Karachi December 16 2021: PACRA gives A+ rating to Soneri Bank Limited that reflect Bank's maintained business profile as reflected by intact system share of in terms of deposits (end Jun21: 1.7%, end-Dec20: 1.8%).
However, since Jun'21, SNBL's customer deposits observed growth of 6.9% to stand at 315.4bIn as at end Sep-21, and CASA ratio 73.6% (CY20: —69%; CY19: —63%).
Going forward enhanced deposit mobilization will remain vital in maintaining system share. During 9MCY21 total income witnessed an increase of 4% YoY (9MCY21: PKR 11.4bn, 9MCY20: PKR 11.0bn), attributable to increased net mark up income as well as non-markup income. During 9MCY21, NIMR inched up by —4% YoY (9MCY21: PKR 8.4bn; 9MCY20: PKR 8.1bn). Sustainability in net mark up income and non-markup income and continued enhancement in non-fund based exposure is important for future years.
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Infection ratio declined to 5.5% (CY20: 6.2%; CY 19: 5.1%) owing to marginal decline in non-performing loans.
The Investment book remained intact at PKR 236bn (end-Dec20: PKR 246bn), dominated by investments in PIBs. Going forward, the strategy is to strengthen the existing good relationships and digital platform by offering various unique solutions to its customers. The Bank's Tier-I ratio as at end Sep-21 stands at 13.4% (end-Dec20: 14.1%) while CAR stands at 15.1% (end-Dec20: 17.0%). The proactive measures taken by the regulators and other concerning bodies against COVID-19 have mitigated the potential damages much anticipated from this pandemic. As a result, the banking industry remained protected and in fact posted record profits. Vigilance is required as the loan repayment cycle resumes amid variants of the pandemic continue to re-emerge.
The rating is a function of a bank's ability to maintain its market position in the banking industry while strengthening its overall risk profile. Bringing efficiency in operational structure is important for long term growth. In the comparative landscape, adding granularity to deposits and advances is critical. Meanwhile, a sustainable increase in system share and consequent profitability would be ratings positive.
Profile Soneri Bank Limited ("SNBL" or the "Issuer"), incorporated as a public limited company, commenced operations as a Scheduled Commercial Bank in 1991. The Bank is engaged in the provision of banking and financial services. The Bank operates with 346 branches (CY20: 340) branches including 30 Islamic banking branches (CY20: 30 Islamic banking branches) in Pakistan.
The Feerasta Family - sponsors of the Rupali Group, own 63% stake of the Bank; mainly through three trusts and individuals of the sponsor family. Other shareholders mainly include NBP which through NIT holds —9% stake. The remaining stake (-28%) is widely spread among financial institutions and the general public.
The overall control of the Bank vests with an eight-member board of directors (BoD), including the CEO. Three of the board members are nominees of the Feerasta family. There are two independent directors on board, namely Mr. Jamil Hassan Hamdani & Ms. Naveen Salim Merchant and one NIT nominee director, Mr. Manzoor Ahmed. The board members carry an extensive professional experience in banking and other sectors. The BoD provides an overall guideline in managing risks associated with the bank's operations and strategic direction. There are six board committees that assist the board in effective oversight of the Bank's overall operations on relevant matters. KPMG Taseer Hadi & Co., Chartered Accountants have expressed an unqualified opinion on the financial statement for the year ended 31st December 2020. Also, an interim review was performed on the financial statements for the period ending June 30th, 2021. SNBL has an Internal Audit function which reports to the Board Audit Committee in line with the Code of Corporate Governance. PACRA has assigned AA-/ Al+ (Double-A minus and A one plus) ratings to Soneri Bank.
Overall operations have been divided into thirteen functions and organized into Northern, Central and Southern regions for effective management and control. SNBL's management team comprises experienced individuals. Mr. Muhtashim Ahmad Ashai joined the bank as CEO in Apr, 20. He is a seasoned banker and carries over 28 years of banking experience. SNBL has nine management committees in place; all headed by the CEO. These committees ensure the efficiency of the bank's overall operations.
The indicators of the banking sector reflected signs of recovery and resilience. Deposits of the banking sector grew by 18% to PKR 19,799bn (1HCY21: PKR 16,732bn) as compared to 16.1% growth in CY20. The surge in deposits provided the necessary funding support to finance the robust rise in investments (IHCY21: PKR 14,162bn, CY20: PKR 11,935bn) which remained tilted towards government instruments. On the advances front, during 1HCY2 I, after recording a slight uptick advances stood at PKR 8,808bIn (CY20: PKR 8,292bn) where mild contraction was observed in CY20 owing to slackness amid the COVID-19 pandemic outbreak. A minute uptick of 0.5% was observed in the sector's infection. The policy measures rolled out by the SBP (during CY20) enabled the sector to enhance profitability, improve resilience and limit the credit risk. With the completion of the deferment period allowed, the aftermath is yet to be comprehended by the industry. SNBL, a smallsized bank, holds a customer deposit base of PKR 315.4bn at end Sep'21 (Dec'20: PKR 295.2bn). The market share of deposits of the bank remained stagnant at 1.8% (IHCY21: 1.7%, CY20: 1.8%). As at end-Sep21, the total deposit base recorded growth to stand at PKR 359.9b1n, up 4.2%. During 9MCY2 I, SNBL's total income witnessed an increase of-.4% YOY to stand at PKR 11.4bn (9MCY20: PKR 11bn). NIMR inched up by —4% YoY (9MCY2I: PKR 8.4bn; 9MCY20: PKR 8.1bn). Preprovision operating profitability ended at PKR 3.9b1n (9MCY20: PKR 4.3bIn), and with reversals of PKR 24 ImIn recorded during the period, net profitability increased by —30% to PKR 2.3bn (9MCY20: PICA 1.8bn). The Bank's CASA mix improved to 73.6% (CY20: 68.7%). Moving ahead, the Bank intends to expand its branch network. Continuous growth in deposits would be targeted and along with diversification in deposits portfolio mix.
During 9MCY21, SNBL's gross finances increased by 8.2%. The Bank's ADR inched up to 49.8% as at end-Sep21 (end-Dec20: 47.6%). Infection ratio declined to 5.5% (end-Dec20: 6.2%) owing to marginal decline in non-performing loans. As at end-Sep21, SNBL has an investment book of PKR 236b1n (end-Dec20: PKR 246bIn), majorly comprising of Government securities. As at end-Sep21, the deposit base increased to PKR 360b1n (end-Dec20: PKR 346bIn). The bank's liquidity, in terms of Liquid Assets-to-Deposits and Borrowings ratio, declined to 56% (end-Dec20: 62%). Herein, the bank's leverage ratio (4.0%) safely complies with SBP's requirement i.e. 3%. At end-Sep21, the bank reported CAR of 15.1% (end-Dec20: 17.0%), comprising of Tier I capital to risk-weighted assets at 13.4% (end-Dec20: 14.1%), remaining compliant with the minimum requirement by SBP.