PACRA maintains debt instrument rating of Samba Bank

May 17, 2024 (MLN): Pakistan Credit Rating Agency Limited (PACRA) has maintained the debt instrument rating of Samba Bank Limited (PSX: SBL) at "AA-" for long term with a stable outlook forecast, latest press release issued by PACRA showed.

The rating of Samba Bank Limited is reinforced by the strong profile of the sponsoring group i.e., Saudi National Bank (SNB).

The SNB is the largest commercial bank of KSA with an equity base of SAR 176 billion as of Dec-23.

However, the ownership structure of the bank is expected to change contingent on the successful acquisition of an 84.51% stake of SNB in SBL.

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.

As of CY23, the CAR of the SBL stood at 21.3% (CY22: 18.7%) well above the minimum requirement prescribed in SBP banking regulations.

The consistent improvement in CAR over the years has augmented the risk absorption capacity of the SBL and provides comfort to the currently assigned debt instrument rating.

The Bank recorded net mark-up income at Rs8.1 billion (CY22: Rs4.7bn) mainly attributed to the surge in the policy rate.

During CY23 the Bank optimized its ADR (Advances to Deposits ratio) at 64.0% (CY22: 70.7%).

The management has prudently recognized all infectious exposure. Consequently, there was a consistent increase in the infection ratio (CY23: 9.1%; CY22: 6.5%).

In CY23, the bank's government securities portfolio decreased (CY23: Rs70.4bn, CY22: Rs76.9bn), reflecting a deliberate strategy to reduce risk by offloading securities and minimizing duration.

The NPL Coverage Ratio continues to remain around 100% over the years. The equity of SBL stood at Rs16.4bn as of CY23. The SBL has paid the 06th redemption of Tier-II TFC due on March 01, 2024.

The rating is dependent on the Bank's sustained risk profile along with improvement in 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.

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