Commercial Banks: THE BANK OF KHYBER - Year Ended December 31, 2005 (Audited)
The Bank of Khyber (Khyber Bank), the premier provincial bank, was established under "The Bank of Khyber Act 1991" for conducting banking business within NWFP and was formally launched on November 1, 1991. Its first branch commenced commercial operations at University Road, Peshawar on December 22, 1991.
Khyber Bank was given by the State Bank of Pakistan the status of a schedule bank in 1994, which enabled it to open branches outside NWFP, become a member of the clearing house, and to engage in trade finance activities directly throughout the country. JRC-VIS has maintained the medium to long term entity rating of the bank at "BBB" (Triple B) with "Stable" outlook and the short term rating at "A-2" (A Two). The bank had 370 permanent employees as on December 31, 2005 (2004: 360).
The number of Khyber Bank branches as at December 31, 2005 was 29 branches (2004: 29) including four Islamic Banking branches. According to the notes to the financial statements, the financial results of the Islamic Banking Division have been consolidated in these financial statements for reporting purposes. The balances of the Islamic Banking Division as on December 31, 2005 were as follows: (i) Islamic Banking Fund Rs 150 million; (ii) Murabaha financing Rs 1,748 million; (iii) Deposits Rs 1,208 million; and (iv) Profit before tax for 2005 Rs 32.8 million. The Directors in their Report state that the bank aims to grow geographically in future and fully geared up to convert into a full fledged Islamic Bank in the near future.
All the directors of the bank are the nominees of the government of NWFP. The NWFP government originally controlled 87 % of shares, the remaining 13 % shares were owned by a German institution, DEG. The bank was provisionally listed on the Karachi Stock Exchange (KSE) following the issuance of a prospectus on December 30, 2005 for public subscription of shares. The bank offered 41.1 million shares to public at a price of Rs 15/- per share inclusive of Rs 5/- as share premium on January 25-27, 2006. The shares were oversubscribed by more than seven times. Khyber Bank shares are now traded on KSE at around Rs 25.70 per share, at 150% of the book value of Rs 17.19 per share as on December 31, 2005.
As on December 31, 2005, authorised capital of Khyber Bank was Rs 2.5 billion, comprising 250 million shares of Rs 10 each, of which paid up capital is Rs 1.231 billion. For 2005, the issuing of Rs 360 million bonus shares has been recommended for consideration in the next AGM. Also, there is a proposal to raise the authorised capital to Rs 3 billion. According to BSD circular No 12 dated August 25, 2004, Khyber Bank was required to raise its share capital to Rs 2,000 million by December 31, 2005. On Khyber Bank's request, the SBP has reportedly extended the period of compliance with the aforementioned requirement till March 31, 2006. The public offer of shares and the issue of bonus shares will raise the paid up capital beyond Rs 2 billion and the bank will be in compliance with the SBP requirements.
Total assets of Khyber Bank increased by 5% to Rs 25 billion on December 31, 2005 compared to Rs 23.8 billion on December 31, 2004. Increase in assets has been financed through increase in Deposits and retention of profits. As on December 31, 2005 Investments increased by 10% to Rs 7.6 billion (30% of Total Assets) compared to Rs 6.9 billion (29% of TA) as on December 31, 2004. Of the total, Khyber Bank has rather high investments in Available for Sale Securities 72% (2004: 68%). The bank owns 33.3% of the shares of Taurus Securities Limited which is an associated company.
Khyber Bank activities include financing of long-term projects, micro-business and rural development which in a way distinguish it from other commercial banks. It has arranged several lines of credit from international agencies such as DEG, ADB, KfW and IFAD for the Rural Development in NWFP.
Its Advances as on December 31, 2005 were Rs 10.6 billion (42% of Total Assets), registering 18% increase over previous year Advances at Rs 9 billion (38% of TA). All the Advances are in local currency. Of the total Advances on December 31, 2005, 58% are for short term (2004: 66%). Major exposure of the bank is in Agribusiness (12%), Services (12%), Fisheries (3.5%) and Others (72%).
The bank's equity (including Rs 0.4 billion Surplus on Revaluation of Securities) as on December 31, 2005 stands at Rs 2.5 billion (10% of Total Assets) whereas gross NPLs on this date were Rs 2.869 billion (24% of Gross Advances). Khyber Bank has made full provision (Rs 1.543 billion) against Gross NPLs according to the SBP criteria applicable on December 31, 2005. The notes to the financial statements provide that NPLs aggregating Rs 1.075 billion (2004: Rs 0.794 billion) have been forwarded by Khyber Bank to the National Accountability Bureau for settlement and recovery against which a provision of Rs 0.678 billion (2004: Rs 0.474 billion) is being carried in accordance with the prudential regulations of the SBP.
