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Pakistan Credit Rating Agency Limited affirms ratings of Escorts Investment Bank

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by March 16, 2016 General

Lahore, March 16, 2016 (PPI-OT): The Pakistan Credit Rating Agency (PACRA) has maintained the long-term and short-term entity ratings of Escorts Investment Bank Limited (EIBL) at ‘BBB’ (Triple B) and ‘A3’ (A Three), respectively. The ratings denote an adequate capacity of timely payment of financial commitments.

The ratings reflect EIBL’s subdued business profile, an outcome of weak revenue base from core business operations and sizeable non-earning assets, thereby putting pressure on earnings profile. As a result, the bank has not been able to arrest its losses. The management is making efforts for turnaround; establishing income streams from ancillary activities, mainly investment in physical commodities, margin financing, and bills discounting.

However, sustainable success is yet to achieve. In addition to equity, the company’s asset base is primarily funded by certificates of deposit, wherein a sizeable portion comprises individuals. The bank is non-compliant with minimum regulatory capital, however, regulator has granted grace period till November 2016. Continuous erosion in equity, in turn risk absorption capacity is highlighting urgency of break-even on a sustainable basis. In this regard, curtailing unfavourable gap of earning assets vis-a-vis interest bearing liabilities remains important.

The sponsors are cognizant of issues in hand and are exploring various options to raise capital, notably through a new equity partner. Herein, timeliness is critical. Any significant delay would magnify the bank’s challenges and may put pressure on ratings.

For more information, contact:
Hammad Rashid
Analyst
The Pakistan Credit Rating Agency Limited (PACRA)
Awami Complex, FB1, Usman Block New Garden Town,
Lahore – Pakistan
Tel: +9242 586 9504 -6
Fax: +9242 583 0425
Email: hammad.rashid@pacra.com
Web: www.pacra.com

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