PACRA assigns Entity ratings to The Punjab Provincial Cooperative Bank Limited

The Punjab Provincial Cooperative Bank Limited ('PPCBL' or the 'Bank') is one of the oldest banks in Pakistan, having started operations in 1924. The principal activity of the Bank is to create a green revolution through agriculture financing and support the cooperatives societies, whereas work still needs to be done to achieve this. The Bank has a limited presence in the banking space due to having long-standing qualitative and legislative challenges. However, PPCBL is currently in a transformative stage having made major investments towards updating its operational efficiency and infrastructure, along with strengthening its management team. PPCBL currently operates through 151 branches located in Punjab, primarily lending to the agriculture sector. The Government of Punjab has controlling stake of the Bank (~95%). The Bank has recently constituted a seven-member board of directors, having two independent and five non-executive directors, whereas remaining four board members (one independent, two non-executive, and one executive) shall be appointed within FY24 for an 11-member board. The chairperson of the board shall be the current Secretary of Cooperatives Society of the Government of Punjab; moreover, the non-executive directors are also representatives of the Government of Punjab. The organizational structure of PPCBL has recently been improved to add key departmental heads. An experienced management team is present to run the operations; however, currently Mr. Saleem Tahir is acting as the CEO/President along with his role as the Chief Operating Officer. Having a dedicated President/CEO to oversee the Bank is important. The transformative stage the Bank is currently in also involves digitalizing its operations and the Bank has also added a Core Banking System, which will improve the internal control environment moving forward. The ratings reflect the limited growth of PPCBL over the years. The Bank has a stable ~PKR 6bln deposit base at end-Jun'23 which has had low growth over the years due to legislative measures imposed on PPCBL. Similarly, advances have largely remained around the ~PKR 8bln to ~PKR 12bln mark over the past four years, standing at ~PKR 12bln at end-Jun'23. The Bank earned ~PKR 2.6bln of markup income during FY23 (SPLY: ~PKR 2bln) whereas net profitability surged to ~PKR 623mln during FY23 (SPLY: ~PKR 357mln) due to topline growth and rental income. Liquidity risk is limited as PPCBL has no borrowings as at end-Jun'23, parking its excess funds into an investment book of ~PKR 3bln at end-Jun'23 comprising mainly market T-Bills. The ratings incorporate an adequate equity base (net of revaluation) of ~PKR 8.4bln at end-Jun'23 (SPLY: ~PKR 7.8bln) whereas CAR stood at ~40% at end-Jun'23 (~38% at end-Jun'22).
Moving forward, the ratings are dependent upon the Bank completing its transformative stage and improving its internal control environment. Moreover, growth in advances and deposits, translating to topline growth, remains important.

About the Entity
The Punjab Provincial Cooperative Bank Limited was incorporated in 1924 as a Cooperative Bank under the Cooperative Societies Act, 1912 (repealed) (now the Cooperative Societies Act, 1925). It was given the status of a scheduled bank by the State Bank of Pakistan (SBP) in 1955. The Government of Punjab holds a controlling stake of ~95% of the Bank while the rest of the shareholding is by cooperative societies ~5%.