PACRA Maintains Entity Rating of The Punjab Provincial Cooperative Bank Limited

Punjab Provincial Cooperative Bank Ltd. (PPCBL, “the Bank”), a Scheduled Bank established in 1924, remains a pivotal institution in Punjab’s agricultural finance sector, serving 151 branches and anchoring credit delivery to Primary Agricultural Credit Societies (PACS). Governed by cooperative principles, the Bank’s core mandate includes crop financing, livestock loans, and SME support, with ~95% ownership retained by the Government of Punjab. PPCBL has initiated transformative governance measures, including Board reconstitution and senior management recruitment. The Board currently comprises seven members (two independent, five non-executive), with plans to expand to 11 members by FY25 through the addition of one independent, two non-executive, and one executive director. A seasoned leadership team now oversees operations, including incoming CEO Mr. Farrukh Iqbal (effective April 1, 2025), a 30-year veteran with expertise in credit, digital banking, and corporate governance, complemented by CISA/CICA certifications. The Bank reported a deposit base of PKR 8.2 billion (Dec-24: +21% YoY) and advances of PKR 10.6 billion (Dec-24: +14% YoY). Markup income rose to PKR 1.8 billion in 1HFY25 (1HFY24: PKR 1.6 billion), though net profitability fell sharply to PKR 14.5 million (1HFY24: PKR 240.7 million), pressured by lower fee income, elevated credit loss allowances, and write-offs. PPCBL’s equity base (net of revaluation) stood at PKR 8.7 billion (Dec-24), supporting a Capital Adequacy Ratio (CAR) of 38% (Dec-24: 41% in FY23), reflecting adequate capital buffers despite moderation. Liquidity risk is limited, with zero borrowings and PKR 4.7 billion invested in T-Bills as of Dec-24. Implementation of a Core Banking System aims to strengthen internal controls and digitalization efforts, critical for scaling agricultural lending efficiency. While growth has been historically muted, strategic reforms position the Bank to enhance its systemic role in Punjab’s agri-value chain.
The rating trajectory remains contingent upon the Bank’s successful execution of its transformative governance and operational modernization initiatives, alongside demonstrable strengthening of its risk management framework. Sustained improvement in core profitability metrics underpinned by loan book expansion and deposit franchise growth will be critical, particularly given current pressures on net margins. Additionally, prudent asset quality preservation amid advancing portfolio diversification, coupled with maintenance of capital buffers above regulatory thresholds, will remain key rating sensitivities.

About the Entity
The Punjab Provincial Cooperative Bank Limited was incorporated in 1924 as a Cooperative Bank under the Cooperative Societies Act, 1912 (repealed) (now the Cooperative Societies Act, 1925). It was given the status of a scheduled bank by the State Bank of Pakistan (SBP) in 1955. The Government of Punjab holds a controlling stake of ~95% of the Bank while the rest of the shareholding is by cooperative societies ~5%.