The Punjab Provincial Cooperative Bank Limited

CREDIT RATING REPORT | Mar-25

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Rating History
Dissemination Date Long-Term Rating Short-Term Rating Outlook Action Rating Watch
19-Mar-25 BBB+ A2 Stable Maintain -
19-Mar-24 BBB+ A2 Stable Initial -
About the Entity

The Punjab Provincial Cooperative Bank Limited was incorporated in 1924 as a Cooperative Bank under the Cooperative Societies Act, 1912 (repealed) (now the Cooperative Societies Act, 1925). It was given the status of a scheduled bank by the State Bank of Pakistan (SBP) in 1955. The Government of Punjab holds a controlling stake of ~95% of the Bank while the rest of the shareholding is by cooperative societies ~5%.

Rating Rationale

Punjab Provincial Cooperative Bank Ltd. (PPCBL, “the Bank”), a Scheduled Bank established in 1924, remains a pivotal institution in Punjab’s agricultural finance sector, serving 151 branches and anchoring credit delivery to Primary Agricultural Credit Societies (PACS). Governed by cooperative principles, the Bank’s core mandate includes crop financing, livestock loans, and SME support, with ~95% ownership retained by the Government of Punjab. PPCBL has initiated transformative governance measures, including Board reconstitution and senior management recruitment. The Board currently comprises seven members (two independent, five non-executive), with plans to expand to 11 members by FY25 through the addition of one independent, two non-executive, and one executive director. A seasoned leadership team now oversees operations, including incoming CEO Mr. Farrukh Iqbal (effective April 1, 2025), a 30-year veteran with expertise in credit, digital banking, and corporate governance, complemented by CISA/CICA certifications. The Bank reported a deposit base of PKR 8.2 billion (Dec-24: +21% YoY) and advances of PKR 10.6 billion (Dec-24: +14% YoY). Markup income rose to PKR 1.8 billion in 1HFY25 (1HFY24: PKR 1.6 billion), though net profitability fell sharply to PKR 14.5 million (1HFY24: PKR 240.7 million), pressured by lower fee income, elevated credit loss allowances, and write-offs. PPCBL’s equity base (net of revaluation) stood at PKR 8.7 billion (Dec-24), supporting a Capital Adequacy Ratio (CAR) of 38% (Dec-24: 41% in FY23), reflecting adequate capital buffers despite moderation. Liquidity risk is limited, with zero borrowings and PKR 4.7 billion invested in T-Bills as of Dec-24. Implementation of a Core Banking System aims to strengthen internal controls and digitalization efforts, critical for scaling agricultural lending efficiency. While growth has been historically muted, strategic reforms position the Bank to enhance its systemic role in Punjab’s agri-value chain.

Key Rating Drivers

The rating trajectory remains contingent upon the Bank’s successful execution of its transformative governance and operational modernization initiatives, alongside demonstrable strengthening of its risk management framework. Sustained improvement in core profitability metrics underpinned by loan book expansion and deposit franchise growth will be critical, particularly given current pressures on net margins. Additionally, prudent asset quality preservation amid advancing portfolio diversification, coupled with maintenance of capital buffers above regulatory thresholds, will remain key rating sensitivities.

REPORT CONTENTS
  1. Rating Analysis
  2. Financial Summary
  3. Rating Scale
  4. Regulatory Disclosure

The Punjab Provincial Cooperative Bank Limited

rating analysis

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Profile
Structure

The Punjab Provincial Cooperative Bank Limited ('PPCBL' or 'the Bank') was incorporated in 1924 as a Cooperative Bank under the Cooperative Societies Act, 1912 (repealed) (now the Cooperative Societies Act, 1925).


Background

PPCBL was given the status of a scheduled bank by the State Bank of Pakistan (SBP) in 1955. The Bank is operating under the supervision of the Cooperative Department, the Government of Punjab, and the State Bank of Pakistan (SBP).


Operations

The bank’s principal activity is to provide credit facilities to the agricultural sector. At the end - Dec'24, the Bank has 9 zonal offices and 151 branches in the province of Punjab. Additionally, three branches are currently under construction: one in Tandliyan Wala, one in Sangla, and one in Shadrah.


Ownership
Ownership Structure

The Government of Punjab holds a controlling stake of ~95% in The Punjab Provincial Cooperative Bank Limited. The rest of the shareholding is by cooperative societies ~5%.


Stability

The ownership structure of the bank is seen as stable due to the government ownership, and no ownership changes are expected in the future.


Business Acumen

The Bank had a period of low growth; however, since CY21, the Bank has entered into a transformative state with resurged sponsor interest.


Financial Strength

Being government owned, financial strength of the Bank's sponsor is considered strong.


