PACRA Maintains the Entity Ratings of Bank of Khyber

The ratings reflect stability achieved with the improved business profile, on an overall basis, as reflected by the largely intact customer deposit share of the Bank. The ratings also reflect the Bank’s ownership structure and the continued support of its strong sponsors. Moreover, the government of KPK is committed to maintaining its controlling stake in the Bank is aware of the Bank’s growth strategy, and is supportive of it. The bank has managed to demonstrate healthy financial performance. However, the fragile economic conditions and subdued business activities have impaired the repayment capacity of certain businesses and obligors, leading to a deterioration in the infection ratio. To control this portfolio infection, management has implemented robust risk management policies and procedures and is making strenuous efforts to recover non-performing loans (NPLs). The deposit mix remained tilted towards saving deposits, while the CASA ratio declined 4.7% on a YoY basis and clocked 64.0% at the end of Dec'23 (End-Dec’22: 68.7%). During the period, net markup income surged by ~97% influenced by the high interest rate environment and portfolio reprofiling, while non-markup income exhibited a robust growth of ~50% which highlights the Bank's enhanced revenue generation capabilities and effective strategic initiatives. The bank has experienced a comparative decline in profitability at the end of 1QCY24, however remains focus on holding the profitability. Moreover, an enhancement in the branch network has been a major dimension for the Bank. The Bank has planned to increase its exposure to Private Sector Advances. An enduring emphasis is laid on building trade business. It is of paramount importance to manage the credit risk, if any, arising from lending through government schemes. The Bank has further embarked upon improving efficiency and effectiveness in the operating system through the implementation of widely used Core Banking Software T-24. The investment portfolio is majorly vested with government securities, indicating the bank's strategic focus on secure investments amidst a challenging lending environment. At end-Dec23, the bank’s equity base was recorded at PKR 20.3bln (end-Dec21: PKR 16.4bln) accompanied by improved retention ratio. The bank’s capital adequacy ratio stands at 18.25% at end-Dec’23 where Tier I capital clocked at 18.09% (CY22: 14.88%) reflecting a comfortable position. It signifies a marked fortification of the bank's capital structure and financial stability, reflecting enhanced resilience and a more robust capacity to absorb potential losses. Going forward, an enhanced focus on digitalization and process automation to enhance the efficiency and quality of customer facilitation would augment the bank’s profile. Moreover, the ongoing efforts to diversify the deposit base align with the bank's strategic objectives, potentially enhancing its stability and growth prospects.
The rating reflects the bank's ability to hold its risk profile while maintaining its relative market position. Moreover, the bank enjoys the continued support of its strong sponsors.

About the Entity
Bank of Khyber (BoK) was established in 1991 under the BoK Act and was awarded the status of a scheduled bank in September 1994. The Government of Khyber Pakhtunkhwa (KPK) has a majority stake in BoK (70.2%), whereas, Ismail Industries' stake is 24.4% in BoK. Mr. Syed Imtiaz Hussain Shah is the Chairman of the board. The process of appointing new President is currently underway. Mr. Irfan Saleem Awan has been designated as the Acting Managing Director in this stead. Additionally, Mr. Irfan Saleem Awan continues to serve as the Chief Financial Officer of the Bank. He is supported by a team of highly qualified and seasoned professionals.