Press Release

JCR-VIS reaffirms ratings of National Bank of Pakistan at AAA/A-1+

Karachi, June 26, 2013: JCR-VIS Credit Rating Company Limited (JCR-VIS) has reaffirmed the entity ratings of National Bank of Pakistan (NBP) at ‘AAA/A-1+’ (Triple A/A-One Plus) with ‘Stable’ Outlook.

Ratings assigned to NBP are driven by the bank’s prominent position in the Pakistani banking sector, as reflected in sizeable market share of deposits. Ratings also derive support from the bank’s healthy capitalization levels and adequate liquidity profile. Majority ownership of the bank rests with the Government of Pakistan (GoP) in addition to which security of deposits is also guaranteed under the Banks’ Nationalization Act. Moreover, NBP handles treasury transactions for the GoP as an agent to the State Bank of Pakistan.

Given the limited demand for private sector credit, significant increase in financing to the public sector was witnessed, resulting in sharp rise in portfolio concentration levels. The latter includes exposure against certain state-owned enterprises which are under-going financial stress; by virtue of these being public sector entities, such exposures are exempted from classification criteria, despite delays in repayments.

Alongside corporate exposures, the bank’s consumer portfolio has now obtained a reasonable size representing almost one-fifth of the bank’s performing loan book. Going forward, focused growth in financing to the consumer and agriculture segments is planned where returns are higher and the bank has a strong track record. Given the product structures in the consumer segment, infection for the segment has been recorded well below industry norms.

In line with the trend in the banking sector, spreads have marginalized on account of 250 bps discount rate cut in 2012 and imposition of a 6% floor on savings deposits. Increase in retail lending which now comprises almost one-fifth of loan book may allow the bank to enhance return on lending activities. Efficiency indicators of the bank do not compare favorably to peers. Surplus resources from the existing employee pool will be utilized to staff the new branches set up during the on-going year, in order to improve staff productivity. While so far Islamic banking had not been an area of focus, the bank plans to rapidly expand its Islamic foot print by opening 100 new Islamic branches over the course of the next three years.

For further information on this rating announcement, please contact Mr. Javed Callea (Ext: 501) or Ms. Sobia Maqbool, CFA (Ext: 604) at 35311861-70 or fax to 35311872-3.



Jamal Abbas Zaidi
Deputy CEO

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 2013 VIS Credit Rating Company Limited . All rights reserved. Contents may be used by news media with credit to VIS .