The upgrade reflects the consistent improvement in the bank''s core profitability, asset quality and economic capitalisation in the recent years, exerting positive pressure on the FSR. Moody''s notes that the bank has been benefiting from a buoyant economic situation in Pakistan characterised by high credit growth.
NBP''s growing asset base has meant a higher earning capacity for the bank. The revised FSR takes into account the increasing recurring earnings and enhanced bottom-line profitability that NBP has demonstrated over the last few years on the back of enhanced net interest income as well as fees and commissions, Moody''s said.
NBP has also been able to improve its efficiency by containing operating expenses, despite the significant asset growth in recent years. As a result, NBP''s profitability and efficiency indicators are now comparable with those of higher-rated peers. The growing emphasis given to tackling the problem of non-performing loans (NPLs) has also proved fruitful for the bank. Asset quality has been steadily improving through recoveries of NPLs and increased provisioning levels.
Moody''s notes that the large volume of uncovered NPLs that had in the past threatened the bank''s solvency is no longer a credit concern. NBP''s economic capitalisation has been supported by retained earnings as well as reserves and is now at satisfactory levels. A more diversified business and credit risk profile combined with increasing modernisation and restructuring of the bank in recent times have also been factors exerting upward pressure on the FSR. Personal loans to the government employees is a focus for growth, being a captive segment for NBP given its role as the government''s treasury bank.
National Bank of Pakistan is headquartered in Karachi and had total assets of Rs 536.5 billion ($9 billion) at the end of September 2005.