The Pakistan Credit Rating Agency Limited
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Ayesha Qasim

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PACRA Maintains Entity Ratings of The Bank of Khyber

Rating Type Entity
(29-Dec-17 )
(21-Jun-17 )
Action Maintain Maintain
Long Term A A
Short Term A1 A1
Outlook Stable Stable
Rating Watch - -

The ratings reflect BOK's strong fundamentals. This includes sound liquidity and high capital adequacy, accompanied by improving profitability. Spreads remained low, showed a downward trend. NPLs has seen slight rise hence require management attention though provision coverage is adequate. The bank has dependence on large ticket deposits from Government of Khyber Pakhtunkhwa (GoKP) and its related agencies. However, stability is observed in such deposits over time. The bank is expanding its branch network with high focus on KPK and Punjab; However, slightly establishing footprints in other provinces may be needed to better compete with established banks. The management plans to increase advances book with higher focus preferably on power, cement and 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, thereby weakening the bank's risk absorption capacity, 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, 83 of its branches function as dedicated Islamic banking branches, whereas 82 cater conventional banking. The Government of Khyber Pakhtunkhwa (GoKP) has majority stake in BoK (70%), whereas, Ismail Industries stake is 24% in BoK.

The board comprises seven members, out of which four are GoKP nominees, including two ex officio members and a Managing Director. The remaining includes one member of Ismail Industries and two independent members. Dr. Shahzad Khan Bangash is elected as the new chairman of the board as he took the charge in Nov-17. Current Acting Managing Director – Mr. Muhammad Shahbaz Jameel – was appointed by the government in Oct-17. He is a seasoned banker with twenty four (24) years of diverse experience at leading multinational financial institutions.

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.