Pakistan Credit Rating Agency maintains Ratings of Khadim Ali Shah Bukhari Bank

Lahore, July 23, 2012 (PPI-OT): The Pakistan Credit Rating Agency (PACRA) has maintained the long-term and short-term entity ratings of KASB Bank at “BBB” (Triple B) and “A3″ (A Three) respectively. The ratings denote an adequate capacity of timely payment of financial commitments. Meanwhile, these ratings are assigned a positive outlook.

The ratings of KBL recognize joint efforts of the sponsors and the management to prevent continuing pressure on financial profile of the bank. The management has been working on a multi-pronged strategy, including, i) focusing on transactional banking, both local and international trade accounts, thereby mobilizing low-cost deposits, though their long-term stability is yet to be tested, ii) reduction in infected portfolio by accelerating the recovery process, iii) adopting selective lending approach while investing new funds majorly in low-risk government securities, iv) focusing on non-fund based revenue streams and v) divesting key non-earning assets.

All these initiatives are likely to contribute fairly towards turnaround in bottom-line performance. Meanwhile, weak capitalization, subdued profits, and limited franchise value continue to plague KBL’s profile. The ratings draw comfort from the vigilance and pro-activeness of the apex regulator – SBP.

The positive outlook highlights a) the firm commitment of the key sponsor to provide requisite funds to the bank to improve its capitalization through acquisition/merger opportunities available in the market, and b) the breathing space provided by low cost transactional deposits to equity erosion, wherein the bank can channelize its strategy. In PACRA’s opinion timely materialization of these initiatives is critical. At the same time sustainability of recent improvement in performance remains important.

For more information, contact:
Hammad Rashid
Analyst
The Pakistan Credit Rating Agency Limited (PACRA)
Awami Complex, FB1, Usman Block New Garden Town,
Lahore – Pakistan
Tel: +9242 586 9504 -6
Fax: +9242 583 0425
Email: hammad.rashid@pacra.com
Web: www.pacra.com