Khyber Bank achieved just 9% increase in its profit after tax for the year ended December 31, 2005 to Rs 0.288 billion as compared to Rs 0.264 billion for the last year. This has happened partly due to lower relative contribution of net mark up income this year. For 2005 it was only 38% of total mark up income compared to 55% for the previous year. ROE at nearly 14% for the year is at the level of the last year. Performance statistics are given below.
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Performance Statistics
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Balance Sheet (Audited) (Rs million)
As on Dec. 31, 2005 2004
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Total Assets: 25,034 23,825
Cash, balances with banks: 4,129 2,445
Lending to financial institutions: 1,552 4,120
Investments-Net: 7,623 6,927
Advances-Net: 10,612 9,001
Borrowing from fin. Institutions: 4,374 4,180
Deposits, other accounts: 17,452 15,832
Total Liabilities: 22,514 21,644
Net Assets: 2,520 2,181
Share Capital: 1,231 1,231
Reserves, Un-app. Profit: 885 597
Total Equity: 2,116 1,828
Surplus on Revalue, securities: 404 353
Equity incl. Revalue Surplus: 2,520 2,181
Subordinated Loan: 0 0
Equity and Sub. Loans: 2,520 2,181
Advances-Gross: 12,155 10,311
Gross NPLs: 2,869 2,809
Total Provision: 1,543 1,310
Conting. & Commitments: 6,582 4,692
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Ratios:
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Cash and bank/Total Assets: 16% 10%
Investments/Total Assets: 30% 29%
Advance-Net/Total Assets: 42% 38%
Gross NPLs/Advances-Gross: 23.6% 27.2%
NPLs/Total Equity: 136% 154%
NPLs Prov./Advances-Gross: 12.7% 12.7%
Deposits/Total Assets: 70% 66%
Total Liabilities/Total Assets: 90% 91%
Total Equity/Total Assets: 10.1% 9.2%
Equity & S.Loans/Total Assets: 10.1% 9.2%
Deposits/Equity-Times: 8.2 8.7
Advances/Deposits: 61% 57%
Investments/Deposits: 44% 44%
Contin.& Comm./Equity-Times: 3.11 2.57
Book Value Per Share: 17.19 14.85
Quoted Price (31-03-06) - Rs: 25.70 -
Price/Book Value Ratio: 1.50 -
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Income Statement 2005 2004
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Markup-interest earned: 1,453 937
Markup-interest expensed: 908 417
Net Markup-interest income: 545 520
Provisions and write offs: 230 237
Net mark up after provisions: 315 283
Total non-markup income: 354 305
Total Income before Admn. Exp.: 669 588
Admin Expenses, etc: 363 302
Profit before Taxation: 324 299
Current & deferred tax: 36 35
Profit after taxation: 288 264
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Ratios: (Annual Basis)
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Markup earned/Total Assets: 5.8% 3.9%
Net Markup Income/T Assets: 2.2% 2.2%
Net markup income (Prov.)/TA: 1.3% 1.2%
Non-Markup Income/TA: 1.4% 1.3%
Total Income bef. Admn/TA: 2.7% 2.5%
Admin Expenses/TA: 1.5% 1.3%
Profit before Taxation/TA: 1.3% 1.3%
Profit after taxation/TA: 1.2% 1.1%
Profit after tax/Total Equity: 13.6% 14.4%
EPS- (year-end paid up) - Rs: 2.34 2.14
Price/Earnings Ratio: 10.98 -
Cash Dividend: 0% 0%
Bonus Shares: 22% 17%
Cash flow Summary 2005 2004
Net Cash flow, Operations: 2,306 -2,896
Net Cash flow, Investing: -622 2,527
Net Cash flow, financing: 0 0
Change in Net Liquidity: 1,684 -369
Net Liquidity at beginning: 2,445 2,814
Net Liquidity at end: 4,129 2,445
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COMPANY INFORMATION: Chairman: Ghulam Dastagir Akhtar; Managing Director (Acting): Qazi Munir-ul-Haq; Director: Zia-ur-Rehman; Auditors: A.F. Ferguson & Co, Chartered Accountants; Company Secretary & CFO: Abdul Majid Alvi; Legal Advisors: 1- Nisar Ahmad Khan, Advocate, Peshawar; 2- M/s Mohsin Tayebaly & Co Karachi; Head Office: 24-The Mall, Peshawar Cantt., NWFP, Pakistan; Web Address: www.bok.com.pk
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