Analyst
Saliha Sajid
saliha.sajid@pacra.com
+92-42-35869504
www.pacra.com
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Related Research
PACRA Maintains Entity Ratings of The Bank of Khyber
Rating Type | Entity | |
Current (25-Jun-19 ) |
Previous (24-Dec-18 ) |
|
Action | Maintain | Maintain |
Long Term | A | A |
Short Term | A1 | A1 |
Outlook | Stable | Stable |
Rating Watch | - | - |
The lending portfolio of BoK continued ascending trajectory when NPLs largely remain stagnant; asset quality improved marginally. BoK’s ADR increased to ~56% (CY17: 52%). Another reason for the rise in ADR was the less then market growth in the deposit mobilization. The bank’s funding base includes customer’s deposits and borrowings; there was slight uptick in CASA as compared to last year. Deposit base grew with contribution by savings deposit. The bank has dependence on large ticket deposits from Government of Khyber Pakhtunkhwa (GoKP) and its related institutions. Stability is observed in such deposits, over the years, composing 62% of the public deposits. Treasury Single Account may pose a challenge. During CY18, lesser reliance on borrowings from financial institutes resulted in marginal improvement in cost structure; inched up spread. Other operating income witnessed sharp decline attributable to loss on investments. The slimming total net revenue coupled with maintained cost structure resulted in declined profitability. In the current economic scenario, recovery of NPLs seems a challenge. The ratings incorporate association of the bank with the Government of Khyber Pakhtunkhwa (GoKP). The bank suffered sizable loss on its investment book, though the future losses are not anticipated. It is expected to be cushioned with future profits. The bank needs to beef up and elaborate its investment policy. The bank's CAR stand at 12.3% as at end-Dec18 (Tier-I: 12.2%) – it will need to be increased to 12.5% by end of this year. Profitability in operations is a crucial.
The ratings are dependent on bank's ability to hold its risk profile, while maintaining its relative market position. Improvement in the technology platform is critical to foster the control environment including reporting framework. Meanwhile, any significant infection in asset quality, in the wake of significant expansion in the loan book, and/or any intervention compromising the governance standards would impact negatively.
About
the Entity
The Bank of Khyber (BoK) was established in 1991 under the BoK Act and was awarded status of a scheduled bank in September 1994. BoK was established with a vision to gradually promote Islamic banking. At present, 85 of its branches function as dedicated Islamic banking branches, whereas 84 cater conventional banking. The Government of Khyber Pakhtunkhwa (GoKP) has majority stake in BoK (70%), whereas, Ismail Industries stake is 24% in BoK.
BOK’s board comprises eight members, out of which four are GoKP nominees. The remaining includes one representative of Ismail Industries, while two are independent members and the Managing Director. Dr. Shahzad Khan Bangash, who worked at different departments of the Government, is the chairman of the board. Mr. Saif ul Islam has been appointed as the new CEO of bank on December 4, 2018. He is a seasoned banker with forty two years of diverse experience mainly in banking industry. Other senior management is consist of seasoned professionals.