Cargills Bank Limited turned a net profit of Rs.26 million for the year ended December 31, 2016 (FY16), from a loss of Rs.315.8 million incurred in 2015 as the banking group benefitted from the rising interest rates because it could keep the bank’s cost of funds down largely due to the receipt of fresh equity during the year while increasing its low cost deposit base, the bank’s financial accounts showed.
Cargills Bank group comprises of the licensed commercial bank and Capital Alliance Finance PLC, a licensed finance company it acquired in 2014.
The bank, on a standalone basis, reported a net profit of Rs.12.1 million, recovering from a loss of Rs.316.2 million a year ago.
During the year, Cargills Bank raised Rs.5.8 billion in fresh equity through a combination of rights issue and a private placement to bring the core capital base up to Rs.10 billion to comply with the Central Bank’s minimum capital rules.
The bank also extended its efforts to improve its low cost deposit base measured through the Current and Savings Accounts (CASA). The CASA ratio improved from 20.6 percent to 27.2 percent when almost all other banks saw their CASA ratios falling.
Out of the Rs.5.5 billion growth in its deposits in 2016, slightly over Rs.1.75 billion has been raised from current and savings accounts. The bank on a standalone basis has a deposit base of Rs.9.4 billion.
The banking group increased its net interest income (NII) by 152 percent to Rs.1.05 billion as interest income rose at a faster pace than the interest expense.
Making further in-roads in to CASA, the bank this month launched its Cargills Cash Savings Account with a state-of-the art mobile app enabling the users to deposit and withdraw cash through Cargills Food City check-out counters, purchase goods using the app and send cash to any mobile with the same app.
The ability to deposit and withdraw cash via over 300 plus Food City outlets will give much leverage for the bank to mobilize deposits without much effort and without the need to spend on capital expenditure – a luxury its competitors do not have.
The bank could also improve its fee incomes as purchases could be made via the mobile app. During the year fee and commission incomes doubled to Rs.79.9 million.
Meanwhile, the bank granted loans to the tune of Rs.7.0 billion, bringing the total gross loans and receivables up to Rs.13.6 billion.
Overdrafts and personal loans, which generally fetch a higher yield than other loans, accounted for Rs.2.2 billion of the new loans granted during the year.
These higher yielding facilities coupled with the low cost funding profile of the bank, were able to double its net interest margin to 6.47 percent from 3.22 percent a year ago.
The bank now has an asset base of Rs.20.9 billion and operates with a branch network of 15 and a staff pool of 430.
Asset quality continues to improve as the gross non-performing loan ratio came down to 0.94 percent from 1.31 percent at the beginning of the year.
However, the bank made some higher provisions for possible bad loans compared to last year.
The bank’s capital adequacy levels stand healthy with both Tier I and Tier II capital adequacy ratios remaining above 50 percent.