Lahore: First National Bank Modaraba (FNBM), a financial entity managed by a subsidiary of the National Bank of Pakistan (NBP), has outlined its strategy for addressing non-compliance issues that have led to the suspension of its trading certificates on the Pakistan Stock Exchange (PSX). The quarterly progress report for the period ending March 2025 details both the nature of FNBM's non-compliance and the steps being taken to remedy the situation.

On April 4, 2025, FNBM disclosed that its suspension from trading originated from accumulated losses exceeding 50% of its paid-up capital. These losses stemmed largely from provisions for Non-Performing Loans (NPLs) as required by the Securities and Exchange Commission of Pakistan's (SECP) Modaraba Regulations. This led to the Registrar Modaraba (SECP) invoking Section 23(I)(ii)(b) of the Modaraba Companies and Modaraba (Floatation and Control) Ordinance 1980, resulting in a winding-up application filed in the Modaraba Tribunal Lahore.

The accumulated losses are predominantly attributed to the provisioning charges against NPLs. These charges are not considered permanent losses, as they act as a reserve that could potentially be reversed if recovery efforts succeed. According to information available from the Pakistan Stock Exchange (PSX), FNBM has initiated recovery suits for all NPLs and has obtained favorable decree orders. Execution proceedings are currently underway, with optimistic prospects for recovery.

Since the suspension in April 2018, FNBM has reported consistent cash recoveries from its NPLs, both through court orders and out-of-court settlements. These recoveries have facilitated the reversal of provisions, allowing FNBM to post net operating profits annually since fiscal year 2021. As a result, the accumulated losses are gradually decreasing. These financial developments have been communicated promptly to PSX.

FNBM anticipates further cash recoveries, which, alongside continued support from the National Bank of Pakistan, could enable compliance with the 50% threshold within two to three years. Currently, FNBM is seeking judicial intervention from the Modaraba Tribunal in Lahore to have the winding-up application reconsidered by the SECP, aiming for a resolution that serves the interests of all stakeholders, especially Modaraba Certificate Holders. The matter remains under adjudication.