PACRA Maintains Entity Ratings of Soneri Bank Limited | Tier 2 Capital TFC | PKR 4bln | Dec'22

The ratings reflect the astute leadership of Soneri Bank Limited ("SNBL" or "the Bank"). This has been the driving force behind the Bank's sustainable business profile over the years. The Bank saw a growth of 12% in deposits during 9MCY24, driven by a steady CASA ratio of 82.7%, while the Advances-to-Deposit Ratio (ADR) declined to 34% (9MCY23: 36%, CY23: 40%). Despite this, Soneri Bank maintained a strong NPL coverage of 119.5%, with the infection ratio improving to 3.6% (9MCY23: 6.3%, CY23: 4.9%), driven by the expansion of the advance base during the period. Financially, Soneri Bank's net profitability during 9MCY24 increased to PKR 4.7bln (9MCY23: PKR 4.1bln, CY23: PKR 6.0bln) primarily due to an increase in the net markup income. During Sep'24, the Bank's investment portfolio witnessed an increase of 15% reaching PKR 398bln (Sep'23: PKR346bln) with almost 99% skewed towards Government securities. In terms of market presence, Soneri Bank commands a 6% share in the trade business, reflecting its strengthened position. During the ongoing year, Bank's trade business crossed PKR 1trln further strengthening its trading income and profitability. The Bank's equity rose to PKR 30.5bln in 9MCY24 from (CY23: PKR 28.6bln), while its Capital Adequacy Ratio (CAR) stood at 18.6% (CY23: 18.4%). Looking ahead, Soneri Bank aims to continue enhancing its deposit base, sustain growth in net markup and non-markup income, and expand its digital platforms to offer innovative solutions to customers, thereby strengthening its market position and operational efficiency.
Bringing efficiency to the operational structure is important for long-term growth. 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 521 as of Sep'24 (Dec'23: 443) 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). Three of the Board members are nominees of the Feerasta family while one is an NIT representative. Mr. Amin A. Feerasta is the newly appointed Chairman of BOD.

About the Instrument
SNBL issued unsecured, DSLR listed, subordinated and rated TFCs ("TFCs" or the "Instrument") in Dec-22 of PKR 4bln to contribute towards Bank's Tier II Capital. The funds raised were utilized in the Bank's normal business operations. The profit rate is 6MK+1.70% and is being paid semiannually in arrears on the outstanding principal. The TFCs are tenured 10 years and can be recalled, subject to SBP approval, after five years from the issue date on principal redemption date or thereafter, subject to call option condition. The lock-in clause ensures that no principal or profit is payable if it causes a shortfall in the Bank’s MCR, CAR, or LR. The TFC is subject to a loss absorbency clause, allowing the SBP to convert the TFCs into common shares in the event of non-viability. It is subordinated to other Bank debts, but ranks equally with Tier II instruments and higher than Additional Tier I instruments and common shares. The principal will be redeemed gradually: 0.36% over the first 9 years and 99.64% in two semi-annual installments in the final year. The Bank made a coupon payment of 436.3mln in December 2024.