Karachi, June 28, 2016: JCR-VIS Credit Rating Company Limited (JCR-VIS) has reaffirmed the entity ratings of The Bank of Khyber (BoK) at ‘A/A-1’ (Single A/A-One). Outlook on the assigned ratings is ‘Stable’. The previous rating action was announced on June 30, 2015.
The ratings assigned to BoK take into account its shareholding structure with the Bank being majority owned by Government of Khyber Pakhtunkhwa (GoKP). In addition to being the primary shareholder, GoKP has also placed sizeable deposits with the Bank; these have remained relatively stable over the years. Ratings also take into account sound capitalization indicators of the Bank with Capital Adequacy Ratio (CAR) better placed among peer commercial banks.
With additional funding channelized into investments, share of advances portfolio in the overall asset base has trended downward. Around three-fourth of the advances pertained to conventional banking. Asset quality indicators have weakened on a timeline basis. Given the declining interest rate regime, the Bank intends to focus on increasing its advances portfolio in order to support spreads.
Deposit base posted healthy growth during FY15 and in the ongoing year. However, concentration related indicators have trended upwards. Cost of deposits of Islamic Banking Group (IBG) compares favorably with conventional banking on account of higher proportion of CASA in IBG deposits.
While core earnings of the Bank largely remained flat, bottom line received impetus from gain on sale of government securities. The Bank maintains a high payout ratio. Resultantly, pace of internal capital generation has been slow. Net NPLs as a percentage of tier-1 equity are on the higher side.
Timely appointment at vacant senior management positions is considered important in achieving long term business strategy of the Bank. Moreover, early & effective implementation of Bank Essential, the new core banking system, will enable real time connectivity across all branches, strengthen controls and enable introduction of new services.
For further information on this rating announcement, please contact the undersigned at (Ext: 501) or Mr. Mohammed Khalid Ali (Ext: 508) at 021-35311861-71 or fax to 021-35311872-3.
Applicable rating criterion: Commercial Banks Methodology - November 2015
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