⚡ Flash Summary

First National Bank Modaraba (FNBM) reported a challenging financial year ending June 30, 2025, with a net loss of PKR 3.960 million, contrasting sharply with a profit of PKR 34.759 million in the previous year. This decline is reflected in a negative earnings per certificate of PKR -0.16 compared to PKR 1.39 in 2024. The company’s return on assets also turned negative, falling to -0.96% from 9.81% year-over-year. Management is focused on a business revival plan involving balance sheet restructuring and NPL recovery to restore profitability and comply with regulatory equity requirements.

📌 Key Takeaways

• 📉 FNBM reported a net loss of PKR 3.960 million for the year ended June 30, 2025.
• 📉 This contrasts with a net profit of PKR 34.759 million in the previous year (June 30, 2024).
• 📉 Earnings per certificate decreased significantly to PKR -0.16 (FY25) from PKR 1.39 (FY24).
• 📉 Return on Assets (ROA) fell to -0.96% in FY25 compared to 9.81% in FY24.
• 🏦 The balance sheet size increased to PKR 425.422 million from PKR 402.506 million year-over-year.
• 😔 Total equity remains negative at PKR -25.528 million in FY25, slightly worse than PKR -20.845 million in FY24.
• 💰 Total operating and other income decreased substantially to PKR 49.139 million from PKR 115.936 million year-over-year.
• ❗ Operating and financial expenses slightly decreased to PKR 50.591 million.
• 💼 Management is actively pursuing a business revival plan, including balance sheet restructuring.
• 🤝 Recovery of Non-Performing Loans (NPLs) is a key priority for the Modaraba.
• ✅ The company aims to comply with regulatory equity requirements through NPL recovery and favorable settlements.
• 🌱 The company plans to re-enter the market with renewed focus on permissible Islamic modes of financing.
• 🏛️ The winding-up petition against the Modaraba is expected to be withdrawn upon approval and implementation of the revival plan.
• 🔄 The resumption of trading of certificates in the PSX is anticipated following regulatory compliance.

🎯 Investment Thesis

Based on the current financial performance and associated risks, a SELL recommendation is warranted. The company faces significant challenges in restoring profitability and complying with regulatory requirements. Until there is clear evidence of successful implementation of the revival plan and a return to profitability, the investment carries substantial risk. Price target is $0. We need to see NPL get paid back before any consideration can be given.