Soneri Bank achieved optimization in 2018 despite high operating costs: PACRA

June 21, 2019: Pakistan Credit Rating Agency (PACRA) has maintained the entity ratings of Soneri Bank Limited at ‘AA-’ for long-term and ‘A1+’ for short-term. The outlook on the assigned ratings is ‘stable’.

The ratings reflect Soneri Bank’s sustained business profile as reflected in net interest margin. During CY18, customer deposits witnessed growth of ~12%, at par with the small scale industry average growth - customer deposit system share remained the same at ~1.8% as at end-Dec18 (end-Dec17: ~1.8%).

Current deposits witnessed a growth of ~4.3% YOY, however, current deposit mix declined from ~28% to 25%, due to overall growth in deposits. The lending portfolio recorded growth of ~14% (against industry growth of ~22%). Non-Performing Loans witnessed an increase in Dec18 and came down in 1QCY19. Fee based income also witnessed growth and needs to seek a higher stimulant.

The Bank's operating cost is higher, yet the bank achieved optimization in 2018 and maintained it in the ongoing year. This could be a challenge from future growth perspective. But this has helped in achieving higher profitability. Spread also witnessed slight uptick. Sustainability in NIMR, continued enhancement in non-fund based exposure and sustainable growth in fee income is important for future years. Going forward, the strategy is to mobilize low cost deposits.

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 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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