Lahore, December 21, 2020 (PPI-OT): The ratings reflect Soneri Bank’s maintained business profile as reflected by slightly-inched up system share (9MCY20: 1.9%, CY19: 1.8%). Markup Income witnessed jump attributable to hike in asset yield and higher earning asset on a period on period basis. The net revenue witnessed significant increase whilst gain on securities was also recorded. Core Spread witnessed a dip (9MCY20: 3.7%, 9MCY19: 4.4%) on the back of reduced policy rates.

Sustainability in NIMR and non-markup income, continued enhancement in non-fund based exposure is important for future years. SNBL’s customer deposits grew and CASA ratio experienced uptick (9MCY20: ~67%; 9MCY19: ~59%); where deposits remained tilted towards saving. Going forward deposit mobilization remains critical.

Covid-19 has posed challenges to all segments of the economy, worldwide and domestically, most sectors are getting negatively impacted. The ramifications would continue to unfold, warranting vigilance and timely actions where needed. The central bank has taken well-tailored and comprehensive actions including reduction in key policy rates (~625bps down since January 2020) and deferment of repayment obligations for a defined period.

While reduction in interest rates would determine the bank’s profitability, these measures have cushioned the allied risks surrounding the credit exposures. The Investment book has expanded significantly and fueled by borrowings from financial institutions. The bank’s total CAR stands at 17.3%. The bank also issued additional Tier-1 TFC (PKR 4,000mln) in CY18, thereby boosting its lending capacity.

The rating is a function of 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.

For more information, contact:
Analyst,
The Pakistan Credit Rating Agency Limited (PACRA)
Awami Complex, FB1, Usman Block New Garden Town,
Lahore, Pakistan
Tel: +92-42-5869504-6
Fax: +92-42-5830425
Email: hammad.rashid@pacra.com
Website: www.pacra.com

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