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The Pakistan Credit Rating Agency Limited
Press Release

Date
26-Jun-20

Analyst
Maryam Arshad
maryam.arshad@pacra.com
+92-42-35869504
www.pacra.com

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This press release is being transmitted for the sole purpose of dissemination through print/electronic media. The press release may be used in full or in part without changing the meaning or context thereof with due credit to PACRA

PACRA Maintains Entity Ratings of The Bank of Khyber

Rating Type Entity
Current
(26-Jun-20 )
Previous
(24-Dec-19 )
Action Maintain Maintain
Long Term A A
Short Term A1 A1
Outlook Stable Stable
Rating Watch - -

The ratings reflect Bank of Khyber’s maintained business profile as reflected by intact system share (end-Dec19: 1.3%, end-Dec18: 1.3%). The bank’s funding base comprise of deposits and borrowings. Markup income witnessed substantial jump attributable to hike in asset yield and higher earning asset on year on year basis. However, net mark up income did not follow the same growth trend attributable to high term deposits. Non-mark up income turned positive attributable to slight gain booked from treasury operations which supplemented the profitability. Spread also witnessed slight uptick (end-Dec19: 3.9%; end- Dec18: 3.1%). Reversal in provisions also simulated positively. Sustainability in NIMR, continued enhancement in non-fund based exposure and strengthened treasury operations are important for future years. Notably, Covid-19 has posed challenges to all segments of the economy, worldwide and domestically, most sectors are getting negatively impacted. The ramifications would continue to unfold, warranting vigilance and timely actions where needed. Current deposits witnessed a growth of ~10% in CY19. Deposits recorded good growth whilst tilted towards saving deposits; CASA ratio witnessed improvement (CY19: 62.8%; CY18: 56.4%). Non-Performing Loans inched up but adequate coverage is in place to limit the risk. The Investment book has expanded significantly – tilted towards Govt. papers and fueled by borrowings from financial institution. Going forward, it is essentially important that the bank maintains its asset quality, given high concentration in advances.The bank’s total CAR stands at 15.3% as at end-Dec19.
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, 84 of its branches function as dedicated Islamic banking branches, whereas 82 cater conventional banking. The Government of Khyber Pakhtunkhwa (GoKP) has majority stake in BoK (70%), whereas, Ismail Industries stake is 24% in BoK. The bank enjoys relationship support with the KPK government.
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. Mr. Shakil Qadir khan, is appointed as the Chairman of the board since Dec-19 & Mr. Ihsan Ullah Ihsan has been appointed as the new acting CEO of bank on December 9, 2019. He is a seasoned banker with twenty six of diverse experience mainly in banking industry. He was an Executive vice president/Credit risk officer of bank since Jun, 18. Other senior management is consists of seasoned professionals.

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.