The Pakistan Credit Rating Agency Limited
Press Release


Muhammad Azmat Shaheen

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PACRA Assigns Pre-liminary Rating to Soneri Bank Limited | Tier II Capital TFC | TBI

Rating Type Debt Instrument
(14-Nov-22 )
Action Preliminary
Long Term A+
Short Term -
Outlook Stable
Rating Watch -

The ratings reflect Soneri Bank’s ("SNBL" or the "Bank") improved business profile as reflected by system share of 1.9% in terms of deposits as of Jun'22. SNBL’s customer deposits observed growth of 32.4% as of Jun’22, where CASA recorded further improvement (Jun’22: 69.5%). Net income witnessed a decrease of 70% during 1HCY22 as compared to same period in previous year attributable to higher markup expense. Improvement 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 to 4.5% as on Jun’22 (Jun’21: 5.7%). The Investment book has expanded significantly by 3.6% YoY, dominated by investments in PIBs. The bank's strategy is to strengthen the existing good relationships and digital platforms by offering various unique solutions to its clients. Previously, the bank had issued a PKR 3bln Tier-II TFC in 2015 and a PKR 4bln Tier-I TFC in 2018. The current issue will constitute of PKR 4bln Tier-II TFCs. Pakistan’s economy has gone through several varied phases in last two years due to the Covid-19 pandemic. 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 including the banking industry. The Bank’s total Capital Adequacy Ratio (CAR) stood at 14.14% as of Sep’22.
The growth trajectory of the bank especially nurturing of the deposit & advances base and enriching the granularity would be considered positive.

About the Entity
SNBL, established in 1991, operates with a network of 360 plus branches including 35 Islamic banking branches, 15 Islamic banking windows and 1 sub-branch. The Bank’s primary sponsors are the Feerasta Family who collectively own 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 comprising five non-executive, two independent and one executive director (CEO).

About the Instrument
The Bank is planning to issue rated, listed, unsecured, subordinated, ten years tenured "Soneri Bank Limited | Tier II Capital TFC" with an issue size of PKR 4bln bearing exercisable call option after five years of the issue date. The TFC will be subordinated to the payment of principal and profit, to other indebtedness of the Bank, including deposits, but will rank pari passu with other Tier 2 instruments and superior to Additional Tier 1 instruments. Neither profit nor principal will be payable in respect of TFC, if such payment will result in a shortfall in the bank’s Minimum Capital Requirement (MCR) or CAR. The bank may call the TFCs, with prior approval of SBP, any time after five years from the date of issue. The TFCs shall, if directed by the SBP, be fully and permanently converted into ordinary shares and/or have them immediately written off (partially or in full) upon the PONV Trigger Event. The Issue amount will contribute towards the Issuer’s Tier II Capital for CAR and have a floating rate coupon priced @6MK+1.70%. The instrument will be redeemed 0.36% of the issue amount during the first 9 years after the Issue Date and the remaining issue amount of 99.64% in two equal semi-annual installments of 46.82% each in the last year.

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.