PACRA Maintains Instrument Rating of Soneri Bank Limited | TFC II | Jul-15

The ratings reflect Soneri Bank’s ("SNBL" or the "Bank") improved business profile as reflected by system share of 1.9% in terms of deposits as of Jun'22. SNBL’s customer deposits observed growth of 32.4% as of Jun’22, where CASA recorded further improvement (Jun’22: 69.5%). Net income witnessed a decrease of 70% during 1HCY22 as compared to same period in previous year attributable to higher markup expense. Improvement in net mark-up income, non-markup income and continued enhancement in non-fund-based exposure are important for future years. Advance book recorded marginal uptick whereas, infection ratio declined to 4.5% as on Jun’22 (Jun’21: 5.7%). The Investment book has expanded significantly by 3.6% YoY, dominated by investments in PIBs. The bank's strategy is to strengthen the existing good relationships and digital platforms by offering various unique solutions to its clients. The bank issued current TFC to support Tier-II capital in 2015 and a PKR 4bln Tier-I capital TFC in 2018. New issue of PKR 4bln Tier-II TFC is under process and the previous Tier-II TFC, being completely phased out of supplementary capital as per BASEL III regulations, will be tentatively called back in Dec'22. 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 including the banking industry. The Bank’s total Capital Adequacy Ratio (CAR) stood at 14.14% as of Sep’22, while the issue of new tier-II instrument would strengthen the CAR further.
The growth trajectory of the bank especially nurturing of the deposit & advances base and enriching the granularity would be considered positive.

About the Entity
SNBL, established in 1991, operates with a network of 360 plus branches including 35 Islamic banking branches, 15 Islamic banking windows and 1 sub-branch. The Bank’s primary sponsors are the Feerasta Family who collectively own majority share in SNBL. The Feerasta Family has diverse commercial interests ranging from manufacturing, exporting, banking and trade financing. The overall control of the bank vests with an eight-member board of directors comprising five non-executive, two independent and one executive director (CEO).

About the Instrument
SNBL issued its 2nd unsecured, subordinated and listed TFC (Soneri Bank Limited | TFC II) of PKR 3bln in 2015. The amount raised through this Issue contributed towards SNBL’s Tier II Capital in accordance with SBP guidelines on capital adequacy. Furthermore, the amount raised is being utilized in SNBL’s normal business operations as permitted under its Memorandum & Articles of Association. The profit is paid semi-annually in arrears at the rate of 6MK+135bps on the outstanding amount. Total 0.30% of the principal will be redeemed in the first 7.5 years of the tenor through semiannual payments and the remaining principal of 99.70% at maturity. The instrument is subordinated as to the payments of principal and profit to all other indebtedness of SNBL, including deposits. The instrument is subject to lock in clause, loss absorbency and/or any other requirements under SBP’s Basel III Capital Regulations. Call option which is exercisable on and after five years of issue date, is expected to be exercised by end Dec'22.