Governance
Board Structure

PPCBL has constituted a seven-member board with two independent and five non-executive directors. Moreover, one independent director, two non-executive directors, and one executive director shall also be on-boarded during FY25 for an eleven-member board. The board structure is congruent with the Bank's business plans and the best practices of the industry.


Members’ Profile

The Chairman of the Board, Miss Musarrat Jabeen, joined in Feb’23 as a Secretary, Govt. of Punjab, Cooperatives Department. She has an extensive work experience of 23 years in different government sectors. Moreover, the other non-executive directors are also representatives of the Government of Punjab having a diverse experience.


Board Effectiveness

The board has already taken major steps towards streamlining operations of the Bank, whereas formation of board committees has also been completed.


Financial Transparency

Munif Ziauddin & Co. Chartered Accountants are the external auditors of the company. They have issued a qualified opinion on the financial statements for the fiscal year 2024. The firm is in the A Category of SBP’s panel of auditors. The Company also has an internal audit department for a better control framework.


Management
Organizational Structure

The bank has a well- developed organizational structure with experienced senior management. PPCBL has recently enhanced its organizational structure by the addition of all requisites departments and departmental heads.


Management Team

The senior management consists of seasoned bankers having diversified experience. The Management Team is headed by Mr. Saleem Tahir who joined PPCBL in CY22 and is currently the Chief Operating Officer and the acting President/CEO. Mr. Farrukh Iqbal has been appointed as the new CEO of PPCBL, effective April 1, 2025. With over 30 years of experience in banking and qualifications in business administration, CISA, CICA, and a Banking Diploma, he brings extensive expertise to the role.


Effectiveness

The bank's management structure comprises of three management-level committees: i) Risk Management Committee, ii) Compliance Committee, iii) Corporate Management Team, and, iv) IT Steering Committee. The Committees are tasked with overseeing day-to-day operations and implementing the board's outlined strategy.


MIS

A comprehensive IT security policy has been put in place along with risk mitigation protocols. PPCBL has installed different software to manage different departments. A recent overhaul of the IT systems has been done, with the Bank having installed a state-of-the-art Core Banking System to effectively manage its risks and operations.


Risk Management Framework

The risk management framework is based on prudent risk identification, measurement, management and monitoring processes which are closely aligned with the activities of the bank. The framework combines core policies, procedures and process designs with broad oversight. It is supported by an efficient monitoring mechanism across the bank to ensure its risks are kept within an acceptable level.


Business Risk
Industry Dynamics

Pakistan's economy showed mixed results in H1FY25, with GDP growth of 0.92%, led by agriculture and services, while industry contracted. The SBP reduced the policy rate to 12% but paused further cuts in March despite low inflation. The banking sector remained stable, with assets growing by 11.5% and a 20% Capital Adequacy Ratio. Foreign direct investment and IT exports increased, reflecting cautious optimism for the economy.


Relative Position

PPCBL has a market share of ~0.01% at end-Dec'24 in terms of deposits. The customer deposit base stands at ~PKR 8bln as of end-Dec’24. The Bank had a period of low to no growth over the past few years; however, is poised to grow its business and achieve a higher market share with the conclusion of its transformation.


Revenues

During 1HFY25, PPCBL’s net markup interest income witnessed an incline of ~2.3% to stand at ~PKR 1.23bln (1HFY24: ~PKR 1.20bln) primarily attributed to increased markup earnings amounted to ~PKR 1.8bln (1HFY24: ~PKR 1.7bln), whereas, the Company generated a net profit of ~PKR 15mln as compared to the net profit of ~PKR 240mln.


Performance

During 1HFY25, PPCBL’s net markup interest income witnessed an incline of ~2.3% to stand at ~PKR 1.23bln (1HFY24: ~PKR 1.20bln) primarily attributed to increased markup earnings amounted to ~PKR 1.8bln (1HFY24: ~PKR 1.7bln), whereas, the markup expenses increased to stand at ~PKR 562mln (1HFY24: ~PKR 485mln). During 1HFY25, net profitability fell sharply to PKR 14.5 million (1HFY24: PKR 240.7 million), pressured by lower fee income, elevated credit loss allowances, and write-offs. The non-markup expenses also grew by 19% to stand at PKR 1.3bln (Dec’23: PKR 1.1bln).


Sustainability

The management aims to expand the deposit base and enhance customer diversity.The implementation of modern technological tools is envisioned to bolster control measures and operational efficiency.


Financial Risk
Credit Risk

At end-Dec’24, PPCBL's net advances have grown by 13% YoY to stand at PKR 11bln (end- Dec'23: PKR 9.4bln). As of dec’24, ADR was reported at 129%, NPLs stood at PKR 485mln. Consequently, the infection ratio of the bank inched up to 3.5%.


