Press Release

VIS Assigns Positive Outlook to Samba Bank Limited

Karachi, June 28, 2021: VIS Credit Rating Company Limited (VIS) has maintained the entity ratings of Samba Bank Limited (‘SBL’ or ‘the Bank’) at ‘AA/A-1’ (Double A/A-One). Outlook on the assigned ratings has been revised from ‘Stable’ to ‘Positive’. The long term rating of ‘AA’ signifies high credit quality; protection factors are strong. Risk is modest but may vary slightly from time to time because of economic conditions. The short term rating of ‘A-1’ signifies high certainty of timely payment; liquidity factors are excellent and supported by good fundamental protection factors. Risk factors are minor. Previous rating action was announced on June 23, 2020.

The revision in rating outlook takes into account change in sponsor profile. In H1’2021, the Samba Financial Group (SFG) of the Kingdom of Saudi Arabia (KSA) has merged with National Commercial Bank (NCB) in KSA, forming a new entity by the name of Saudi National Bank (SNB). Previously NCB was the largest bank in the Kingdom of Saudi Arabia (KSA), with an asset base of USD 160b approximately as at end of December 2020 i.e. more than twice the asset base of SFG. The merged entity, SNB, will now be the largest bank of KSA, having an asset base of more than USD 220b as at end of June 2021, and an Issuer Default Rating of ‘A-’ on the international scale.

The assigned ratings of SBL continue to factor in sound capitalization indicators and maintained market positioning. During the period under review, SBL posted moderate growth, which mainly emanated from an increase in borrowings, accompanied by comparatively low growth in deposit base. Akin to the industry, we have noted rationalization in ADR, albeit it continues to trend on the higher side vis-à-vis peers. Corporate segment remained the largest segment in SBL’s loan book, while growth during the period under review largely emanated from the Commercial & SME segments, with modest growth in consumer segment as well, which was auto-financing driven. Overall market share of the Bank in terms of advances and deposits has been maintained.

Overall, the NPLs of the Bank increased specifically as a large-sized client became non-performing, albeit the management has prudently provisioned for the same, keeping SBL’s net infection much lower than peer median. SBL’s profitability indicators depict further room for improvement, when compared to the AA rated banks. Cognizant of the effectiveness of branch banking model common across the industry, there are plans to open branches in the medium term. Even though this will push the operating overheads upwards in the short-term, in the longer term horizon it should allow the Bank to attract low cost funding and improve its net interest margin.

The revised outlook qualifies potential direction of assigned rating. An upgrade in SBL’s rating is contingent upon implementation of new strategy and translation in operating performance. VIS will continue to closely monitor the business & financial risk profile of SBL on quarterly basis.

For further information on this rating announcement, please contact the undersigned (Ext: 306) or Arsal Ayub, CFA (Ext: 214) at 021-35311861-71 or fax to 021-35311872-3.

Faryal Ahmad Faheem
Deputy CEO

Applicable rating criterion: Commercial Banks Methodology - June 2020

Information herein was obtained from sources believed to be accurate and reliable; however, VIS Credit Rating Company Limited (VIS) does not guarantee the accuracy, adequacy or completeness of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information.VIS , the analysts involved in the rating process and members of its rating committee do not have any conflict of interest relating to the rating(s)/ranking(s) mentioned in this report.VIS is paid a fee for most rating assignments. This rating/ranking is an opinion and is not a recommendation to buy or sell any securities. Copyright 2021 VIS Credit Rating Company Limited . All rights reserved. Contents may be used by news media with credit to VIS .

VIS Credit Rating Company Limited