Press Release

JCR-VIS Reaffirms Entity Ratings of The Bank of Khyber

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Karachi, June 29, 2017: 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). Outlook on the assigned ratings is ‘Stable’. The previous rating action was announced on June 28, 2016.

The ratings assigned to BoK take into account its shareholding structure with the bank being majority owned by Government of KPK. In addition to being the primary shareholder, Government of KPK has also placed sizeable deposits with the bank which have remained stable over the years.

Growth in the advances portfolio during the ongoing year is attributable to commodity related financing. Advances to deposit ratio of the bank continue to remain lower in comparison to industry trends. The bank aims to aggressively increase its advances portfolio by focusing on infrastructure related projects while proportion of consumer lending is also projected to increase. Asset quality indicators of the bank have remained intact.

Investment portfolio primarily comprises government securities. Credit risk arising from the same is considered to be minimal in the local context; however the same is exposed to interest rate risk, this is accentuated given the high proportion of investments in asset mix. Spreads of the bank have declined owing to continued low interest rates and lower proportion of advances in earning assets. Profitability of the bank continues to receive impetus from treasury operations.

Deposit base posted healthy growth during the outgoing year. Deposit mix reflected less than desirable changes with declining share of CASA. The high level of liquidity carried on balance sheet mitigates the risk associated with high deposit concentration. Going forward, the bank may need to review its assets mix to improve long term profitability and balance the credit and interest rate risk.

Strengthening of senior management team bodes well to achieve the strategic objectives of the bank. The implementation of replacing bank’s existing software with a new Core Banking System ‘Bank Essential’ is under process; management expects major rollout of the system by end-2017. Effective implementation of BE will enable real time connectivity across all branches, strengthen controls and enable introduction of new services.

For further information on this rating announcement, please contact the undersigned at 021-35311861-70 (Ext: 234) or Mr. Waqas Munir, FRM at 042-35723411-13 (Ext: 8010).

Javed Callea

Applicable rating criterion: Commercial Banks Methodology - November 2015

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 2017 VIS Credit Rating Company Limited . All rights reserved. Contents may be used by news media with credit to VIS .