PACRA Maintains the Entity Ratings of Samba Bank Limited

Samba Bank Limited (or "Samba") is owned by The Saudi National Bank (SNB). SNB is the largest financial institution in Saudi Arabia while having a strong lending position in the region. SNB was formed after the merger of two big banks; the National Commercial Bank and Samba Financial Group. The Saudi National Bank, as the majority shareholder of Samba Bank Limited (''Samba Pakistan''), has notified that they have received a non-binding offer from Bank Alfalah Limited relating to the proposed divestment of SNB's 100% stake in Samba Bank Limited. SNB has agreed to evaluate the non-binding offer and will, subject to compliance with the requirements under applicable laws and regulations. Currently, the Bank's current market share in deposits is relatively small. It has achieved a 9% growth in its deposit base, reaching PKR 114.7bln (CY22: PKR 105.2bln). The deposit base reflects a high concentration of Term-deposits. The Bank needs to enhance its outreach to attract a low-cost deposit base. The ADR of the Bank stood at 64% (CY22: 70.7%). The management has prudently recognized all infectious exposure. Consequently, there was an increase in the infection ratio (CY23: 9.08%; CY22: 6.53%). The bank’s investment book is majorly vested with government securities. The coverage of NPLs is considered good, however, declined compared to the previous year (CY23: 99%; CY22: 115%). The bank’s risk absorption capacity is high: CAR is reported at 21.31% (CY22: 18.7%). The Bank is continuously right-sizing its earning assets mix vis-a-vis credit risk. The Bank has strategically reduced its balance sheet size which primarily represents a reduction in investments, loans and advances. During the period, the net markup income witnessed an enormous increase of 71% compared to last year. This increase is mainly in line with the hike in policy rates. The Bank recorded a Net profit of PKR 1,235mln (CY22: Net loss of PKR 428mln). While the competitive landscape has been increasingly intensified, the Bank is focused on enhancing its digital footprint so that customers are provided with all "digital and online banking services".
The placement of the Rating Watch is attributed to the recent disclosure of SNB to divest its shareholding in SAMBA Bank and the initiation of the due diligence process consequently. PACRA will continue to monitor ongoing developments in this matter.
Ratings are dependent on the bank's ability to sustain and improve performance parameters. Meanwhile, upholding asset quality, enhancing its share of deposits in the banking sector, adding diversity to the income stream, maintaining a cushion in CAR and a strong governance framework are critical.

About the Entity
Samba Bank Limited is majorly owned by Saudi National Bank (formerly Samba Financial Group) of Saudi Arabia. Saudi National Bank currently holds an 84.51% stake in Samba Bank Limited. The Bank has a network of 47 branches (CY22: 47 branches) located in 15 major cities across the country. The board comprises nine members, including the President and CEO. The five members of the board are representatives of SNB. The bank's President & CEO, Mr. Ahmad Tariq Azam, has broad experience in the banking and financial services sector.