June 28, 2022 (MLN): The Pakistan Credit Rating Agency Limited (PACRA) has maintained ratings of Soneri Bank Limited at ‘A+’ for the long term with a stable outlook, the company filing on PSX showed on Tuesday.
The ratings reflect Soneri Bank’s maintained a business profile as reflected by system share in terms of deposits (end-Dec21: 1.7%, end-Dec20: 1.8%). SNBL’s customer deposits observed growth of ~13%, where CASA recorded further improvement (CY21: ~70%; CY20: ~69%).
Going forward enhanced deposit mobilization will remain vital in maintaining system share. Net income witnessed an increase of 18.9% YoY attributable to lower provisioning and impairment charge.
Sustainability in net markup income & non-markup income and continued enhancement in non-fund-based exposure is important for future years. The advance book recorded a marginal uptick, whereas, the infection ratio declined (CY21: 5.9%; CY20: 6.2%), owing to a marginal decline in NPLs.
The Investment book has expanded significantly by 31% YOY, 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. Pakistan’s economy has gone through several varied phases in the last two years due to the COVID-19 pandemic.
The banking sector continued to flourish with high profitability. Going forward, the macro-economic environment is beset with myriad challenges due to heightened interest rate, tightening of demand, rupee depreciation, and higher inflation. This has repercussions for all segments of the economy. The Bank’s Tier-I ratio stands at 12.23% as of end-Dec21.
Total CAR stands at 13.8% (CY20: 17%). With dilution recorded in CAR of the bank, prudent capital management remains essential.
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 to the 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.
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