Cargills Bank posts Rs 259 Mn Q1 operating PBT
Cargills Bank reported a profit after tax of Rs.106 Mn for 1Q2023, vs. a loss of Rs.58 Mn in 1Q2022. The results were driven by strong progress in its core business and lower impairment charges during the quarter.
Net Interest Income rose 52% YoY to Rs.863 Mn, driven by the high interest rate environment prevalent during the quarter and expansion of the Bank’s Total Assets by 11% QoQ to Rs.60 Bn, with Loans and Advances increasing 8% QoQ. The Bank reported Net Fee & Commission Income of Rs.227 Mn, up 56% YoY,with growth in transaction volumes reported in the business lines of Card Services, Trade and Remittances. Meanwhile, Total Other Income declined 42% YoY to Rs.124Mn due to lower foreign exchange gains during the quarter.
As a result of the resilient operating performance, Total Operating Income rose 31% YoY to Rs.1.2Bn. The Bank reported impairment charges of Rs.278 Mn in 1Q2023, down 32% YoY. Nevertheless, managing credit quality remains a challenge as the weak economic environment continues to impact customers’ ability to meet their scheduled payments. Total operating expenses rose 23% YoY to Rs.677 Mn, largely on account of a 47% YoY increase in Other Operating Expenses due to the impact of currency depreciation on the expense base and higher utility and other costs.
Nevertheless, with the higher growth reported in income over expenses, the Bank’s Cost to Income ratio moderated to 56% in 1Q2023 from 60% in 1Q2022. The Bank reported an Operating Profit before taxes of Rs.259 Mn, a sharp improvement from the loss before taxes of Rs.31Mn reported in the corresponding quarter.Profit after tax, at Rs.106 Mn, was impacted by higher taxes on account of both VAT on financial services and corporate income tax. A net fair value gain of Rs.156 Mn on investments in financial assets, reflected in Other Comprehensive Income, brought the Bank’s Total Comprehensive Income for the quarter to Rs.262 Mn.
Senarath Bandara, Managing Director/CEO of Cargills Bank stated, “We are pleased to carry the positive earnings trend into 2023 in what continues to remain a challenging near-term environment. Our focus has been to manage portfolio quality and the narrowing interest spreads while selectively growing our portfolio to maintain the positive earnings trajectory. “Thegradual improvement in economic indicators and ongoing negotiations with the IMF augur well for a recovery of the Sri Lankan economy, which should alleviate the portfolio quality stress faced by the sector and provide renewed growth opportunities in the medium term.”
The Bank has opened three MINI locations this year and plans to open its 24 th branch in Bandarawela in June. The Bank has commenced preparations for its Initial Public Offering in 2023 in line with our regulatory commitments.