PACRA Maintains Debt Instrument Ratings of Soneri Bank Limited | Tier 1 TFC

The ratings reflect Soneri Bank’s (SNBL) stable leadership since the inception of the bank along with its maintained business profile. Over the years, the system shares of the bank in terms of deposits has largely remained intact (9MCY23: 1.9%, CY22: 1.8%). The bank was working on the composition of the deposit base and also improving its cost structure. During 9MCY23, SNBL’s customer deposits observed growth of 20.7%, whereas CASA ratio stood at (9MCY23:78.8%; CY22: 79.2%) with contribution from CA (9MCY23: 31.5%; CY22: 32.7%). The advances book reflected decline, and subsequently, the infection ratio increased (9MCY23: 6.3%; CY22: 4.7%). The NIMR of the bank witnessed a sizeable improvement (9MCY23: PKR 16.1bln; 9MCY22: PKR7.7bln). The ADR of the bank is 35.8% as of 9MCY23 (CY22: 50.9%) and the investment yield stood at 19.6% primarily supplemented through investment in government securities providing comfort to the liquidity of the bank. The enhancement in the gross markup has facilitated the net profitability of the bank to incline (9MCY23: PKR 4.1bln; 9MCY22: PKR 1.3bln). The Bank remains adequately capitalized, with a Capital Adequacy Ratio of 17.61% on 9MCY23 with the Tier I ratio clocking in at 15.4% (end-Dec22: 12.9%), reflecting an adequate cushion for growth. The 10th profit payment on TFC ADT1 was paid by the SNBL on 06th December 2023.
The rating is a function of the bank's ability to maintain its market position in the banking industry while strengthening its overall risk profile. 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.

About the Entity
SNBL, established in 1991, operates with a network of 412 branches across the country. The Bank’s primary sponsors are the Feerasta Family who collectively own a majority share in SNBL. The overall control of the bank vests with an eight-member Board of Directors (BoD) comprising four non-executive directors, three independent directors, and one executive director (CEO).

About the Instrument
SNBL issued unsecured, listed, subordinated, perpetual, rated and non-cumulative Additional Tier-ITFCs in Dec-18 of PKR 4bln to contribute towards Bank's Tier I Capital. The additional tier-I is exposed to non-payment (principal & interest) risk in case the CAR falls below the minimum regulatory requirements. The profit rate is 6MK+2.00% and is being paid semiannually in arrears on the outstanding principal. The TFCs may be recalled and replaced with similar or better-quality capital, after five years from the issue date, subject to call option condition. Being non-cumulative in nature, the interest payment falling due during that specific period wouldn't be paid to the investors as per the regulatory disclosures. As per the lock-in clause, neither profit nor principal would be payable, if such payment will result in a shortfall in Bank's MCR or CAR. Upon the occurrence of a CET1 trigger or non-viability event, SBP may fully or permanently convert the TFCs into common shares of the Bank subject to a cap of 360mln ordinary shares. The instrument is unsecured and subordinated as to payment of principal and profit to all other claims except common shares and is pari passu to other Additional Tier I instruments.