The Pakistan Credit Rating Agency Limited
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Wajeeha Asghar

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PACRA Maintains Debt Instrument Rating of Samba Bank Limited | PPTFC

Rating Type Debt Instrument
(19-May-23 )
(20-May-22 )
Action Maintain Maintain
Long Term AA- AA-
Short Term - -
Outlook Stable Stable
Rating Watch - -

The assigned rating of Samba Bank Limited (“Samba Bank” or the "Bank") is reinforced by the strong profile of its sponsor i.e. Saudi National Bank. The sponsor SNB is the largest commercial bank of KSA. Currently, as of 1QCY23, the CAR of the SBL stood at 16.74% (CY22:18.7%, CY21:20.2%). This reflects the impeccable risk absorption capacity, which is integral to the rating. During 1QCY23, the Bank recorded net mark-up income at PKR 1.5bln. While the total income stood at PKR 1.65bln. The Profit before tax stood at PKR 502mln. The bank recorded an ADR of 50.8% at the end of 1QCY23. During CY22, the Bank recorded net markup income at PKR 4.7bln (CY21: PKR 4.3bln). The total income stood at PKR 4.97bln during CY22 (CY21: PKR 5.77bln). However, during CY22 the bank recorded a loss before tax of PKR (926)mln against a profit of PKR 1,304 last year. The loss after tax during CY22 was recorded as PKR (428) mln (CY21: profit 789mln). Whereas, the Bank booked the profit after tax of PKR 280mln in 1QCY23. During CY22 the bank recorded an advance-to-deposit ratio (ADR) of 58.4% (CY21 85.9%). The equity of SBL stood at PKR 13.9bln at the end of 1QCY23 (CY22: PKR 14.6bln, CY21: PKR 15.9bln).
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.

About the Entity
Samba Bank Limited is a majority owned subsidiary of Saudi National Bank (formerly Samba Financial Group) of Saudi Arabia. Saudi National Bank currently holds 84.51% stake in Samba Bank Limited. The Bank has a network of 47 branches as of Dec’22 (CY21: 44 branches) located in 14 major cities across the country. Currently, the Bank has nine-member Board of Directors (BoD) including the President and CEO. The five members of the board are representative of SNB. The Bank’s BoD comprises qualified and experienced professionals. The Bank’s President & CEO, Mr. Ahmed Tariq Azam has diversified business and leadership experience in the banking and financial services sector.

About the Instrument
The instrument PPTFC-TIER II was issued in Mar-21. The amount of the instrument is of PKR 5,000mln and priced at 6MK+135bps p.a. payable semi-annually. The tenor of this instrument is 10 years, callable from Mar-26 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. The TFC is subject to a loss absorbency clause as stipulated in terms of the Basel III Guidelines wherein upon the occurrence of a Point of Non-Viability event, the SBP may at its option, fully and permanently convert the TFCs into common shares of the Bank or have them immediately written off (either partially or in full). As per the lock-in clause requirement, neither profit nor principal would be payable (even at maturity), if such payment will result in a shortfall in Bank's MCR, LR, or CAR or results in an increase in any existing shortfall in MCR, LR or CAR.

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.