The Pakistan Credit Rating Agency Limited
Press Release


Muhammad Noor Ul Haq

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PACRA Maintains Entity Ratings of National Bank of Pakistan.

Rating Type Entity
(28-Jun-19 )
(28-Dec-18 )
Action Maintain Maintain
Long Term AAA AAA
Short Term A1+ A1+
Outlook Stable Stable
Rating Watch Yes Yes

The ratings reflect formidable strength the bank in the domestic commercial banking industry. The bank’s strong financial risk profile, characterized by firm risk absorption capacity and systemic importance provides strength to the ratings. NBP’s renowned domestic franchise along with extended outreach aids the bank in deposit mobilization; private deposit-mix slightly improved. NBP fortified its position as the second largest bank in the country in terms of advances, investments as well as deposits. Additionally, CASA mix improved; especially the CA side of it; benefiting in the spreads. High administration cost of the bank is limiting profitability. There was deterioration in the asset quality as NBP booked PKR 12.5bln of NPLs mainly due to single-group default and translation impact of Rupee devaluation on overseas loans. With focused efforts, NBP has managed to bring volumes in Islamic banking (Aitemaad) though limited; it is targeted to contribute towards growth. The bank has developed a system for early warning pertaining to the risks of NPL, wherein some refinement may also be beneficial. The ratings are driven by strong ownership structure (Government of Pakistan (GoP) holds majority stake) also.
The ratings are dependent upon the management’s ability maintain relative standing of the bank in the industry in all key parameters. Banks (Nationalization) Act, 1974 (clause 4 of section 5) provides for the safety of all deposits in the banks. Depositor Protection Act 2016 (clause 39) has removed the protection clauses of the referred Act. Which law is to prevail, should any dispute arise, is a legal matter. 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 constitution of larger bench which has been accepted.

About the Entity
National Bank of Pakistan - the largest public sector commercial bank - operates with a network of over 1,509 branches in Pakistan and 21 overseas branches at end-Mar19. NBP maintains a total customer deposit share of ~12.8% at end-Dec18. NBP is majority (~75.6%) owned by GoP, through State Bank of Pakistan (SBP). The bank acts as an agent of SBP and manages treasury operations for GoP.
NBP's seven member GoP nominated board includes the President, one independent director, while others are non-executives. The Ministry of Finance appointed Mr Arif Usmani, as President/Chief Executive Officer of the National Bank of Pakistan.

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.