The Pakistan Credit Rating Agency Limited
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Sehar Fatima

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PACRA Maintains the Entity Ratings of Bank of Khyber

Rating Type Entity
(27-Jun-23 )
(04-Oct-22 )
Action Maintain Upgrade
Long Term A+ A+
Short Term A1 A1
Outlook Stable Stable
Rating Watch - -

The ratings reflect stability achieved in the leadership role through the appointment of an experienced CEO together 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 strength of the Bank’s ownership structure and the continued support of its strong sponsors. Moreover, the government of KP is committed to maintaining its controlling stake in the Bank and is aware of Bank’s growth strategy, and is supportive of it. The incumbent leadership assumed the stewardship of the Bank and has devised a clear and prudent strategy for the growth and performance improvement of the Bank. While the competitive landscape has been increasingly intensified, the Bank is focused to enhance its digital footprint so that customers are provided with all “digital and online banking services”. The management team is fully cognizant of the prevailing micro and macro challenges and aligned on the strategy to bring improvement in all the key indicators of the Bank. The deposit mix remained tilted towards saving deposits, while the CASA ratio witnessed improvement (End-Dec’22: 68.7%; End Dec’21: 65.2%). Net markup income and non-markup income registered an increase during the period. 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. Also, more diversification is being planned by enhancing the portfolio in consumer and auto loans. 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. Asset quality remained largely the same as portrayed by NPLs to Gross Advances ratio (End-Dec’22: 8.7%, End-Dec’21: 8.01%). The management has been making concerted efforts for the reduction in NPLs and the improvement of portfolio quality. The investment portfolio is majorly vested with government securities. The bank’s capital adequacy ratio stands at 14.9% at end-Dec’22 where Tier I capital clocked at 14.8% (CY21: 14.5%) reflecting a comfortable position. During 1QCY23, the bank witnessed a sizeable improvement in the bottom line. CASA illustrated an increase clocking in at 77.8%. 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. Further, the bank continues to work on diversification of its deposit base in line with its strategy.
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 (KP) has a majority stake in BoK (70.2%), whereas, Ismail Industries' stake is 24.4% in BoK. Mr. Muhammad Zubair Asghar Qureshi is the Chairman of the board. Mr. Muhammad Ali Gulfaraz took charge as Managing Director on August 12, 2021. He is supported by a team of highly qualified and 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.