PACRA Maintains Entity Ratings of Soneri Bank Limited

The ratings reflect Soneri Bank’s stable leadership since the inception of the bank along with its maintained business profile. Over the years, the system share of the bank in terms of deposits has largely remained intact (end-Dec22: 1.6%, end-Dec21: 1.7%). The bank was working on the composition of the deposit base and also improving its cost structure. During CY22, SNBL’s customer deposits observed growth of 6%, where CASA recorded further improvement (CY22: 79.2%; CY21: 69.8%) with greater contribution from CA (CY22: 32.7%; CY21: 27.2%). The advances book reflected an increase, subsequently, the infection ratio declined (CY22: 4.7%; CY21: 5.9%). The NIMR of the bank witnessed an improvement (CY22: PKR 11.2bln; PKR 10.9bln). Higher reversals recorded have supplemented the profitability. The increase in the overall cost structure has caused the net profitability of the bank to decline (CY22: PKR 1.9bln; CY21: PKR 2.8bln). Consequently, the spread remained stagnant (CY22: 2.6%; CY22: 2.6%). The Bank has expressed an intention to improve its NPL coverage. There is an improving trend expected as the bank closes the ongoing year. During 1QFY23, the net profitability of the bank recorded a sizable improvement to PKR 1.48bln. Going forward enhanced deposit mobilization will remain vital in maintaining system share. Sustainability in net markup income & non-markup income and continued enhancement in non-fund-based exposure is important for future years. Going forward, the strategy is to strengthen the existing good relationships and digital platform by offering various unique solutions to its customers. At end-Mar23, the total CAR of the bank stands at 14.8% (end-Dec22: 15.2%) with the Tier I ratio clocking in at 12.6% (end-Dec22: 12.9%), reflecting an adequate cushion for growth. The bank issued Tier-II TFC (PKR 4,000mln) in CY22, which enhanced its capital base, thereby boosting its lending capacity. The country’s economy has gone through several varied phases in the last few years. Looking ahead, the macroeconomic landscape is fraught with numerous challenges, including political instability, elevated interest rates, demand tightening, sizable rupee depreciation, and heightened inflation, all of which reverberate across all sectors of the economy.
The rating is a function of the bank's ability to maintain its market position in the banking industry while strengthening its overall risk profile. Bringing efficiency to the operational structure is important for long-term growth. In the comparative landscape, adding granularity to deposits and advances is critical. Meanwhile, a sustainable increase in system share and consequent profitability would be ratings positive.

About the Entity
SNBL, established in 1991, operates with a network of 403 as of end-Dec22 (end-Dec21: 367) branches across the country. The Bank’s primary sponsors are the Feerasta Family who collectively own a majority share in SNBL. The Feerasta Family has diverse commercial interests ranging from manufacturing, exporting, banking, and trade financing. The overall control of the bank vests with an eight-member Board of Directors (BoD) comprising four non-executive directors, three independent directors, and one executive director (CEO). Three of the Board members are nominees of the Feerasta family while one is an NIT representative. Mr. Alauddin J. Feerasta is chairman of the board. Independent directors on the Board are Ms. Navin Salim Merchant, Mr. Jamil Hassan Hamdani, and Mr. Tariq Hafeez Malik.