PACRA Upholds Samba Bank Limited’s Debt Instrument Rating Amid Ownership Change

Islamabad, The Pakistan Credit Rating Agency (PACRA) has maintained its debt instrument rating for Samba Bank Limited (SBL), supported by the strong financial profile of its major shareholder, Saudi National Bank (SNB), the largest commercial bank in Saudi Arabia. This affirmation comes amidst discussions of a potential ownership change, as SNB considers a non-binding offer from Bank Alfalah Limited for its 84.51% stake in SBL.

According to The Pakistan Credit Rating Agency Limited, the rating reflects not only the support SBL receives from SNB but also its solid standalone attributes, including a robust capital adequacy ratio (CAR) of 21.3% in CY23, up from 18.7% in CY22. This level is well above the regulatory minimum, underscoring the bank's increased risk absorption capacity. Additionally, SBL reported a significant rise in net mark-up income to PKR 8.1 billion in CY23, largely due to the surge in policy rate, compared to PKR 4.7 billion in CY22.

The review highlighted SBL's prudent management practices, such as optimizing its Advances to Deposits ratio to 64.0% in CY23 from 70.7% in CY22 and maintaining rigorous infection exposure recognition, resulting in an infection ratio increase to 9.1% in CY23 from 6.5% in CY22. Furthermore, SBL's strategic adjustments to its government securities portfolio, reducing it to PKR 70.4 billion in CY23 from PKR 76.9 billion in CY22, demonstrate a deliberate risk mitigation approach.

The NPL (Non-Performing Loan) Coverage Ratio has consistently hovered around 100%, emphasizing the bank's resilience. SBL's equity stood firm at PKR 16.4 billion as of CY23. The bank also successfully fulfilled the 06th redemption of its Tier-II TFC on March 01, 2024.

PACRA's rating outlook is contingent on SBL's ability to maintain its risk profile, improve performance parameters, uphold asset quality, enhance its deposit market share, diversify income streams, sustain its CAR cushion, and uphold strong governance practices.