KARACHI: JCR-VIS Credit Rating Company Limited (JCR- VIS) has reaffirmed the entity rating of The Bank of Khyber (BoK) at 'A/A-1' (single A/A-One).
According to a report released on Thursday the "Outlook" on the assigned rating has been described to 'Stable.
Mentioning that the previous rating action was announced on June 28, 2016, the report compilers said Growth in the advance portfolio during the ongoing year is attributable to commodity related financing.
Ratings assigned to BoK take into account its shareholding structure with the bank being majority owned by Government of KPK.
Advances to deposit ratio of the bank was said to had remained lower in comparison to industry trends while asset quality indicators of the bank also remained intact.
The bank was cited to focused on aggressively increasing its advances portfolio with all attention towards infrastructure related projects while proportion of consumer lending was also projected to increase.
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 as 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 objective 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 Bank Essential was said to enable real time connectivity across all branches, strengthen controls and enable introduction of new services.