PESHAWAR, Feb 24: The JCR-VIS Credit Rating Company Limited has upgraded the rating of the Bank of Khyber (BoK) for showing better financial management and operations in 2006.

BoK chief executive officer Syed Iqbal Ashraf told Dawn on Saturday that credit rating agency last week upgraded the rating of the bank to BBB+ or A-2, describing its outlook as 'stable'.

As per the State Bank of Pakistan guidelines every bank is required to get its ratings assessed at least once a year to forecast the financial position of the bank for one to three years.

The rating agency has noted that the bank has improved its asset quality indicators, Mr Ashraf said.

He said the BoK management was in the process of increasing its paid-up capital to Rs4.5 billion by April 2007, surpassing the yearly target of minimum capital requirement (MCR) set by the SBP.

Under the right issue, he pointed out, 24 per cent shares of the NWFP government would be offered to the existing shareholders of the bank and then underwriters could purchase it.

The move will reduce the NWFP government shareholding in the bank to 51 per cent from the existing 65 per cent, resulting in the reconstitution of the board.

The rating agency has termed the move a positive sign and observed that it would double its paid-up capital, allowing the bank to be compliant with the minimum paid-up capital requirement. It has pointed out that this would also allow the bank to pursue active business growth and increase risk assets.

The World Bank has been asking the provincial government to curtail its shareholding in the BoK for the last couple of years.However, the rating agency has cautioned that the bank continues to face challenges from other banks that have significantly enhanced their network in the NWFP.

"We have devised an effective strategy to make the bank a competitive entity by expending its operational network in the province," Mr Ashraf maintained.

“The bank is also in the process of expanding human resources at all levels, which is expected to continue over the next two years,” he added.