Press Release
VIS Reaffirms Entity Ratings of The Bank of Khyber
Karachi, June 30, 2020: VIS Credit Rating Company Limited (VIS) has reaffirmed the entity ratings of The Bank of Khyber (BoK) at ‘A/A-1’ (Single A/A-One). The medium to long-term rating of ‘A’ denotes good credit quality, with adequate protection factors. Moreover, risk factors may vary with possible changes in the economy. The short-term rating of ‘A-1’ denotes high certainty of timely payment, liquidity factors are excellent and supported by good fundamental protection factors. Outlook on the assigned rating is ‘Stable’. The previous rating action was announced on June 26, 2019.
The ratings assigned to BoK reflect its shareholding structure, as majority shareholding of the bank is held by the Government of KPK. The ratings are supported by steady growth in advances portfolio, largely stable asset quality and adequate liquidity profile. The ratings also factor in improvement in profitability during FY19 as the bank recorded gain on sale of government securities vis-à-vis a significant loss in the corresponding period. With higher equity base and significant new exposure to public sector, the bank witnessed notable improvement in Capital Adequacy Ratio.
Regulatory relief measures undertaken by regulator to promote financial stability, ensure continued credit supply to the economy and maintain confidence in the banking system have been received positively and are expected to delay the impact of prevailing headwinds on portfolio asset quality indicators. However, exposure of banking sector to credit risk is elevated due to significant impact of Covid-19 on already weak macroeconomic indicators.
The bank enhanced its investment portfolio by end-FY19 mainly by taking fresh exposure in T-bills. Given considerable decline in interest rates during the ongoing year, deficit on the bank’s PIBs portfolio has been converted into an adequate surplus. Digital and internet banking platforms have been introduced in early FY20, whereas implementation of core banking software - Temenos T24 - is scheduled to be rolled out by Nov’20. Timely implementation of core banking software and stability at the senior management level are considered important for effective implementation of the bank’s strategy.
For further information on this rating announcement, please contact Syed Fahim Haider at 042-35723411-13 (Ext: 8006) or the undersigned at 021-35311861-70 (Ext. 306) or mailto:info@vis.com.pk
Faryal Faheem Ahmed
Deputy CEO
Applicable rating criterion: Commercial Banks Methodology - March, 2018
http://www.vis.com.pk/kc-meth.aspx