Fitch also said that although the banking sector's margins have tightened, PABC's yields on its target market were high.
The increased capital in the bank's funding mix enabled its net interest margins to increase to 6.
2 percent in FY07 from 5.3 percent in FY06.
The bank's return on assets increased to 1.
5 percent in FY07 from 1.4 percent in FY06.
Fitch said it notes that PABC's lending profile continues to be mainly to small and medium-sized entities and retail customers in the sub-prime category.
"Credit concentrations remained high in the export-import and wholesale trading sectors," it said.
Loans to these sectors accounted for half of loans.
"Given that most loans were overdrafts and largely cash-backed, interest rate mismatches were on the whole better than the sector average," Fitch said.
PABC has added eight branches to its network of 29 branches and customer centres.
The agency said in a statement the rating reflects the bank's improving capitalisatio