Soneri Bank Limited (SNBL) deserves recognition for being one of the few players in the Pakistani banking industry that are moving against the bandwagon by focusing more on core banking activities instead of parking funds in government securities.
With its advance-to-deposit ratio (ADR) lingering well above the investment-to-deposit ratio (IDR), SNBL is surely defying the herd mentality. Conversely, a noticeable dip in its ADR with burgeoning IDR during the first quarter of CY13 definitely raises some eyebrows.
During 1QCY13, non performing loans (NPLs) for the bank grew by over 19 percent year-on-year. To put a cap on its toxic assets, SNBLs disinterest towards private sector lending comes as no surprise. Despite a 28 percent year-on-year growth in its earning assets, the top line of SNBL couldn impress, witnessing just a nominal uptick. Who else could be the culprit than the discount rate shaving off 250 basis points since 1QCY12?
SNBLs focus towards mobilising low cost deposits enabled it to hold back its mark-up expenses in spite of a remarkable 25 percent year-on-year growth in deposits. Admirably, the bank was able to keep its CASA intact even amid rising deposits. Among the low cost deposits too, non-remunerative current accounts witnessed the highest year-on-year growth during 1QCY13.
The major blow to the top line comes from the banks growing provisioning charges owing to rising NPLs during the period. Besides, the addition of 19 branches since 1QCY12 also propelled the non mark-up expense during the period.
During an earlier interview with BR Research, President Soneri Bank, Aftab Manzoor had stated that the bank can afford lazy banking as it doesn justify the cost. Being small in size, SNBLs cost of funds and intermediation cost is almost twice than that of large banks. So for SNBL, risky private sector lending is inevitable.
Soneri Bank enjoys an excellent foothold in domestic retail sector. Thus going forward, in order to be successful, the bank should retain its focus on adopting the policy of prudent lending and proactive loan restructurings and recoveries. SNBLs recent initiative to establish a high-performance risk framework for Anti-Money Laundering and Credit Risk Management in association with business analytics leader SAS, would certainly help in this endeavour.
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Soneri Bank Limited
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(Rs mn) chg 1QCY13 1QCY12
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Markup Earned 1% 3,365 3,338
Markup Expenses -4% 2,177 2,277
Net Markup Income 12% 1,188 1,061
Provisioning 205 (52)
Net Markup Income after provision -12% 983 1,113
Non Mark-up / Interest Income 12% 515 459
Operating Revenues -5% 1,498 1,572
Non Mark-up / Interest Expenses 17% 1,040 893
Profit Before Taxation -33% 457 680
Taxation -15% 158 186
Profit After Taxation -39% 300 494
EPS (Rs.) 0.30 0.49
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Source: Company Accounts
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