Press Release

VIS Reaffirms Entity Ratings of The Bank of Khyber

Karachi, June 30, 2022: VIS Credit Rating Company Limited (VIS) has reaffirmed the entity ratings of The Bank of Khyber (BoK) at ‘A+/A-1’ (Single A Plus/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, 2021.

The ratings assigned to BoK reflect its shareholding structure as majority stake is held by the sub-sovereign, the Government of KPK. The ratings are underpinned by Bank wide roll-out of core banking system coupled with ongoing branch network expansion plans to improve geographical footprint. The ratings take into account the impact of upward and downward movement in net worth and profitability in the last two years due to higher one-off gain on investments in CY20 which turned into loss, albeit small in CY21 and high operating expenses in the outgoing year on account of branch network growth and capacity building. Given incidence of fresh infection and weakening of asset quality indicators on account of impaired repayment capacity of businesses and obligors remains a key concern from ratings perspective. Focus on recouping the provisioning coverage going forward would be important. This is expected to be facilitated from management expectations of recovery from some large delinquent clients. VIS has been given to understand that the management has developed and started implementation of strategy for reduction of NPLs and improvement of portfolio quality; the outcome of the same will be ascertained over time.
As per medium-term strategy, the Bank plans to deepen its business relationship with existing corporate clients, add new blue-chip clients with rigorous efforts to increase trade and government-backed SME business. Moreover, special focus is expected to be placed on home remittance business for channeling forex through the formal sector; the same is expected to be aided through broadening of product suite and further supported through the digital banking platform. The ratings reflect elevated level of market risk exposure on account of sizable buildup of investment portfolio during the rating review period. While a sharp reversal in interest rates is unlikely at this point in time, proactive market risk management remains important in order to address any market risk therein.
The ratings reflect adequate liquidity profile of the bank in line with increase manifested in investment portfolio, sizable deposit mix and considerable proportion of liquid assets in terms of deposits & borrowings. However, given market conditions, managing asset-maturity mismatch would be challenging, going forward. Concentration risk on the liability side exhibited an improving trend as the contribution of top 50 depositors decreased on a timeline. The largest deposit pertained to government of KPK; however, this high-cost deposit is expected to be slightly tapered off to alleviate pressure on spreads. The ratings take into account the timeline lowering in Capital Adequacy Ratio (CAR) of the bank on account of increase in market risk weighted assets and dividend payouts. The Bank however has opted for bonus shares issue for FY-2021 to shore up the capital. Optimizing risk weighted assets growth would remain a key rating driver. The ratings remain dependent on managing CAR buffers aligned to the assigned ratings, improving asset quality indicators amidst growth strategy and market risk management on investment portfolio.

For further information on this rating announcement, please contact Ms. Maham Qasim (042-35723411-13, Ext. 8010) and/or the undersigned at 021-35311861-66 (Ext. 207) or email at

Javed Callea

Applicable rating criterion: Commercial Banks Methodology - June 2020

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