PACRA Maintains the Ratings of The Bank of Punjab | Additional Tier 1 Capital TFC | PKR 3.95bln | Feb-24

The Bank of Punjab ("BOP" or the "Bank") has established a strong franchise, underscored by the strategic backing of its principal shareholder, the Government of Punjab (GoPb). This public-sector parentage has consistently provided institutional strength, policy alignment, and credibility, enabling the Bank to access high-impact and underserved market segments. The GoPb’s involvement not only reinforces public trust in the Bank but also facilitates its participation in development-focused initiatives across agriculture, SMEs, and financial inclusion. Over the years, BOP has made exceptional strides in the SME and agriculture sectors, positioning itself as a market leader. Its SME market share has doubled from 6% to 15.6% in less than three years. The Bank has further distinguished itself through targeted initiatives supporting small businesses, women entrepreneurs, and rural communities. Climate-related financing is another area of highlight. In line with this, the Bank has embraced digital transformation as a core strategic priority. It has achieved a 95.3% surge in digital transaction volumes since 2022, with 75% of all transactions now routed through digital channels. Innovative offerings such as SME e-Qarza, freelancer accounts, and government-backed initiatives like the Kissan and Livestock Cards underscore its commitment to financial inclusion and modern service delivery. The Bank has won a number of rewards and accolades. To sustain its momentum, BOP is actively exploring foreign funding opportunities while continuing to benefit from a stable and growing deposit base. During CY24, the deposit base of the Bank increased by 12.5% to stand at PKR 1,710.3bln (CY23: PKR 1,520.8bln). A significant contributor to this growth was 24.3% increase in current account deposits, which rose to PKR 354.1bln and now constitute 20.7% of total deposits (CY23: 18.7%). These deposits have more than doubled over the past three years. The ADR declined to 45.4% (CY23: 53%), indicating a more conservative lending approach. The PAT increased by 17.9% to stand at PKR 13.4bln (CY23: PKR 11.3bln), attributable to enhanced non-markup income, which increased by 50.6% YoY and stood at PKR 26.7bln (CY23: PKR 17.7bln) with major contributions from FCY income, which increased by 188.6% YoY and fee & commission income by 53.1% YoY. In CY24, the Bank’s equity base increased to PKR 92.5bln (CY23: PKR 80.8bln), while the CAR stood at 17.93 % (CY23: 18.37%).
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About the Entity
The BOP, established under the BOP Act 1989, is listed on the PSX. As of end-Dec24, the Bank operates with a vast network of 900 branches (end-Dec23: 815 branches), mainly concentrated in Punjab. The GoPb holds a majority stake in BOP (57.5%), whereas the rest is widely dispersed. The oversight of the Bank is done under a Board comprising three non-executive directors and one executive director, the CEO. All four members are representing the GoPb. Mr. Zafar Masud, a renowned & experienced banker and currently Chairman of the Pakistan Banks Association, is the President & CEO of the Bank.

About the Instrument
The Bank issued PKR 3.95bln unsecured, listed, perpetual Additional Tier I capital TFCs ("TFCs" or the "Instrument") to enhance BOP's Tier I Capital, with funds allocated to business operations. The instrument offers a profit rate of 6M KIBOR + 200bps, payable semiannually in arrears. Neither profit nor principal will be payable in respect of TFC if such payment will result in a shortfall in the Bank’s MCR or CAR. The TFCs shall, if directed by the SBP, be fully and permanently converted into ordinary shares and/or be immediately written off upon the Point of Non-Viability Trigger Event, subject to a cap of 1,123mln shares. The Bank may call the TFCs, with prior approval of SBP, after five years from the date of issue.