PACRA Maintains Entity Ratings of Soneri Bank Limited

The ratings reflect the astute leadership of Soneri Bank’s (or the "Bank"). This has been the driving force behind the bank's sustainable business profile over the years. The Bank has increased its deposit share and the bank is working on the composition of the deposit base and also improving its cost structure. During CY23, SNBL’s deposits observed growth of ~27%, where CASA was recorded 79% at the end of CY23 (CY22: 79%) with greater contribution from SA and Term deposits. While the contribution of the Islamic side in the total deposits stood at 8.3%. The Bank is also focusing on enhancing overall branch network to remain at a competitive advantage relative to its peers. The advances book reflected a slight decrease resulting decline in the ADR reported at 40% (CY22:51%). While the NPL coverage stood at 81% with the infection ratio inclined to 5.1% (CY22: 4.7%). The Bank is primarily invested in textile, wholesale trade, food & allied, and power. The investment book of the Bank increased by 20% wherein the investment in government securities comprising 98.7% of the total book. These investments are majorly in floater PIBs while the fixed book would be matured from Sep'24 onwards.
The net profitability of the Bank increased by 2.2x majorly on account of a double increase in the net markup income. During CY23, the high interest rate environment supported the core profitability of the Bank. However, going forward, amid further rate cuts in addition to the recent rate cut, compression in the net interest margins is expected: revenue from the non-core income would be a supporting factor. To cater to this, the Bank is already strengthening its footprints in the trade business. Additionally, there has been a notable increase in the trade volumes managed by the Bank. As represented by the management, the Bank is enjoying a market share of 6% in the trade business. Moreover, the Bank has shown enhanced efficiency ratios compared to CY22. The Bank's equity increased to PKR 29bln (CY22: PKR 21bln) and its Capital Adequacy Ratio (CAR) stood at 18.4% as of Dec23, (CY22:15.2%). 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 are important for future years. Further, the strategy is to strengthen the existing good relationships and digital platforms by offering various unique solutions to its customers.
Bringing efficiency to the operational structure is important for long-term growth. 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 443 as of end-Dec23 (end-Dec22: 403) 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. Amin A. Feerasta is the newly appointed chairman after the sad demise of late Mr. Allaudin J. Feerasta this year. Independent directors on the Board are Ms. Navin Salim Merchant, Mr. Jamil Hassan Hamdani, Mr. Tariq Hafeez Malik.