)
deviation from expected trend. But it does
not mean that a rating change is
inevitable. Rating Watch may carry
designation – Positive (rating may be
raised, negative (lowered), or developing
(direction is unclear). A watch should be
resolved within foreseeable future, but
may continue if underlying circumstances
are not settled.
Outlook (Stable, Positive, Negative,
Developing) Indicates the potential and direction of a
rating over the intermediate term in response
to trends in economic and/or fundamental
business/financial conditions. It is not
necessarily a precursor to a rating change.
‘Stable’ outlook means a rating is not likely
to change. ‘Positive’ means it may be raised.
‘Negative’ means it may be lowered. Where
the trends have conflicting elements, the
outlook may be described as ‘Developing’.
Suspension It is not possible to update
an opinion due to lack of
requisite information.
Opinion should be resumed
in foreseeable future.
However, if this does not
happen within six (6)
months, a suspended rating
should be considered
withdrawn.
Withdrawn A rating is withdrawn
on a) termination of
rating mandate, b)
cessation of underlying
entity, c) the debt
instrument is
redeemed, d) the rating
remains suspended for
six months, or e) the
entity/issuer defaults.
Disclaimer: PACRA's rating is an assessment of the credit standing of an entity/issue in Pakistan. They do not take into account the potential transfer /
convertibility risk that may exist for foreign currency creditors. PACRA's 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.
Regulatory and Supplementary Disclosure
Name of Rated Entity First Women Bank Limited
Sector Banking
Type of Relationship Solicited
Purpose of the Rating Independent Risk Assessment
Rating History
Dissemination Long Term Short Term
Outlook Action
Date
29-Jun-15 BBB+ A2 Positive Maintain
30-Jun-14 BBB+ A2 Stable Downgrade
28-Jun-13 A- A2 Stable Maintain
18-Jun-12 A- A2 Stable Upgrade
30-Jun-11 BBB+ A2 Positive Maintain
Related Criteria and Research Banking Sector - Viewpoint | Dec-15
Rating Methodology Bank Rating Methodology
Rating Analysts Abdul Sami Aisha Khalid
[email protected] [email protected]
(92-42-35869504) (92-42-35869504)
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Rating is an opinion on relative credit worthiness of an entity or debt instrument. It does not constitute recommendation to buy, hold or sell any security. The rating team for
this assignment does not have any beneficial interest, direct or indirect in the rated entity/instrument.
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Probability of Default (PD) PACRA's Rating Scale reflects the expectation of credit risk. The highest rating has the lowest relative likelihood of default (i.e, probability). PACRA's transition studies capture
the historical performance behavior of a specific rating notch. Transition behavior of the assigned rating can be obtained from PACRA's Transition Study available at our
website. (www.pacra.com). However, actual transition of rating may not follow the pattern observed in the past
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