Muhammad Fahad Iqbal
PACRA Assigns Initial Rating to Samba Bank Limited | PPTFC - Tier II
|Rating Type||Debt Instrument|
Samba Bank has a healthy Capital Adequacy Ratio (“CAR”) (Dec20: 18.18%, Dec19: 17.98%). This reflects the impeccable risk absorption capacity, which is integral to the rating. The deposit base of the Bank suggests room for further improvement and deposit mobilization in order to strengthen Bank’s Advances-to-Deposit’s ratio and overall liquidity profile. With the issue of this TFC, the bank intends to augment its growth in high-yielding lending segments while creating a reasonable buffer in its capital ratios for risks that may emerge from the ongoing COVID-19 and its consequential stress on the businesses. The bank has a growth stance in the future and particularly intends to target the small and medium enterprises wherein the Bank has expanded outreach. The Bank is a subsidiary of SAMBA Financial Group of Saudi Arabia, which holds 84.51% shares of the Bank as of December 31, 2020 (December 31, 2019: 84.51%). Samba Financial Group ("SFG") (of the Kingdom of Saudi Arabia) entered into a legally binding merger agreement with The National Commercial Bank ("NCB") (of the Kingdom of Saudi Arabia) dated October 11, 2020, pursuant to which SFG was to merge with and into NCB in accordance with the applicable laws of the Kingdom of Saudi Arabia. In this respect, the merger between SFG and NCB, which has now been renamed as The Saudi National Bank ("SNB") has become effective as of April 1, 2021, and SFG has merged with and into SNB, as a result of which SFG has ceased to exist. Consequently, all the assets and liabilities of SFG (including its shareholding in the Bank) stand vested in SNB by operation of law.
The risk metrics and the compliance ratios are well in range and further adherence will be important. The rating is dependent on the Bank's sustained risk profile. In the wake of heightened competition, profitable growth while retaining the relative positioning in the industry will be a challenge. The equity base of the bank is satisfactory.
Samba Bank Limited, operates with a network of 40 branches at end-Mar-21. Samba Bank has a 0.42% share in the banking industry’s deposits. The Bank’s Board of Directors comprises qualified and experienced professionals. Mr. Shahid Sattar, President & CEO of the Bank, has been associated with the Bank for over 7 years. He is backed by the executive team of seasoned banking professionals, most of whom have a long association with the bank.
The instrument was issued in March 2021. The amount of the instrument is of PKR 5,000mln and priced at 6M-KIBOR plus 135bps p.a. payable semi-annually. The tenor of this instrument is 10 years, callable from March 2026 or thereafter with prior approval of SBP. The TFC Issue is unsecured, subordinated as to payment of principal and profit to all other indebtedness of the Bank, including deposits, and is not redeemable before maturity without prior approval of the SBP. Neither profit nor principal may be paid (even at maturity) if such payments would result in a shortfall in the Bank's MCR or CAR or increase any existing shortfall in Bank's MCR or CAR below regulatory requirement. The TFC is subject to loss absorbency clause as stipulated in terms of the Basel III Guidelines wherein upon the occurrence of a Point of Non-Viability ("PONV") event as defined in the Basel III Guidelines, the SBP may at its option, fully and permanently convert the TFCs into common shares of the Bank and/or have them immediately written off (either partially or in full).