PESHAWAR, Nov 28: The large size of the Bank of Khyber’s classified portfolio is a cause of concern for the provincial government and its major lending agency, official sources said.
According to an official document available with Dawn, the bank’s non-performing loans stood at Rs2.8 billion by August last. The classified portfolio made 46 per cent of the total amount the bank had extended in advances to its clients by August last.
“The ratio (46 per cent) is alarming for a bank as small as the Bank of Khyber,” said a senior banker, adding: “The ratio of non-performing loans to advances by no means should be more than 10 or a maximum of 20 per cent for any bank”.
Set up under the provincial assembly’s Bank of Khyber Act, 1991, with explicit objectives to encourage and promote industrial and agricultural investments in the province, the provincial public sector entity’s total advances come to around Rs6.5 billion of which an amount of Rs2.8 billion was declared as classified portfolio by August last, after the borrowers failed to fulfil conditions of their respective loan agreements.
Acknowledging that the ratio of non-performing loans to advances was on the high side, the BoK’s newly inducted Managing Director Dr Munir Ahmed Khan claimed that the actual ratio was less than 46 per cent shown in the official documents of the bank.
He said the issue had been taken up with SBP Governor Dr Ishrat Hussain, who had been requested that the BoK’s documents needed to be corrected following which the actual figure of non-performing loans to advances would be calculated.
However, the provincial government’s documents provided recently to the World Bank in connection with a loan agreement also reflected the size of BoK’s classified portfolio at Rs2.8 billion, making 46 per cent of the total amount the bank has extended in advances.
A document recently compiled by the World Bank on the provincial government’s performance viz-a-viz implementation of the provincial reforms programme also contained that the large size of BoK’s classified portfolio was a cause of concern.
“The bank’s large non-performing loan portfolio is a cause of concern, however, the management is pursuing the defaulters particularly the large two fishing conglomerates through all available avenues,” contained the World Bank report.
Reviewing the bank’s performance in its report, the World Bank noted: “The bank (BoK) suffered when deviated from its objectives and lent to two large fisheries in Karachi under SBP’s Export Refinance Scheme.”
Both the fisheries — extended a loan of Rs1.2 billion, making 20 per cent of the total amount the BoK has extended in advances — defaulted after failing to materialize their export deals.
It was only last year when the bank managed to record profit — for the first time since it started operations about ten years back.
The after-tax profit recorded by the BoK in the 2002 stood at around Rs140 million, whereas, the pre-tax profit was calculated to be around Rs200 million.