Press Release

VIS Upgrades Entity Rating of The Bank of Khyber

Karachi, June 30, 2021: VIS Credit Rating Company Limited (VIS) has upgraded the medium to long-term entity rating of The Bank of Khyber (BoK) from ‘A’ (Single A) to ‘A+’ (Single A Plus) while maintaining short-term rating at ‘A-1’ (A-One). The medium to long-term rating of ‘A+’ denotes good credit quality, with adequate protection factors. Moreover, risk factors may vary with possible changes in the economy. The short-term rating of ‘A-1’ denotes high certainty of timely payment, liquidity factors are excellent and supported by good fundamental protection factors. Outlook on the assigned rating is ‘Stable’. The previous rating action was announced on June 30, 2020.

The ratings assigned to BoK reflect its shareholding structure, as majority stake is held by the Government of KPK. The ratings draw comfort from bank-wide rollout of Temenos T-24 core banking system, increase in advances portfolio, and notable improvement in profitability led by higher net markup income and gain on sale of government securities. Underpinned by the implementation of core banking system, BoK plans expansion in branch network in order to further grow size of its loan book. In accordance with the COVID-19 relief program of the State Bank of Pakistan, the bank deferred/rescheduled around 10% of advances portfolio by March 31, 2021. Due to some industry-wide incidences of fresh infection, accretion in NPLs was observed during the year; however provisioning on the same is adequate and recovery efforts are underway. Going forward, the bank plans to deepen its business relationship with existing corporate clients, add blue-chip clients, and reduce some exposure in commodity financing due to volatility in business and competitive rates. Moreover, the bank intends to enhance its focus on consumer financing including salary loan for KPK government employees, and SMEs supported by upcoming government schemes, to improve markup spreads while increasing focus on trade finance.

BoK exhibited notable increase in profits despite prudently recording an additional general provisioning in respect of potential credit losses. While liquid assets in relation to total deposits & borrowings have decreased slightly, overall liquidity profile of the bank is considered adequate. Advances-to-Deposit ratio was recorded slightly higher at end-FY20. Contribution of top-50 deposits in overall mix is considered on the higher side and granularity is required to mitigate concentration risk. VIS will continue to monitor the bank’s plan to shed high-cost deposits to improve markup spread which currently stands below industry average. Capital Adequacy Ratio (CAR) of the bank is supported by major exposure in government commodity financing; replacement of the same with private lending may lead to increase in risk weighted assets and thereby decrease in CAR. The process for appointment of a new MD/CEO is currently underway and is expected to be completed soon.

For further information on this rating announcement, please contact Syed Fahim Haider at 042-35723411-13 (Ext: 8006) or the undersigned at 021-35311861-70 (Ext. 306) or email at info@vis.com.pk




Faryal Faheem Ahmed
Deputy CEO
Applicable rating criterion: Commercial Banks - June, 2020
http://www.vis.com.pk/kc-meth.aspx

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 2021 VIS Credit Rating Company Limited . All rights reserved. Contents may be used by news media with credit to VIS .