Market Risk

at the end of Dec’24, the investment portfolio of the bank had increased by ~1.2%, which stood at ~PKR 5.5bln (SPLY: ~PKR 5.4bln). The composition of the investment portfolio was ~87% of the T-bills and the remaining ~13% of other non-government securities. i.e. ~PKR 4.7bln and ~PKR 0.8mln respectively.


Liquidity and Funding

At end Dec’24, customer deposits increased by ~2.7%, which stood at ~PKR 8.2bln (at end Jun’24: ~PKR 7.9bln).


Capitalization

At end-Dec’24, the bank reported CAR of ~ 37.8% (end-Dec’23: ~41.5%) comprising of Tier I capital (~27%). The equity of PPCBL at end-Dec’24 stood at ~PKR 24.42bln (Jun’24: ~PKR 24.33bln).
 
 

Mar-25

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The Punjab Provincial Cooperative Bank Limited

financial summary

(PKR mln)

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Dec-24
6M		 Jun-24
12M		 Jun-23
12M		 Jun-22
12M
BALANCE SHEET
1. Total Finances - net 10,264 9,815 10,392 7,672
2. Investments 5,485 6,279 3,312 4,129
3. Other Earning Assets 1,741 1,220 1,331 1,006
4. Non-Earning Assets 17,987 17,935 17,397 18,004
5. Non-Performing Finances-net 349 268 234 488
Total Assets 35,826 35,517 32,665 31,298
6. Deposits 8,200 7,983 6,224 5,015
7. Borrowings 0 88 0 0
8. Other Liabilities (Non-Interest Bearing) 3,202 3,106 2,444 2,845
Total Liabilities 11,402 11,177 8,668 7,860
Equity 24,425 24,340 23,998 23,438
INCOME STATEMENT
1. Mark Up Earned 1,800 3,580 2,689 2,001
2. Mark Up Expensed (562) (1,070) (636) (211)
3. Non Mark Up Income 161 282 281 157
Total Income 1,399 2,792 2,334 1,947
4. Non-Mark Up Expenses (1,293) (2,048) (1,775) (1,574)
5. Provisions/Write offs/Reversals (18) 31 146 2
Pre-Tax Profit 89 774 705 374
6. Taxes (75) (243) (82) (17)
Profit After Tax 15 531 623 357
RATIO ANALYSIS
1. Performance
Net Mark Up Income / Avg. Assets 6.9% 7.4% 6.4% 6.4%
Non-Mark Up Expenses / Total Income 92.4% 73.4% 76.1% 80.9%
ROE 0.1% 2.2% 2.6% 1.9%
2. Capital Adequacy
Equity / Total Assets (D+E+F) 68.2% 68.5% 73.5% 74.9%
Capital Adequacy Ratio 41.4% 41.4% 40.1% 38.2%
3. Funding & Liquidity
Liquid Assets / (Deposits + Borrowings Net of Repo) 98.3% 96.5% 78.8% 123.9%
(Advances + Net Non-Performing Advances) / Deposits 129.4% 126.3% 170.7% 162.7%
CA Deposits / Deposits 16.3% 20.2% 18.1% 23.0%
SA Deposits / Deposits 75.6% 71.1% 70.5% 64.4%
4. Credit Risk
Non-Performing Advances / Gross Advances 3.3% 2.7% 14.7% 22.2%
Non-Performing Finances-net / Equity 1.4% 1.1% 1.0% 2.1%

