Core operations growth underpins solid Q1 performance at Cargills Bank | Sunday Observer

Core operations growth underpins solid Q1 performance at Cargills Bank

21 May, 2023
Managing Director/CEO Senarath Bandara
Managing Director/CEO Senarath Bandara

* Operating Profit before taxes reported at Rs.259Mn, vs. loss of Rs.31Mn in 1Q2022

* Total Asset base rose 11% QoQ to Rs.60Bn

* Near term environment remains challenging amidst softening margins and credit quality stress

Cargills Bank reported a profit after tax of Rs.106 mn for 1Q2023, vs. a loss of Rs. 58 mn in 1Q, 2022. 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.863Mn, 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 & Advances increasing 8% QoQ.

The Bank reported Net Fee & Commission Income of Rs.227Mn, 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.1.2 bn.

The Bank reported impairment charges of Rs.278Mn 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 1Q, 2022.

The Bank reported an Operating Profit before taxes of Rs.259Mn, a sharp improvement from the loss before taxes of Rs.31Mn reported in the corresponding quarter.Profit after tax, at Rs.106Mn, 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.

Managing Director/CEO of Cargills Bank, Senarath Bandara, commenting on the performance of the Bank said, “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. The gradual 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 opportunitiesin the medium term.

The Bank has opened three mini locations thisyear and plans to open its 24th branch in Bandarawela in June, strengthening its footprint in key Agriculture and Commercial hubs. Further expansion of our footprint is in our plans for the year.

The Bank has commenced preparations for its Initial Public Offering in 2023 in line with our regulatory commitments. Further details will be shared in the coming months, culminating in the listing targeted in 4Q2023.

We welcome Ravi Jayawardena, Group Chief Executive Officer of Maliban Biscuits (Pvt) Ltd,to the Board as an Independent Non-Executive Director. Jayawardena has extensive expertise in the areas of Human Resources, Marketing and Market Development, and we look forward to his contribution to realise the vision of Cargills Bank.”

Cargills Bank has a supported National Long-Term Rating of A(lka), which is on par with or better than its banking sector peers. The Bank maintained healthy capital and liquid asset ratios during the quarter, reporting a Total Capital Ratio of 22.48% and Liquid Asset Ratio of 32.00% as at 31stMarch 2023.

With a vision to be the most inclusive bank in Sri Lanka, Cargills Bank offers customers a full range of products and services including savings accounts, investment planner accounts, credit and debit cards, consumer loans, agriculture and micro financing, SME & Business Banking solutions and trade facilities. The Bank also provides a range of flexible and convenient digital banking services, ensuring 24/7 access and absolute convenience. Cargills Bank accounts are also accessible through Cargills FoodCity outlets island-wide courtesy of the Cargills Cash service and customers enjoy free cash withdrawals and deposits at any Cargills FoodCity counter. The Bank is headquartered in Colpetty, Colombo and maintains a network of branches and MINI locations at key commercial and agriculture hubs across the country.