Press Release

VIS Reaffirms Ratings of Bank of Khyber

Karachi, June 27, 2023: VIS Credit Rating Company Limited (VIS) has reaffirmed the entity ratings of Bank of Khyber (BOK) at ‘A+/A-1’ (Single A Plus/A-One). Long-term rating of ‘A+’ denotes good credit quality with adequate protection factors. Moreover, risk factors may vary with possible changes in the economy. Short-term rating of ‘A-1’ indicates high certainty of timely payment with excellent liquidity factors supported by good fundamental protection factors. Risk factors are considered to be minor. Outlook on the assigned ratings is ‘Stable’. The previous rating action was announced on June 30, 2022.
The ratings assigned to BOK reflect its shareholding structure as the majority stake (70.2%) is held by the sub-sovereign, the Government of KPK followed by Ismail Industries Limited (24.4%). The ratings take into account the impact of downward movement in net worth and profitability in the outgoing year owing to a sizable deficit booked on investments and high operating expenses incurred on account of branch network growth and capacity building. However, the subsequent improvement in the profitability and efficiency indicators evidenced during the ongoing year is in built in the assigned ratings. Moreover, the Bank is focused towards enhancing its digital footprint for better customer experience and portfolio diversification. Given instances of fresh infection reported, weakening of asset quality indicators on account of impaired repayment capacity of businesses and obligors amid weak macroeconomic indicators remains a key concern from the rating perspective. VIS has been given to understand that the management is following a cautious approach in new to-bank lending, plans to enhance business relationships with existing blue chip and public sector clients, and aims to keep an optimal level of risk-free government-backed lending schemes to avoid potential credit risk headwinds in view of the prevailing economic conditions. In view of uncertain market conditions and increase in market interest rates, there was heightened market risk exposure as the net deficit on investments increased sizably on a timeline. However, the same is mitigated to some extent on account of the ongoing repositioning of the investment portfolio.

BOK’s liquidity profile is sound and has improved during the review period, as evidenced by sizable coverage of liquid assets by deposits and borrowings. Moreover, additional liquidity available through growth of deposits was also channelized towards liquid avenues as the advances to deposit ratio declined in the ongoing year. Further, the concentration risk on the deposit side also reduced on a timeline. The largest deposit pertained to the government of KPK; however, this high-cost deposit was slightly tapered off during the outgoing year. In addition, asset-maturity mismatch exists in various buckets; however, liquidity risk arising from withdrawals is limited given that the largest depositors are public/sub-sovereign account holders. While declining on a timeline, the Capital Adequacy Ratio (CAR) is regulatory compliant and adequate for the assigned ratings; however, it needs to be recouped to release the developing pressure on ratings. The ratings capture the consolidation strategy opted by the management for both lending and investment portfolios for maintaining CAR of the Bank at desired levels. Moreover, the ratings remain dependent on improvement in asset quality indicators and market risk management of investment portfolio.

For further information on this rating announcement, please contact Ms. Maham Qasim at 042-35723411-13 (Ext. 8010) and/or the undersigned at 021-35311861-64 (Ext. 201) or email at

Javed Callea

Applicable Rating Criterion: Financial Institution Methodology – June 2023

Rating Scale

Information herein was obtained from sources believed to be accurate and reliable; however, VIS Credit Rating Company Limited (VIS) does not guarantee the accuracy, adequacy or completeness of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information.VIS , the analysts involved in the rating process and members of its rating committee do not have any conflict of interest relating to the rating(s)/ranking(s) mentioned in this report.VIS is paid a fee for most rating assignments. This rating/ranking is an opinion and is not a recommendation to buy or sell any securities. Copyright 2023 VIS Credit Rating Company Limited . All rights reserved. Contents may be used by news media with credit to VIS .