The hefty provisions made against possible bad loans eroded an otherwise good performance at Cargills Bank, as the lender increased its top line and expanded its loan book during the first three months of the year.
The interim results published by the licensed lender of the Cargills group reported a net interest income of Rs.461.6 million for the three months ended March 2018, up 41 percent from the same period last year.
The operating profit also rose by a strong 38 percent year-on-year to Rs.538.4 million.
The newest lender in the industry with an asset base of Rs.35.7 billion managed to expand its loans and receivables book by 16 percent during the three month which translates into Rs.3.3 billion in loans for the period.
Further, the bank grew its deposit base by 10 percent or 1.8 billion to Rs. 20.6 billion.
This was mainly from a foreign currency savings account with a value of Rs.2.0 billion.
Due to this deposit or a combination of a few, the bank managed to operate with 34 percent of its deposits in low-cost funds.
Cargills Bank recently came up with some innovative savings and payment options linked to its state-of-the-art digital banking platform.
The bank’s initial strategy to leverage its existing 300 plus Cargills supermarket stores are yet to yield any results, the interim results showed.
Meanwhile, the bank’s intention to grow its bottom line by the way of rapid expansion in loans has a cost – its higher provisions made for possible bad loans.
Such provisions made for individual clients rose by 263 percent YoY to Rs.54.3 million while the generally made provisions on the entire loan portfolio rose by 902 percent YoY to Rs.24.9 million.
Thus the earnings for the period fell by 57 percent YoY to Rs.18.3 million or 2 cents.
Cargills Ceylon PLC and its ultimate parent CT Holdings PLC together held 65 percent in Cargills Bank Limited while the Employees’ Provident Fund held another 4.98 percent stake in the bank being the second largest shareholder after the promoters.