VIS Reaffirms Entity Ratings of Samba Bank Limited - Press Release issued by VIS Credit Rating Company Limited.

Karachi -- June 23, 2020 (PPI-OT)

Following is the text of press release issued by VIS Credit Rating Company Limited

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VIS Credit Rating Company Limited (VIS) has reaffirmed entity ratings of Samba Bank Limited (SBL) at 'AA/A-1' (Double A/A-One). Outlook on the assigned ratings is 'Stable'. 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 24, 2019.

The assigned ratings incorporate sound profile of its sponsor, Samba Financial Group (SFG). SFG is one of the largest banking groups in Kingdom of Saudi Arabia (KSA). In July 2019, an international rating agency reaffirmed the long-term credit rating of SFG at 'A-' with a stable outlook. Assigned ratings also incorporate standalone financial risk profile of SBL as depicted by sound capitalization indicators, growth in lending portfolio and improvement in operating profitability during the outgoing year.

Gross financing portfolio of SBL witnessed moderate growth of 14.6% to increase to Rs. 64.0b (2018: Rs. 55.9b) at end-2019. Despite considerable growth in lending portfolio, market share of the bank in terms of advances remains on the lower side vis-a-vis peers (2019: 0.8%; 2018: 0.7%). Concentration is witnessed in lending portfolio due to prudent lending practices and limited size of the bank. Asset quality indicators depicted improvement in 2019 vis-a-vis the preceding year. In the emerging weak economic situation due to the pandemic, maintaining asset quality indicators is important from ratings perspective.

Overall liquidity profile of the bank depicts room for improvement in view of higher advances to deposits ratio and lower deposit granularity vis-a-vis peers. Limited branch network contributes to concentration in deposit base. Improvement in liquidity profile in view of projected weak economic outlook is important driver for ratings. Capitalization indicators of the bank remain sound and are expected to remain healthy over the ratings...