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Pakistan Credit Rating Agency Limited revises ratings of KASB Bank Limited

Lahore: PACRA has revised the long-term and short-term entity ratings of KASB Bank to “BBB” (Triple B)and “A3″ (A Three) [Previous: A-/A2] respectively. The ratings denote an adequate capacity of timely payment of financial commitments.

The ratings reflect deterioration in the bank’s risk absorption capacity, a consequence of less than adequate level of capitalization, and high level of infected loans. Moreover, drag of non earning assets (NPLs and strategic equity investments) coupled with low spreads are making it difficult to overcome ensuing business losses.

Nevertheless, the bank carries an adequate liquidity profile and its deposit mix is changing in favor of stable current and saving accounts. The ratings incorporate recent equity injection (~PKR 3,000mln), which is expected to support the bank’s financial profile, though the impact would be limited.

The management has devised a detailed plan which interalia includes a) bringing additional equity of US$50mln, b) reduction in infected portfolio by accelerating the recovery process, c) mobilizing stable yet low cost deposits, and d) divestment of key non earning assets.

In PACRA’s opinion timely materialization of these initiatives is critical. Nevertheless, the ratings draw comfort from the vigilance and pro-activeness of the apex regulator – SBP.

The outlook on the ratings remains negative highlighting the urgency to timely arrest the weakening profile. Meanwhile, garnishing the bank’s franchise and achieving profitability from core business operations remain critical.

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

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