PACRA Upgrades the Rating of Soneri Bank Limited | Tier 2 Capital TFC | PKR 4bln | Dec'22

Soneri Bank Limited's ("SNBL" or the "Bank") rating upgrade reflects a structurally strengthened liability franchise, sustained earnings momentum, and continued sustainability and progress in trade finance. The Bank's deposit mix improved steadily, with the CASA ratio strengthening over the past several years and current deposits growing well ahead, especially in the new branches opened by the Bank. This low-cost funding base remains relationship-anchored rather than rate-sensitive, evidenced by a stable and higher spread than historically. Profitability improved across both funded and non-funded lines. Net markup income and profit before tax both posted strong multi-year growth, supported by right deployment of funds and efficient cost structure. Fee and commission income nearly doubled over the period, with growth ranking among the better performers in the industry. The bank’s position is supported by ongoing investment in alternate delivery channels, payment solutions, and core banking infrastructure that is broadly in line with industry trends. Trade finance has emerged as a notable growth driver. The Bank's foreign trade volumes more than doubled over the past five years, lifting market share to its highest-ever level and crossing a landmark trade volume milestone; the third-highest trade growth rate among major banks in the country. This reinforces the Bank's positioning as an increasingly credible trade-finance partner. Digital banking activity also scaled up meaningfully, with transaction values and volumes rising steadily, reflecting gradual customer migration toward digital channels alongside continued branch expansion. Asset quality strengthened considerably: the infection ratio fell to its lowest level in over a decade, improving the Bank's industry ranking, while both general and specific coverage ratios rose substantially, reinforcing loss-absorption capacity and balance sheet resilience. Branch network expansion continued at pace, with the Bank adding a large number of new branches in recent years, which is its largest expansion phase to date. Islamic banking operations also expanded their contribution to the overall franchise, growing their share of the Bank's assets, deposits, and advances. Looking ahead, the Bank has outlined a three-year strategic roadmap centered on digital adoption, sustainable growth, market expansion, and customer service. Targets include further branch network expansion, growth in total assets and deposits, and a continued scale-up in trade business volumes, positioning trade finance as a core pillar of future non-funded income growth.
The ratings remain dependent on the Bank's ability to sustain profitability, manage asset quality, and maintain adequate capitalization and liquidity buffers. Any material deterioration could impact the ratings.

About the Entity
SNBL was established in 1991. The Bank’s primary sponsors are the Feerasta Family, who collectively own a majority share in SNBL. Mr. Amin A. Feerasta acts as Chairperson of the Board.

About the Instrument
SNBL issued unsecured, DSLR listed, subordinated and rated TFC of PKR 4bln in Dec-22 to contribute towards the Bank's Tier II Capital. The proceeds were utilized for normal business operations. The Instrument carries a profit rate of 6MK + 1.70%, payable semiannually in arrears, with a 10-year tenure and callable option after five years, subject to SBP approval. A lock-in clause restricts payments if regulatory capital thresholds (MCR, CAR, LR) are breached. The Instrument includes a loss-absorption clause, allowing SBP conversion into common shares upon non-viability. It is subordinated to other Bank debts but ranks equally with Tier II TFCs and above Additional Tier I TFCs and common shares. The principal will be redeemed gradually: 0.36% over the first 9 years and 99.64% through two semi-annual installments in the final year. The Bank made a total profit payment of PKR 246.0mln in Jun-26.