The Pakistan Credit Rating Agency Limited
Press Release


Ayesha Qasim

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PACRA Maintains Entity Ratings of Soneri Bank Limited

Rating Type Entity
(26-Sep-18 )
(14-Jun-18 )
Action Maintain Maintain
Long Term AA- AA-
Short Term A1+ A1+
Outlook Stable Stable
Rating Watch - -

The ratings reflect Soneri Bank’s sustained business profile; system share slightly improved YoY. The bank expanded its deposit base in line with the industry growth, while maintaining the contribution of low cost deposits. The bank witnessed a rise in ADR subsequent to fresh deployment in advances. The cost structure (cost to total net revenue) has increased. The marginal increase in net interest revenue translated into slight improvement in profitability (YoY). Going forward, the bank, while focusing on improving asset quality, intends to follow a prudent strategy in terms of advances growth. Continued enhancement in non-fund based exposure, delivering higher fee income, focusing on low cost deposit mobilization and to capitalize on various business opportunities including those which are a part of CPEC. At the same time, the strategy would be to mobilize low cost deposits with an increase in branch network. The bank’s CAR reduced with decline in Tier-I YoY (end-Jun18: 9.7%, end-Dec17: 9.9%) owing to increase in risk weighted assets. The bank is in the process of issuing additional Tier-1 TFC (PKR 4,000mln), expected to boost its total eligible capital.
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 overall 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.

About the Entity
SBL, established in 1991, operates with a network of 290 (CY16: 288) branches across the country. The Bank’s primary sponsors are the Feerasta Family who collectively own a 61% share in SBL. The Feerasta Family is one of the leading business groups in Pakistan with diverse commercial interests ranging from manufacturing, exporting, banking and trade financing. The eight-member BoD, with diversified experience, comprises three nominees of Feerasta family, three independent directors, one NIT representative, and the CEO. Mr. Aftab Manzoor, CEO since 2011, is a seasoned banker. The Chief Operating Officer and Executive Director, Mr. Amin A Feerasta - is a member of Feerasta family and has been associated with the Bank since 2000. They are supported by an experienced management team.

About the Instrument
SBL issued its 2nd unsecured, subordinated, and listed TFCs of PKR 3,000mln in July-15 to enhance cushion in capital adequacy. Profit rate is based on 6M-KIBOR plus 135bps p.a. payable semi-annually in arrears. Major principal repayment (99.7%) will be in bullet form at maturity in Jul-23. SBL retains the call option on the instrument, which may be exercised, in part or full, after five years (Jul-20) of issue, subject to SBP's approval.

SBL is in the process of issuing Unsecured, Subordinated, Rated, Listed, Perpetual and Non Cumulative Term Finance Certificates of PKR 4,000mln. The instrument is perpetual in nature with no fixed redemption date. Profit payments are subject to the condition that such payments will not result in breach of Soneri's MCR or CAR requirements. The Instrument is subject to loss absorption upon the occurrence of a Pre-Specified Trigger.

The primary function of PACRA is to evaluate the capacity and willingness of an entity to honor its obligations. Our ratings reflect an independent, professional and impartial assessment of the risks associated with a particular instrument or an entity. PACRA's comprehensive offerings include instrument and entity credit ratings, insurer financial strength ratings, fund ratings, asset manager ratings and real estate gradings. PACRA opinion is not a recommendation to purchase, sell or hold a security, in as much as it does not comment on the security's market price or suitability for a particular investor.