PACRA Assign Preliminary Rating to Samba Bank Limited | PPTFC - Tier II

Samba Bank has a very strong Capital Adequacy Ratio (“CAR”) (Dec19: 18%, Sep20:19.6%). 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-Deposits 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 parentage of the Bank is already strong, and with the envisaged merger of Samba Financial Group of Kingdom of Saudi Arabia (bank’s parent entity) and National Commercial Bank of Kingdom of Saudi Arabia on the horizon, the Bank is well poised to take the positive benefits in Pakistan.
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.

About the Entity
Samba Bank Limited, operates with a network of 40 branches at end-Sep-20. Samba Bank has a 0.5% share in the banking industry’s deposits. Samba Financial Group, a banking company in the Kingdom of Saudi Arabia, currently holds an 84.51% stake in Samba Bank Limited. The Bank’s Board of Directors comprises of qualified and experienced professionals. Mr. Shahid Sattar, President & CEO of the Bank, has been associated with the Bank for 7 years. He is backed by executive team of seasoned banking professionals, most of whom have a long association with the bank.

About the Instrument
The instrument is of PKR 5,000mln (inclusive of a Green Shoe option of PKR 2,000mln) and will be priced at 6M-KIBOR plus 135bps p.a. payable semi-annually. The tenor of this instrument is 10 years, callable from Mar-25 or thereafter with prior approval of SBP. The TFC Issue will be 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 MCR or CAR. The TFCs will be 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).