Analyst
Madiha Sohail
madiha.sohail@pacra.com
+92-42-35869504
www.pacra.com
Applicable Criteria
Related Research
PACRA Maintains the Ratings of The Bank of Punjab | Tier 2 Capital TFC | PKR 7.5695bln | Jun-24
Rating Type | Debt Instrument | |
Current (14-Jan-25 ) |
Previous (29-Jun-24 ) |
|
Action | Maintain | Initial |
Long Term | AA | AA |
Short Term | - | - |
Outlook | Stable | Stable |
Rating Watch | - | - |
The Bank of Punjab (“BOP” or the “Bank”) has established a strong franchise, with its name serving as a testament to its solid parentage. This backing has provided the Bank with significant advantages, offering robust support during challenging times and facilitating entry into profitable market segments where other institutions may be hesitant. As of Sep'24, the Bank's deposit base stood at PKR 1,574bln (Dec'23: PKR 1,521bln, CY22: PKR 1,227), with a predominant share in savings deposits constituting ~50% of total deposits (CY23: 45%). However, the market share largely remained the same at ~5% as of the end of Sep'24 (CY23: 5.4%). During 9MCY24, the Bank's gross advances decreased by 20% compared to Dec'23, falling to PKR 682bln. This decline led to a reduction in the Advances-to-Deposit Ratio (ADR) to 39.9% from 53% at the end of Dec'23. While the infection ratio was reported at 8.24% during 9MCY24 (Dec'23: 6%) due to a decrease in the gross loan portfolio. The Bank's investment book grew from PKR 913bln at the end of Dec'23 to PKR 1,210bln by the end of Sep'24. A substantial portion of this investment portfolio consists of government securities and has been repriced, positioning the Bank to benefit from improved profitability in the future. In CY23, the Bank's Profit Before Tax (PBT) increased by 15%, reaching PKR 21.2bln, primarily driven by a significant rise in non-markup income, which amounted to PKR 17.7bln, fueled by gains on investments and recoveries. During 9MCY24, the Bank's Profit After Tax (PAT) stood at PKR 14.1bln (9MCY23: 8.9bln). The Bank’s Capital Adequacy Ratio (CAR) strengthened from 18.4% at the end of Dec'23 to 20.2% by Sep'24, supported by the issuance of Additional Tier-1 (ADT-I) and Tier-II bonds, along with retained capital.
Under the guidance of experienced leadership, the management is actively working to enhance the Bank’s profile and address emerging challenges. Key strategic initiatives include diversifying revenue streams with a focus on small and medium-sized enterprises (SMEs), the retail segment, and trade finance. Additionally, the Bank is exploring opportunities to expand its global presence through the establishment of offshore entities.
About
the Entity
The Bank of Punjab, established under the BOP Act 1989, is listed on the Pakistan Stock Exchange (PSX). The Bank operates a vast network of 861 branches as of September 2024, mainly concentrated in Punjab. The Government of Punjab (GoPb) holds a majority stake in BOP (57%), whereas the rest is widely dispersed. Mr. Zafar Masud is the President & CEO of the Bank.
About
the Instrument
The Bank issued unsecured, listed, subordinated, and rated Tier 2 capital TFCs totaling PKR 7.5695bln to strengthen BOP's Tier II Capital. The funds are used in the Bank's operations as permitted. The instrument has a 10-year tenor, with an expected profit rate of 6M KIBOR + 125bps, payable semiannually in arrears on the outstanding principal. 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 bank may call the TFCs, with prior approval of SBP, after five years from the date of issue.