Mar-25

www.pacra.com

The Punjab Provincial Cooperative Bank Limited

rating scale

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Mar-25

www.pacra.com

The Punjab Provincial Cooperative Bank Limited

regulatory disclosure

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  1. Rating Team Statements
    1. Rating is just an opinion about the creditworthiness of the entity and does not constitute a recommendation to buy, hold, or sell any security of the entity rated or to buy, hold, or sell the security rated, as the case may be. (Chapter III; 14-3-(x))
    2. Conflict of Interest
      1. The Rating Team or any of their family members have no interest in this rating (Chapter III; 12-2-(j))
      2. PACRA, the analysts involved in the rating process, and members of its rating committee and their family members do not have any conflict of interest relating to the rating done by them (Chapter III; 12-2-(e) & (k))
      3. The analyst is not a substantial shareholder of the customer being rated by PACRA [Annexure F; d-(ii)]
      4. Explanation: for the purpose of the above clause, the term "family members" shall include only those family members who are dependent on the analyst and members of the rating committee.
  2. Restrictions
    1. No director, officer, or employee of PACRA communicates the information acquired by him for use for rating purposes to any other person, except where required under law to do so. (Chapter III; 10-(5))
    2. PACRA does not disclose or discuss with outside parties or make improper use of the non-public information which has come to its knowledge during a business relationship with the customer. (Chapter III; 10-7-(d))
    3. PACRA does not make proposals or recommendations regarding the activities of rated entities that could impact a credit rating of the entity subject to rating. (Chapter III; 10-7-(k))
  3. Conduct of Business
    1. PACRA fulfills its obligations in a fair, efficient, transparent, and ethical manner and renders high standards of services in performing its functions and obligations. (Chapter III; 11-A-(a))
    2. PACRA uses due care in the preparation of this Rating Report. Our information has been obtained from sources we consider to be reliable, but its accuracy or completeness is not guaranteed. PACRA does not, in every instance, independently verify or validate information received in the rating process or in preparing this Rating Report. (Clause 11-(A)(p))
    3. PACRA prohibits its employees and analysts from soliciting money, gifts, or favors from anyone with whom PACRA conducts business. (Chapter III; 11-A-(q))
    4. PACRA ensures before the commencement of the rating process that an analyst or employee has not had a recent employment or other significant business or personal relationship with the rated entity that may cause or may be perceived as causing a conflict of interest. (Chapter III; 11-A-(r))
    5. PACRA maintains the principle of integrity in seeking rating business. (Chapter III; 11-A-(u))
    6. PACRA promptly investigates in the event of misconduct or a breach of the policies, procedures, and controls, and takes appropriate steps to rectify any weaknesses to prevent any recurrence, along with suitable punitive action against the responsible employee(s). (Chapter III; 11-B-(m))
  4. Independence & Conflict of Interest
    1. PACRA receives compensation from the entity being rated or any third party for the rating services it offers. The receipt of this compensation has no influence on PACRA’s opinions or other analytical processes. In all instances, PACRA is committed to preserving the objectivity, integrity, and independence of its ratings. Our relationship is governed by two distinct mandates: i) rating mandate - signed with the entity being rated or issuer of the debt instrument, and ii) fee mandate - signed with the payer, which can be different from the entity.
    2. PACRA does not provide consultancy/advisory services or other services to any of its customers or their associated companies and associated undertakings that are being rated or have been rated by it during the preceding three years, unless it has an adequate mechanism in place ensuring that the provision of such services does not lead to a conflict of interest situation with its rating activities. (Chapter III; 12-2-(d))
    3. PACRA discloses that no shareholder directly or indirectly holding 10% or more of the share capital of PACRA also holds directly or indirectly 10% or more of the share capital of the entity which is subject to rating or the entity which issued the instrument subject to rating by PACRA. (Chapter III; 12-2-(f))
    4. PACRA ensures that the rating assigned to an entity or instrument is not affected by the existence of a business relationship between PACRA and the entity or any other party, or the non-existence of such a relationship. (Chapter III; 12-2-(i))
    5. PACRA ensures that the analysts or any of their family members shall not buy, sell, or engage in any transaction in any security which falls in the analyst’s area of primary analytical responsibility. This clause, however, does not apply to investments in securities through collective investment schemes. (Chapter III; 12-2-(l))
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  5. Monitoring and Review
    1. PACRA monitors all the outstanding ratings continuously, and any potential change therein due to any event associated with the issuer, the security arrangement, the industry, etc., is disseminated to the market immediately and in an effective manner after appropriate consultation with the entity/issuer. (Chapter III; 17-(a))
    2. PACRA reviews all the outstanding ratings periodically on an annual basis. Provided that public dissemination of annual review and in an instance of change in rating will be made. (Chapter III; 17-(b))
    3. PACRA initiates an immediate review of the outstanding rating upon becoming aware of any information that may reasonably be expected to result in downgrading of the rating. (Chapter III; 17-(c))
    4. PACRA engages with the issuer and the debt securities trustee to remain updated on all information pertaining to the rating of the entity/instrument. (Chapter III; 17-(d))
  6. Probability of Default
    1. PACRA’s Rating Scale reflects the expectation of credit risk. The highest rating has the lowest relative likelihood of default (i.e., probability). PACRA’s transition studies capture the historical performance behavior of a specific rating notch. Transition behavior of the assigned rating can be obtained from PACRA’s Transition Study available at our website. (www.pacra.com) However, the actual transition of rating may not follow the pattern observed in the past. (Chapter III; 14-3(f)(vii))
  7. Proprietary Information
    1. All information contained herein is considered proprietary by PACRA. Hence, none of the information in this document can be copied or otherwise reproduced, stored, or disseminated in whole or in part in any form or by any means whatsoever by any person without PACRA’s prior written consent.

Mar-25

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