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The Pakistan Credit Rating Agency Limited
Press Release

Date
24-Dec-18

Analyst
Sehar Fatima
sehar.fatima@pacra.com
+92-42-35869504
www.pacra.com

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This press release is being transmitted for the sole purpose of dissemination through print/electronic media. The press release may be used in full or in part without changing the meaning or context thereof with due credit to PACRA

PACRA Maintains Entity Ratings of The Bank of Khyber

Rating Type Entity
Current
(24-Dec-18 )
Previous
(25-Jun-18 )
Action Maintain Maintain
Long Term A A
Short Term A1 A1
Outlook Stable Stable
Rating Watch - -

The ratings reflect the bank’s sustained risk profile. The bank’s lending portfolio continued ascending trajectory while NPLs continued witnessing declining trend; resulted in improved asset quality. BoK’s ADR rationalized to ~54% (CY17: 52%). The bank’s funding base includes customer’s deposits and borrowings. The deposit base witnessed substantial growth; led by saving deposits. The bank has dependence on large ticket deposits from Government of Khyber Pakhtunkhwa (GoKP) and its related institutions. Stability is observed in such deposits, over the years, composing 62% of the public deposits. During 9MCY18, lesser reliance on borrowings from financial institutes was witnessed. Hence, spread inched up driven by improvement in cost structure. The bank is expanding its branch network in KPK and Punjab; establishing footprints in major cities especially Lahore and Karachi to compete with established banks. The management plans to further increase advances book with higher focus on infrastructure. With desired credit growth, nurturing strength of management team is essential. The ratings incorporate association of the bank with the Government of Khyber Pakhtunkhwa (GoKP).
The ratings are dependent on bank's ability to hold its risk profile, while maintaining its relative market position. Improvement in the technology platform is critical to foster the control environment including reporting framework. Meanwhile, any significant infection in asset quality, in the wake of significant expansion in the loan book, and/or any intervention compromising the governance standards would impact negatively.

About the Entity
The Bank of Khyber (BoK) was established in 1991 under the BoK Act and was awarded status of a scheduled bank in September 1994. BoK was established with a vision to gradually promote Islamic banking. At present, 84 of its branches function as dedicated Islamic banking branches, whereas 84 cater conventional banking. The Government of Khyber Pakhtunkhwa (GoKP) has majority stake in BoK (70%), whereas, Ismail Industries stake is 24% in BoK.

BOK’s board comprises eight members, out of which four are GoKP nominees, including two officio members. The remaining includes one representative of Ismail Industries, while two are independent members and the Managing Director. Dr. Shahzad Khan Bangash, who worked at different departments of the Government, is the chairman of the board. Mr. Saif ul Islam has been appointed as the new CEO of bank on December 4, 2018. He is a seasoned banker with forty years of diverse experience mainly in banking industry. Other senior management is consist of seasoned professionals.

The primary function of PACRA is to evaluate the capacity and willingness of an entity to honor its obligations. Our ratings reflect an independent, professional and impartial assessment of the risks associated with a particular instrument or an entity. PACRA's comprehensive offerings include instrument and entity credit ratings, insurer financial strength ratings, fund ratings, asset manager ratings and real estate gradings. PACRA opinion is not a recommendation to purchase, sell or hold a security, in as much as it does not comment on the security's market price or suitability for a particular investor.