PACRA maintains the Ratings of Escorts Investment Bank Limited
Escorts Investment Bank Limited (“Escorts Bank” or “the Bank”) is a subsidiary of Bahria Town (Pvt) Limited, a privately
owned real estate development company that owns, develops, and manages properties across Pakistan. Escorts Bank has adopted
a cautious approach to avoid non-performing loans and the revenue gathers support from profit on financing, followed by the
other income. Relevant to the Bank’s business model, house finance is a prominent contributor to the Bank’s total portfolio. A
major proportion of revenue comes from mortgage and microfinance portfolios. On a net level, the Bank continues to incur
losses due to higher non-markup expenses; however, the quantum of losses has reduced. Earlier, the write-off of tax refunds
(pertaining to the takeover period) and re-assessment of deferred tax assets; owing to a change in business plan rendered the
Bank short of equity as required to maintain under NBFC Regulations. Escorts Bank’s capital structure mainly comprises equity,
with a stagnant debt-to-equity ratio. Escorts Bank remains non-compliant with the Minimum Capital Requirement of PKR
750mln. In the form of equity injection, sponsor support remains vital for the ratings. Going forward, development of a
comprehensive business plan, with clear modalities and materialization, remains critical. The Bank must be funded through
equity to sustain operations and acquire an Investment Finance Services (IFS) license.
The ratings are dependent on the Bank’s relative standing and the improved asset quality of the existing portfolio. Moreover,
achieving bottomline profitability remains important. Meanwhile, any further weakening in the financial profile or lack/delay in
support from the sponsor could further impact the ratings.
