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.
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