Cargills Bank reports recurring net loss of Rs.16mn for 3Q

5 January 2018 09:53 am - 0     - {{hitsCtrl.values.hits}}

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Cargills Bank Limited made a recurring net loss of Rs.16 million for the third quarter ended in September 30, 2017 from a profit of Rs.26.4 million during the corresponding quarter last year, as loan loss provisions rose and operating expenditure swelled.  


However, the reported profit was Rs. 464.8 million due to the one-off gain resulted from the sale of its only subsidiary, Colombo Trust Finance PLC in September. 
On September 12, Cargills Bank Limited divested its 80.34 percent stake it held in Colombo Trust Finance  to Dialog Axiata PLC for Rs.1.072 billion resulting in a capital gain of Rs. 480.7 million.


The agri-centric lender turned consumer and SME bank has given Rs.4.42 billion in new loans during the nine months to September with a growth in the total loan portfolio of 32.5 percent. 


But this resulted in a higher provision against possible bad loans during the period as the general provisions rose from Rs.23 million to Rs.33 million for the quarter. 
The bank has a total loan book of Rs.18.02 billion and the gross non-performing loan ratio has risen to 2.65 percent from the previous year’s 0.6 percent, its Chairman Louis R. Pages said in an earnings release.  


Meanwhile for the nine months ended in September, the bank reported earnings of Rs.526.6 million, including the one-off gain from a loss of Rs.100 million in the same period 


last year. The net interest income for the quarter rose by 27 percent year-on-year (YoY) to Rs.364.1 million but Page said the margin was lower than what they have anticipated for the period. 


“Higher interest rates coupled with growth in loans and advances portfolio enabled the bank to boost interest income for the period under review.  

The net interest margin was lower than anticipated and the bank would work towards improving yields”, Page said. 


However, the net interest margin remained at 6.55 percent as of the reporting date, significantly higher than the industry average of around 3.5 percent. 


As the bank received a significant capital boost in 2016 by the promoters to stay on course with the Central Bank’s minimum capital rules, the bank is relatively less reliant on high cost deposits. 


As it results in relatively lower cost of funds, the bank can enjoy higher margins as seen by the reported margins. 


The Tier I and Tier II capital adequacy ratios of the bank were 36 percent although the minimum requirement is 7.25 percent and 11.25 percent under the BASEL III rules.    


Meanwhile, the bank virtually doubled its Rs.9.0 billion deposit portfolio to Rs.18.52 billion during the 9 – months mainly through time deposits of one and five year tenors. The bank with only 16 branches extended its reach to over 300 Cargills Food City outlets across the island under the agency banking model enabling the clients to deposit, withdraw and remit cash.

 
The bank recently appointed the veteran banker and its joint Deputy Chairman, Rajendra Theagarajah as the Chief Executive Officer effective from January 1, 2018 while its former CEO Prabhu Mathavan will remain in the board as an executive member. 


As at September 30, the Cargills group held 65 percent stake in the bank while the Employees’ Provident Fund held 4.98 percent stake being the largest outside investor in the bank. 

 

 

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