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Pakistan Credit Rating Agency Limited downgrades entity ratings of Escorts Investment Bank Limited

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by November 14, 2016 General

Lahore, November 14, 2016 (PPI-OT):EIBL is experiencing deterioration in its business and financial profile. This has severely diminished its risk absorption capacity- also the bank has not been able to meet minimum equity requirement of PKR 750mln. The management has not been able to arrest declining trend in performance. The quantum of loss has gone up significantly in recent periods eroding the bank’s equity. The bank’s woes primarily arise from squeezing size of earning assets, whereas non-earning assets now dominate its asset base. Given reduced equity base, the assets are mainly funded through deposits. Consequently the bank has increased liquidity gap. It would be challenging to meet sizeable deposit withdrawal call.

The management is putting in multiple efforts to cure the situation. The focus is on arranging fresh equity through a new partner. Herein, timeliness is critical. Any significant delay would magnify the bank’s challenges and may put pressure on ratings. 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.

For more information, contact:
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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