Karachi, VIS Credit Rating Company Limited (VIS) has reaffirmed the National Bank of Pakistan's (NBP) ratings at 'AAA' for the medium to long term and 'A-1+' for the short term, underscoring the bank’s robust credit position and operational stability.
According to VIS Credit Rating Company Limited, the ratings reflect NBP's significant domestic presence and its critical role in handling treasury transactions for the Government of Pakistan as an agent to the State Bank of Pakistan. The bank exhibited a solid performance in 2023, with an asset base expansion slightly lower than the industry's year-on-year increase, primarily due to growth in investment holdings while the credit uptake across the sector remained subdued. Deposits grew more rapidly than the sector average, enhancing NBP’s market share from 11.9% in CY22 to 13.2%.
NBP's Non-Performing Loans (NPLs) increased by December 2023; however, a larger volume of corporate lending, which traditionally bears a lower infection rate, helped contain the overall infection levels. The implementation of IFRS-9 in early 2024 led to higher reserves for Expected Credit Losses (ECL), bolstering provisioning coverage and mitigating potential asset loss risks. The bank’s international exposures, however, make its portfolio trends vulnerable to currency valuation changes.
Investment activities saw a marked increase by the end of December 2023, with federal government securities making up approximately 95.2% of total investments, ensuring a low-risk credit profile. About 80% of the bank’s Pakistan Investment Bonds (PIBs) were in floating-rate securities, and the average duration of the investment portfolio was kept under a year, reducing market-to-market loss risks.
Profitability at NBP improved in 2023, driven by higher net markup and non-markup income. Despite rising administrative expenses due to inflationary pressures, the bank’s efficiency ratio improved due to a relatively greater increase in recurring income compared to recurring expenses. With a Capital Adequacy Ratio (CAR) rising to 25.5% by December 2023 and slightly dipping to 24.6% by March 2024, NBP’s financial outlook remains favorable. The bank’s CAR significantly exceeds regulatory requirements, and the quality of capital remains robust, with tier-1 capital making up 75.4% of the total capital.