The Pakistan Credit Rating Agency Limited
Press Release


Madiha Sohail

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PACRA Maintains Rating of Samba Bank Limited | PPTFC - Tier II

Rating Type Debt Instrument
(20-May-22 )
(21-May-21 )
Action Maintain Initial
Long Term AA- AA-
Short Term - -
Outlook Stable Stable
Rating Watch - -

Samba Bank ("SBL" or the "Bank") has a healthy Capital Adequacy Ratio (“CAR”) (Dec21: 20.2%, Dec20: 18.2%). This reflects the impeccable risk absorption capacity, which is integral to the rating. Total Income increased by 14.6% by the end Dec'21. This increase was attributable to increase in net markup income by 16.4%. The Bank recorded net profit of PKR 789mln at the end of year, Dec'21 declining by 22% from last year majorly on account of increased provisioning against advances. The bank has continued its efforts to improve low-cost deposit mix by mobilizing medium to small ticket deposit. The cost of deposits has been restricted at 4.9% by the end Dec'21. The deposit base of the Bank has slightly improved and standing at PKR 79bln at the end Dec'21. With the issue of TFC-TIER II, the bank intended to augment its growth in high-yielding lending segments. Samba Bank Limited is a majority owned subsidiary of Saudi National Bank (SNB) of KSA with a shareholding of 84.51%. The SNB is the largest Bank in the KSA, formed as a result of acquisition of the SBL’s former parent Samba Financial Group (SFG) by the National Commercial Bank (NCB) of Saudi Arabia. As the part of strategic review initiated by SNB, the parent has concluded that it will continue to retain its existing equity stake in SBL.
The risk metrics and the compliance ratios are well in range and further adherence will be important. The rating is dependent on the Bank's sustained risk profile. In the wake of heightened competition, profitable growth while retaining the relative positioning in the industry will be a challenge. The equity base of the bank is satisfactory.

About the Entity
Samba Bank Limited, operates with a network of 44 branches at end-Dec-21. Samba Bank has a 0.42% share in the banking industry’s deposits. The Bank’s Board of Directors comprises qualified and experienced professionals. Mr. Shahid Sattar, President & CEO of the Bank, has been associated with the Bank since 2013. He is backed by the executive team of seasoned banking professionals, most of whom have a long association with the bank.

About the Instrument
The instrument was issued in March 2021. The amount of the instrument is of PKR 5,000mln and priced at 6MK plus 135bps p.a. payable semi-annually. The tenor of this instrument is 10 years, callable from March 2026 or thereafter with prior approval of SBP. The TFC Issue is unsecured, subordinated as to payment of principal and profit to all other indebtedness of the Bank, including deposits, and is not redeemable before maturity without prior approval of the SBP. Neither profit nor principal may be paid (even at maturity) if such payments would result in a shortfall in the Bank's MCR or CAR or increase any existing shortfall in Bank's MCR or CAR below regulatory requirement. The TFC is subject to loss absorbency clause as stipulated in terms of the Basel III Guidelines wherein upon the occurrence of a Point of Non-Viability ("PONV") event as defined in the Basel III Guidelines, the SBP may at its option, fully and permanently convert the TFCs into common shares of the Bank and/or have them immediately written off (either partially or in full).

The primary function of PACRA is to evaluate the capacity and willingness of an entity to honor its obligations. Our ratings reflect an independent, professional and impartial assessment of the risks associated with a particular instrument or an entity. PACRA's comprehensive offerings include instrument and entity credit ratings, insurer financial strength ratings, fund ratings, asset manager ratings and real estate gradings. PACRA opinion is not a recommendation to purchase, sell or hold a security, in as much as it does not comment on the security's market price or suitability for a particular investor.