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​Cargills Bank 4Q net up over tax gains

9 March 2015 04:28 am - 0     - {{hitsCtrl.values.hits}}

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The banking arm of the Cargills group, Cargills Bank Limited (CBL), posted a net profit of Rs.44 million (10 cents per share) for the quarter ended December 31, 2014, increasing from Rs.4.1 million a year earlier helped by a corporate tax credit. 

However, CBL ended the year with a net loss of Rs.114.6 million for the full financial year, the financial results showed. 

Having received the provisional license in 2011 and the fully fledged banking license in early 2014, CBL started its official business in June 2014 at its head office in Bambalapitiya. It now has grown to become a bank with three branches and 140 employees. 

The net interest income (NII) for the quarter contracted by 40 percent year-on-year (YoY) to Rs.89.8 million as the net interest margin (NIM) more than halved to 5.24 percent from 12.91 percent a year ago as the bank started lending in the lower interest rate regime. 

Net fee and commission income was Rs.9.1 million during the quarter. The CBL banking group, which has a finance subsidiary, grew its asset base to Rs.3.1 billion while the bank on a standalone basis lent Rs.2.2 billion worth of loans. Out of this, Rs.1.6 billion is overdrafts, demonstrating the bank’s heavy reliance on corporate clients. 

CBL is not in the gold-backed loan business.  

CBL in August acquired a 73.39 percent stake in Capital Alliance Finance PLC but with the mandatory offer the total holding rose to 76.51 as of February 25, 2015 and the subsidiary is valued at Rs.460 million.
 
The group’s deposit base grew to Rs.1.9 billion but the low-cost funds—Current And Savings Account (CASA) remained at 17.4 percent, significantly lower than the industry average of 39 percent. 

This can put pressure on NIMs unless the bank revs up its efforts in bringing more low-cost funds. However, unlike other banks, CBL has some headroom in this area because of its Rs.5 billion equity in the balance sheet.  The banking group’s asset base was Rs.7.5 billion with a net asset value of Rs.10.33. 
Meanwhile, the total operating expenses rose 62 percent YoY to Rs.177 million, resulting in an operating loss before VAT and NBT of Rs.69.2 million. 

In November, the promoters and the main shareholders of CBL, CT Holdings PLC and Cargills (Ceylon) PLC collectively upped their stakes in the bank to 40 percent.

The World Bank’s private sector investment arm, International Finance Corporation (IFC) was believed to have divested its 10 percent stake in CBL. 
In an earlier occasion German development financier, DEG divested its 10 percent stake in the bank to the Employees’ Provident Fund. 
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