The Pakistan Credit Rating Agency Limited
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Sehar Fatima

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PACRA Maintains Entity Ratings of National Bank of Pakistan

Rating Type Entity
(25-Jun-22 )
(25-Jun-21 )
Action Maintain Maintain
Long Term AAA AAA
Short Term A1+ A1+
Outlook Stable Stable
Rating Watch - -

The ratings reflect formidable strength of National Bank of Pakistan (NBP) in the domestic commercial banking industry. The Bank’s strong financial risk profile, characterized by, its share in the deposit base of the country, its firm risk absorption capacity and systemic importance provides strength to the ratings. NBP’s strong domestic franchise along with extended outreach and high customer penetration aids the Bank in sustaining its position. NBP fortified its position as the second-largest bank in the country in terms of advances and deposits. The ratings are also driven by strong ownership structure (Government of Pakistan (GoP) holds majority stake) and healthy resource profile. The bank boasts of high proportion of current and savings account (CASA) deposits. There is a change at leadership position. Timely finalization of the key post is essential for long term and short-term standing of the bank. Advances observed an increase during CY21, mainly contributed to improving macroeconomic indicators. The bank has developed a system of for early warning pertaining to the risks of NPLs, as rise in NPLs is a concern, which must be managed via prudent exposure taking. In terms of absolute equity, the Bank stands at the first position in the industry. Furthermore, profitability of the Bank has witnessed a decline, with the Bank reporting profit after tax (PAT) of PKR 28bln for CY21 covered by decline in total income. With focused efforts, NBP Islamic Banking (Aitemad Islamic) has achieved a milestone of total assets worth PKR 100bln. Islamic Banking portfolio has also been well diversified to ensure better growth. Pakistan’s economy has gone through several varied phases in last two years due to the COVID19 pandemic. Banking sector continued to flourish with high profitability. Going forward, the macro-economic environment is beset with myriad challenges due to heightened interest rate, tightening of demand, rupee depreciation and higher inflation. This has repercussions for all segments of the economy.
The ratings are dependent upon the management’s ability to maintain the relative standing of the Bank in the industry in all key parameters. Cost optimization and sustenance in the asset quality is important as it will improve the profitability. Moreover, the Bank in a case related to pension benefits to retired employees has filed a review petition against the Supreme Court judgment and has also moved an application for the constitution of the larger bench which has been accepted.

About the Entity
National Bank of Pakistan – the second largest public sector commercial bank - operates with a network of over 1,513 branches in Pakistan and 19 overseas branches at end-Dec21. NBP maintains a total deposit share of ~14.3% at end-Dec20. NBP is majority (~75.6%) owned by GoP, mainly through State Bank of Pakistan (SBP) (75.2%). The remaining shareholding is widely spread. The Bank acts as an agent of SBP and manages treasury operations for GoP.
NBP's eight members GoP nominated board includes the President, one independent director, while others are non-executives. Mr. Rehmat Ali Hasnie, the CEO/ President (acting) since May 2022, is an experienced banker with over 27 years of experience primarily in Investment Banking and Risk Management.

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.