Press Release

Ratings of The Bank of Khyber

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Karachi, June 30, 2014: JCR-VIS Credit Rating Company Limited (JCR-VIS) has reaffirmed the entity ratings of The Bank of Khyber (BoK) at ‘A/A-1’ (Single A/A One) with ‘Stable’ Outlook.

The ratings take into account more than two third holding of a sub-sovereign - Government of Khyber Pakhtunkhwa (KPK) - in BoK. The ratings incorporate demonstrated support in form of equity injection to meet the regulatory minimum capital requirement, as and when needed. KPK has been exclusively availing financing for commodity operations from the bank. BoK also maintains one of the highest capital adequacy ratio amongst peers; this provides considerable room for growth and loss absorption capacity.

The bank has been able to maintain the growth momentum in deposits while increasing the proportion of CASA in the deposit base. Concentration in deposits has also showcased improvement on a timeline basis, though it is still considered relatively high. However, stability has been witnessed in large ticket deposits as most of such deposits pertain to KPK and its related agencies. The management plans to further rationalize its deposit mix by increasing share of retail segment, going forward.

By end-FY13, the bank achieved a network of 100 branches. The management intends to set up 16 new branches during FY14. Currently, the bank operates with 44 Islamic banking branches; the proportion of deposits from this avenue is around one fifth of total deposits. The bank, in line with peers, has been able to achieve reduction in overall cost of deposits.

On account of growth in advances and a decline in non-performing loans, asset quality indicators improved during the outgoing year. Fresh infection was witnessed during 1Q14; it has been partly regularized subsequently. Interest rate risk arising from the investment portfolio has increased as the bank has built considerable exposure in long term PIBs.

Implementation of the new core banking system (CBS) has been validated by a Business Process Improvement (BPI) exercise being carried out by the bank; as per the management, CBS will go live in 2015. The position of Managing Director has remained vacant since an extended time.

For further information on this rating announcement, please contact Ms. Sobia Maqbool, CFA at 021-35311861-70 or Mr. Maimoon Rasheed at 042-36610681-84.

Abdur Rahim

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 2014 VIS Credit Rating Company Limited . All rights reserved. Contents may be used by news media with credit to VIS .