The ratings reflect FHM's strong business profile emanating from healthy asset base, sound asset quality and sustained profitability. The asset yield has declined; FHM has managed to cushion its impact by rationalizing cost of funding- hence slight dilution in spreads. Furthermore, overall profitability has also been maintained through enhancement of financing asset size. Liquidity is being well maintained by investing in government securities. FHM managed to sail through its devised strategy to beef-up its business volumes to maintain its bottom-line performance by maintaining its asset quality. FHM's capital provides strong support to the funding structure of the Modaraba, equally aided by Certificates of Musharika (CoM).

Overall capital structure shows an inclination towards leveraging. Going forward, the management, while continuing with its growth strategy, intends to expand its outreach to other areas of the country, especially those close to CPEC related projects and more focus would be on vehicle financing. The ratings take into account good management quality and strong control environment and also reaching others customers through different business model. The ratings are dependent on the management's ability to sustain its competitive positioning while ensuring stable profitability. The ratings also depend upon keeping its financial profile intact. Any significant change in its risk profile may adversely impact the ratings.-PR

Copyright Business Recorder, 2018