Lahore, November 17, 2014 (PPI-OT): The State Bank of Pakistan, in a recent action, has placed KASB Bank under moratorium for 6 months. The bank is restricted to allow withdrawal of up to PKR 300,000 from any deposit account. With government securities and cash of ~PKR 28bln at end-Sep14, KASB bank has resources to meet such deposit calls.
However, on an overall basis, the bank is now constrained in terms of its operations and meeting its obligations. Meanwhile, it is stated that during this period SBP would consider reconstruction or amalgamation of the bank.
The Pakistan Credit Rating Agency (PACRA) downgrades the short-term rating of KASB Bank to ‘C’ (previous: A3). This rating indicates an inadequate capacity to ensure timely payments. The long-term rating has been downgraded to ‘B’ (previous: BBB).
This, while reflecting the limited margin of safety against credit risk, captures the possibility of emergence of a viable option within moratorium period to achieve minimal eventual loss to depositors. The outlook on the ratings remain negative and these would be kept under watch. These may go down further if a meaningful reconstruction or amalgamation is not achieved in the targeted period.
KASB Bank, with negative rating outlook, has been amongst the lowest rated banks in Pakistan since long. The bank is characterized by small size (less than 1% share in banking deposits), sizeable impaired assets including NPLs (~15% of total assets at end-Sep14), and relatively high operating costs.
This has led to recurring losses resulting in significant equity erosion – negative CAR and nominal equity of ~PKR 01bln at end-Sep14. The bank had capital infusion in the past (~PKR 04bln since Jan11), but this remained inadequate. The sponsors were facing delays in finding a solution in the form of a new equity partner or amalgamation with another bank.
The Bank: KASB Bank Limited, incorporated in October 1994, was acquired by KASB group in October 2002. KASB Group has a portfolio of investments, though majority of these are under strain.
KASB Bank is majority owned by KASB Corporation (84%) which, in turn, is jointly owned by Asia International Finance Company Limited (AIFC) – owned by a Chinese national – and KASB family. The bank’s board currently has six members including the CEO. The Chief Executive, Mr. Bilal Mustafa, a seasoned banker, joined in 2013. The bank is operating with a network of 105 branches.
For more information, contact:
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
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