Karachi, Samba Bank Limited (SBL) has maintained its debt instrument rating, as affirmed by The Pakistan Credit Rating Agency Limited (PACRA). The bank's rating is bolstered by the robust profile of its sponsoring group, the Saudi National Bank (SNB), the largest commercial bank in Saudi Arabia.
According to Pakistan Credit Rating Agency Limited, the financial strength of SNB, with an equity base of SAR 167 billion as of December 2022, significantly supports SBL’s position. SBL’s Capital Adequacy Ratio (CAR) as of the third quarter of 2023 stood at 19.8%, surpassing the minimum requirement set by the State Bank of Pakistan (SBP) and reflecting an upward trend from the previous year. This improvement in CAR enhances SBL’s risk absorption capacity, a key factor in the assigned debt instrument rating.
The bank has recorded a notable increase in net mark-up income during the first nine months of 2023, primarily due to the surge in the policy rate. SBL has also optimized its Advances to Deposits Ratio (ADR) to 54.0%, a prudent shift from 70.7% in the previous year. This strategy is part of the bank’s focus on recognizing all infectious exposures, as reflected in the increasing infection ratio.
SBL’s investment portfolio is primarily concentrated in government securities. During the same period, there was a noticeable decline in the investment portfolio, attributed to a strategic decision to offload securities and reduce duration to minimize risk. The significant improvement in the coverage of Non-Performing Loans (NPLs) is also a positive development. As of the third quarter of 2023, SBL's equity stood at PKR 15.3 billion.
The bank successfully completed the 5th redemption of its Tier-II Term Finance Certificates (TFC) due on September 1, 2023. PACRA’s rating is contingent upon SBL’s ability to maintain its risk profile and improve performance parameters. Key factors include upholding asset quality, increasing deposit shares in the banking sector, diversifying income streams, maintaining a CAR cushion, and upholding a strong governance framework.
About Samba Bank: Majorly owned by the Saudi National Bank, Samba Bank Limited operates with an 84.51% stake held by SNB. The bank has expanded its network to 47 branches in 15 major cities. The eight-member board, including President and CEO Mr. Ahmed Tariq Azam, reflects a strong representation from SNB.
About the Instrument: SBL issued PPTFC-TIER II in March 2021, amounting to PKR 5,000 million, with a 10-year tenure and a profit rate of 6MK+135bps, payable semi-annually. This instrument is callable from March 2026 with SBP approval. The TFC issue is unsecured and subordinated to other bank indebtedness. It includes a lock-in clause and is subject to loss absorbency as per Basel III Guidelines, with provisions for conversion or write-off in case of a Point of Non-Viability (PONV) event.