Press Release

JCR-VIS reaffirms ratings of National Bank of Pakistan at AAA/A-1+
 

Karachi, June 30, 2017: JCR-VIS Credit Rating Company Limited (JCR-VIS) has reaffirmed the entity ratings of National Bank of Pakistan (NBP) at ‘AAA/A-1+’ (Triple A/A-One Plus) with ‘Stable’ outlook. The previous rating action was announced on June 28, 2016.

Ratings assigned to NBP derive strength from the Government of Pakistan’s (GoP) majority shareholding in the bank, its role in handling treasury transactions for the GoP as an agent to the State Bank of Pakistan (SBP) in addition to which security of deposits is guaranteed under the Banks’ Nationalization Act. Assigned ratings are also supported by the bank’s improved profitability levels.

On the asset side, gross advances of the bank increased on the back of incremental lending to existing low-risk borrowers belonging to energy and textile sectors. Despite recoveries in the outgoing year, infection levels compare less favorably with peer group average. In order to improve asset quality, management has formulated a recovery strategy for the coming two years, as approved by the Board.

NBP is the second largest bank in Pakistan in terms of domestic deposits. While depositor concentration continues to be on the higher side vis-à-vis peers, liquidity profile continues to be supported by sizeable liquid assets in relation to deposits and borrowings. Deposits of the bank depicted growth in 2016. However, proportion of CASA remains on the lower side in comparison to peers and may need to be improved, going forward.

Despite volumetric growth in earning assets, spreads depicted a decline during the outgoing year. However, the bank reported an improved bottom line on the back of growth in fee based income. Going forward, NBP plans to capitalize on cross sell opportunities to offset the expected impact of spread compression on the bottom line. In the backdrop of forecasted mid-term economic scenario and policy rate regime along with maturity of PIBs and low lending rates due to excess liquidity, spreads and profitability growth of the banking sector are expected to remain under pressure during 2017.

During the ongoing year, there was a change at the helm of organization with Mr. Saeed Ahmad appointed as President and Chief Executive Officer. With appointment of a new CEO, a business plan has been formulated with key focus on improving functional efficiency of NBP; developments in this regard would emerge over time.

For further information on this rating announcement, please contact the undersigned (Ext: 201) at 35311861-70 or fax to 35311872-3.

Javed Callea
Advisor

Applicable rating criterion: Commercial Banks Methodology - November 2015
http://www.jcrvis.com.pk/Images/Meth-CommercialBanks201511.pdf

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Information herein was obtained from sources believed to be accurate and reliable; however, JCR-VIS Credit Rating Company Limited (JCR-VIS) does not guarantee the accuracy, adequacy or completeness of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information. JCR-VIS, the analysts involved in the rating process and members of its rating committee do not have any conflict of interest relating to the rating(s)/ranking(s) mentioned in this report. JCR-VIS is not an NRSRO and its credit ratings are not NRSRO credit ratings. JCR-VIS is paid a fee for most rating assignments. This rating/ranking is an opinion and is not a recommendation to buy or sell any securities. Copyright 2017 JCR-VIS Credit Rating Company Limited. All rights reserved. Contents may be used by news media with credit to JCR-VIS.

JCR-VIS Credit Rating Company Limited