PACRA Assigns Initial Debt Instrument Rating to Soneri Bank Limited

September 26, 2018: The Pakistan Credit Rating Agency has assigned an Initial Debt Instrument Rating for Soneri Bank Limited's tier 1 Term Finance Certificates (TFC) at ‘A’ for the Long Term, with a ‘Stable Outlook’ assigned to the firm.

According to the rating agency, the ratings reflect Soneri Bank’s sustained business profile as system share slightly improved YoY.

The bank expanded its deposit base in line with the industry growth, while maintaining the contribution of low cost deposits.

It also witnessed a rise in ADR subsequent to fresh deployment in advances. The cost structure (cost to total net revenue) has increased. The marginal increase in net interest revenue translated into slight improvement in profitability (YoY), the report added.

Going forward, the bank, while focusing on improving asset quality, intends to follow a prudent strategy in terms of advances growth. Continued enhancement in non-fund based exposure, delivering higher fee income, focusing on low cost deposit mobilization and to capitalize on various business opportunities including those which are a part of CPEC.

At the same time, the strategy would be to mobilize low cost deposits with an increase in branch network.

According to the press release, the bank’s CAR reduced with decline in Tier-I YoY (end-Jun18: 9.7%, end-Dec17: 9.9%) owing to increase in risk weighted assets. The bank is in the process of issuing Tier-1 TFC (PKR 4,000mln), expected to boost its total eligible capital.

“The rating is a function of bank's ability to maintain its market position in the banking industry while strengthening its overall risk profile. Bringing efficiency in overall operational structure is important for long term growth,” it said.

“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,” the report further added.

SBL issued its 2nd unsecured, subordinated, and listed TFCs of PKR 3,000mln in July-15 to enhance cushion in capital adequacy. Profit rate is based on 6M-KIBOR plus 135bps p.a. payable semi-annually in arrears. Major principal repayment (99.7%) will be in bullet form at maturity in Jul-23. SBL retains the call option on the instrument, which may be exercised, in part or full, after five years (Jul-20) of issue, subject to SBP's approval.

SBL is in the process of issuing Unsecured, Subordinated, Rated, Listed, Perpetual and Non-Cumulative Term Finance Certificates of PKR 4,000mln. The instrument is perpetual in nature with no fixed redemption date. Profit payments are subject to the condition that such payments will not result in breach of Soneri's MCR or CAR requirements. The Instrument is subject to loss absorption upon the occurrence of a Pre-Specified Trigger.

SBL, established in 1991, operates with a network of 290 branches across the country. The Bank’s primary sponsors are the Feerasta Family who collectively own a 61% share in SBL. The Feerasta Family is one of the leading business groups in Pakistan with diverse commercial interests ranging from manufacturing, exporting, banking and trade financing.

Posted on: 2018-09-26T14:50:00+05:00

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