Research Analyst
1 - 7, 2010

Soneri Bank Ltd is engaged in banking services, and operates in corporate, commercial, and retail banking.

Corporate banking includes syndicated financing and services provided in connection with mergers and acquisition, underwriting, privatization, securitization, research, debts, equity, syndication, IPO, and secondary private placements. Trading and sales include fixed income, equity, foreign exchanges, commodities, credit, funding, own position securities, lending and repos, brokerage debt and prime brokerage.

Retail banking includes retail lending and deposits, banking services, trust and estates, private lending and deposits, banking service, trust and estates investment advice, merchant/commercial/corporate cards and private labels and retail.

Commercial banking includes project financing, real estate, export finance, trade finance, factoring, leasing, lending, guarantees, bills of exchange, and deposits. The bank now operates with 154 branches spread all over Pakistan including the northern areas of the country.


The period under review (Jan-Sep, 2009) was full of challenges for the banking industry due to stagnancy in growth, increasing defaults, downturn in industrial production and exports, issue of national security, and unfavorable balance of payments position. This resulted in a major decline in the profitability of the banks. However, Soneri bank is making its way forward keeping liquidity and other business risks within acceptable levels.




SEP 30, 2009 SEP 30, 2008
Profit before provisions and taxation 1,336,289 1,737,086
Provisions (1,193,115) (705,131)
Profit before taxation 143,174 1,031,955
Taxation (26,557) (315,141)
Profit after taxation 116,617 716,814
EPS (Rs) 0.23 1.43

During the period, despite a surge of 15% in net interest income (NII), cumulative earnings of the sector were recorded at Rs 44.1bn, a decline of 23% over Rs 57.4bn in 9M08.

NII of the listed banks grew by 15% to Rs 183.5bn largely due to higher banking spreads. The sector's advances growth remained lukewarm at 3% while average spreads during first 8 months in 2009 were recorded at 7.53% versus 7.11% in the same period of last year. However, non-interest income registered a decline of 5% to Rs 61.0bn as against Rs 64.2bn in 9M09 despite a significant 2.6-fold rise in capital gain to Rs 5.3bn.

Dividend and income from dealing in foreign currency dropped 40% and 16% to Rs 5.5bn and Rs 11.3bn, respectively. During 9M09, the sector's total provision and write-offs expenses reached Rs 58.4bn as compared to Rs 34.7bn in the same period of last year - up by 68%.

Credit provisions swelled by 54% to Rs 49.3bn. Though the flow of fresh NPLs has started to slowdown, the continuous downgrading of exposures forced the banks to book provisions in the 9M09 accounts. Moreover, the banks with higher exposure in consumer finance also wrote down the loans. As a result, bad debt written-offs also increased to Rs 5.2bn from Rs 2.4bn a year earlier.

On the other hand, provisions against pending diminution in value of investment were recorded at Rs 3.9bn versus Rs 278m only in the last year's similar period. Administrative expenses grew 13% to Rs 112.5bn during the period under review due to persistent inflationary pressure. Consequently, the cost to income ratio of the sector has also moved up to 46.0% from 44.4% a year earlier.


INDICATORS 2007 2006 2005 2004 2003
Investments - Net 19,181,562 16,724,253 16,390,624 13,982,828 11,912,517
Advances - Net 40,154,449 35,412,248 32,052,544 24,375,905 17,348,525
Deposits & other Accounts 60,150,128 53,000,647 47,605,508 37,383,756 27,868,418
Profit before taxation 1,476,685 1,448,901 1,400,032 1,046,566 813,512
Profit after taxation 1,000,334 985,298 920,233 648,380 438,712
Net Assets 6,610,479 5,611,903 4,389,659 3,043,308 2,603,846
EPS - Basic/Diluted 2.43 2.39 3.08 3.92 3.45


Soneri Bank offers premium deposit rate to individuals, minors, charitable institutions, provident fund, and other funds of benevolent nature, local bodies, autonomous corporations, limited companies, firms, associations, educational institutions, clubs etc. who retain their savings for a fixed period of 12 months, thereby earning a most lucrative rate of return thereon.

The depositors have the option to reinvest the deposit automatically with or without profit.


The period under review was challenging since there was a perpetual economic slowdown and the NPLs exerted full-throated pressures on earnings of the bank. However, the bank managed to earn a profit. This indicates that the bank has the potential to remain profitable. The bank has also displayed flexibility in choosing its earning asset base. The bank also maintains a respectable credit rating of AA- (long term) and A1+ (short term) plus an A+ rating for the TFC category.

The bank is striving to expand its services and products base to accommodate more customers. Their innovative products such as the generator financing scheme has the potential for growth in times of worsening power crisis specially the in the upper Pakistan. The bank is adamant about its strategy and hopes to aggressively compete with the market forces to remain profitable. Soneri Bank is also expanding its branch network further for a greater financial outreach.