PACRA Maintains Rating of Soneri Bank Limited | TFC II | Jul-15

The ratings reflect Soneri Bank’s maintained business profile as reflected by intact system share of in terms of deposits (end-Jun21: 1.7%, end-Dec20: 1.8%). However, since Jun'21, SNBL’s customer deposits observed growth of 6.9% to stand at 315.4bln as at end Sep-21, and CASA ratio 73.6% (CY20: ~69%; CY19: ~63%). Going forward enhanced deposit mobilization will remain vital in maintaining system share. During 9MCY21 total income witnessed an increase of 4% YoY (9MCY21: PKR 11.4bln, 9MCY20: PKR 11.0bln), attributable to increased net mark up income as well as non-markup income. During 9MCY21, NIMR inched up by ~4% YoY (9MCY21: PKR 8.4bln; 9MCY20: PKR 8.1bln). Sustainability in net mark up income and non-markup income and continued enhancement in non-fund based exposure is important for future years. Infection ratio declined to 5.5% (CY20: 6.2%; CY19: 5.1%) owing to marginal decline in non-performing loans. The Investment book remained intact at PKR 236bln (end-Dec20: PKR 246bln), 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. The Bank’s Tier-I ratio as at end Sep-21 stands at 13.4% (end-Dec20: 14.1%) while CAR stands at 15.1% (end-Dec20: 17.0%). The proactive measures taken by the regulators and other concerning bodies against COVID-19 have mitigated the potential damages much anticipated from this pandemic. As a result, the banking industry remained protected and in fact posted record profits. Vigilance is required as the loan repayment cycle resumes amid variants of the pandemic continue to re-emerge.
The rating is a function of a 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.

About the Entity
SNBL, established in 1991, operates with a network of 346 (end Dec-20: 340) branches across the country. The Bank’s primary sponsors are the Feerasta Family who collectively owns the 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 the Feerasta family while one is an 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.

About the Instrument
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.