Press Release
VIS Upgrades Entity Ratings of The Bank of Khyber
Karachi, June 30, 2025: VIS Credit Rating Company Limited (VIS) has upgraded entity ratings of Bank of Khyber (‘BOK’ or ‘the Bank’) to 'AA-/A1' (Double A Minus/A One) from ‘A+/A1’ (Single A Plus/A One). Medium to long term rating of 'AA-' indicates high credit quality; protection factors are strong. Risk is modest but may vary slightly from time to time because of economic conditions. Short term rating of 'A1' indicates strong likelihood of timely repayment of short-term obligations with excellent liquidity factors. Outlook on the assigned ratings is ‘Stable.’ Previous rating action was announced on June 28, 2024.
Bank of Khyber was established under the Bank of Khyber Act, 1991 and was subsequently awarded the status of a scheduled bank in 1994. BoK is listed on the Pakistan Stock Exchange (PSX) and is one of the three commercial banks owned by the provincial governments. The provincial government of Khyber Pakhtunkhwa (KPK) holds a controlling stake, followed by Ismail Industries Ltd (IIL) – a leading confectionary manufacturer, having a stake of 24.4% in the bank.
The entity ratings assigned to BoK reflect its sponsorship profile, being owned in majority by the government of Khyber Pakhtunkhwa. During the period under review, BoK significantly expanded its asset base, reflected mostly in investment portfolio growth, while also focusing on improving advance-to-deposit ratio. Portfolio expansion remained focused on the corporate segment, although efforts were underway to diversify exposure towards consumer, SME, and Shariah-compliant sectors.
Asset quality indicators posted improvement, with a decline in net infection ratios and a substantial increase in coverage levels under the IFRS-9 provisioning framework. While temporary fluctuations were observed in the gross advance portfolio till 1QCY25, however these did not have material impact of the credit risk profile of the Bank. The investment book remained concentrated in sovereign instruments with short-duration and floating-rate profiles, containing both credit and market risk.
On the funding side, BoK’s deposit base demonstrated stability, supported by growing contributions from low-cost retail and government-related accounts. Liquidity indicators remained above regulatory thresholds throughout the period, with the Bank continuing to demonstrate a strong capacity to meet funding obligations under stress scenarios.
Profitability remained stable, with an uptick in core earnings driven by volumetric growth in earning assets. Non-markup income remained stable, although strategic focus on remittances, trade services, and fee-based products is expected to broaden revenue streams going forward. Cost rationalization, digital enablement, and operational optimization remain key components of the Bank’s efficiency strategy.
BoK’s capitalization remained sound, with capital adequacy indicators comfortably above regulatory requirements. Although slight moderation in capital ratios was observed due to asset expansion, capital quality remained sound, with limited reliance on supplementary capital instruments.
The Bank continues to pursue its Shariah-conversion roadmap, with a portion of the asset book and branch network already aligned with Islamic principles. The transition remains a key strategic focus and is expected to pave the way for business opportunities, particularly in underserved regions. To complement its business growth, the Bank is prudently expanding its branch network apart from increasing its digital footprint. Going forward, further improvement in asset quality, core profitability, and liquidity metrics, amid a changing macroeconomic and interest rate environment will remain important from a ratings perspective.
For further information on this rating announcement, please contact at 021-35311861-64 or email at info@vis.com.pk.
Applicable Rating Criteria:
Financial Institution
https://docs.vis.com.pk/Methodologies%202024/Financial-Institution-v2.pdf
VIS Issue/Issuer Rating Scale
https://docs.vis.com.pk/docs/VISRatingScales.pdf