PACRA Maintains Rating of Soneri Bank Limited | TFC II | Jul-15
|Rating Type||Debt Instrument|
The ratings reflect Soneri Bank’s maintained business profile as reflected by system share in terms of deposits (end-Dec21: 1.7%, end-Dec20: 1.8%). SNBL’s customer deposits observed growth of ~13%, where CASA recorded further improvement (CY21: ~70%; CY20: ~69%). Going forward enhanced deposit mobilization will remain vital in maintaining system share. Net income witnessed an increase of 18.9% YoY attributable to lower provisioning and impairment charge. Sustainability in net mark up income & non-markup income and continued enhancement in non-fund based exposure are important for future years. Advance book recorded marginal uptick, whereas, infection ratio declined (CY21: 5.9%; CY20: 6.2%), owing to marginal decline in NPLs. The Investment book has expanded significantly by 31% YOY, dominated by investments in PIBs. Going forward, the strategy is to strengthen the existing good relationships and digital platform by offering various unique solutions to its customers. Pakistan’s economy has gone through several varied phases in last two years due to the COVID19 pandemic. Banking sector continued to flourish with high profitability. Going forward, the macro-economic environment is beset with myriad challenges due to heightened interest rate, tightening of demand, rupee depreciation and higher inflation. This has repercussions for all segments of the economy. The Bank’s Tier-I ratio stands at 12.23% as at end-Dec21. Total CAR stands at 13.8% (CY20: 17%). With dilution recorded in CAR of the bank, prudent capital management remains essential.
The rating is a function of bank's ability to maintain its market position in the banking industry while strengthening its overall risk profile. Bringing efficiency in 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.
SNBL, established in 1991, operates with a network of 367 (CY20: 340) branches across the country. The Bank’s primary sponsors are the Feerasta Family who collectively own majority share in SBL. 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 five non-executive directors, two independent directors and one executive director (CEO). Three of the Board members are nominees of Feerasta family while one is NIT representative. Mr. Alauddin J. Feerasta is chairman of the board. Independent directors on the Board are Ms. Navin Salim Merchant and Mr. Jamil Hassan Hamdani.
SNBL issued its 2nd unsecured, subordinated, and listed term finance certificate of PKR 3,000mln in July-15 to enhance cushion in capital adequacy. The proceeds are being utilized in SNBL's business operations. The profit is being paid semi-annually in arrears at the rate of 6M-KIBOR plus 135bps. Major principal repayment (99.7%) will be at maturity in Jul-23. The instrument is unsecured and subordinated as to the payments of principal and profit to all other indebtedness of SNBL, including deposits.