PACRA Assigns Initial Rating to Additional Tier 1 Capital TFC | The Bank of Punjab
|Rating Type||Debt Instrument|
The Bank of Punjab has built a franchise around its name, which itself is a reflection of strong parentage. The bank enjoys a respectable position in its peer universe, also reflected by its system share. The parentage of the bank has provided associated benefits to the institution. The areas of focus envision three phases (control, consolidation & growth), which help lead the bank from augmented control environment to growth arena. Customer focus and geographical diversification and expansion are the key elements. The Bank grew its deposit base by 20.1% to stand at PKR 1,003bln - higher than the industry's growth where deposits remained tilted towards saving. During CY21, total net income of the bank displayed improvement primarily attributable to enhanced net markup income. Further, reversals of provisioning showed prudent asset management that augmented bank’s YOY net profit to increase by 79%, highest profit surge in the banking industry. Asset quality improved along with growth in advances. whereby the growth in risk assets will be covered through insurance and first loss guarantees wherever available. The top management is very much motivated and focused in further enhancing profitability and strengthening the Bank's relative position. There is a dilution in the CAR of the bank, prudent management of CAR is important. For this, the bank is in process of raising Tier 1 & Tier 2 capital, which is further expected to be supplemented by internal generation of capital.
The ratings are dependent on the financial risk profile of the bank, mainly emanating from volumetric increase in core operations and continued healthy profitability trend in line with the management's plans. Any weakening in asset quality will in turn put pressure on the bank's profitability and risk absorption capacity.
The Bank of Punjab, established under the BOP Act 1989, is listed on Pakistan Stock Exchange (PSX). The bank operates a vast network of 664 branches as at end Mar-22, mainly concentrated in Punjab. The Government of Punjab (GoPb) holds majority stake in BOP (57%), whereas the rest is widely dispersed. The bank’s President & CEO – Mr. Zafar Masud was appointed as President & CEO by the GoPb on 17th March, 2020 and assumed the charge on 16th April, 2020. The senior management consists of seasoned bankers. The current team has played a pivotal role in the bank's revival; their continuity and cohesiveness is critical for successful execution of the envisaged business plan.
BOP has issued an unsecured, unlisted, subordinated, perpetual, rated and non-cumulative in the nature of additional tier I capital term finance Certificates of the amount PKR 8bln to contribute towards BOP's Tier I Capital. The funds raised are planned to be utilized in the Bank's normal business operations. The instrument is perpetual. The profit rate is 6M-KIBOR plus 200bps and is being paid semiannually in arrears on the outstanding principal. The instrument is unsecured and subordinated as to payment of principal and profit to all other claims except common shares. The rating has been marked at initial after the receipt of the related documents.