Cargills Bank Limited narrowed losses during the three months ended March 2021 (1Q21), as loans grew amid low interest rates and widespread optimism on future economic prospects, although the euphoria faded due to the resurgence of virus-related restrictions from April onwards.
The Cargills group’s banking unit reported a net interest income of Rs.436.4 million in the quarter ended on March 31, 2021, down 5 percent from the same period last year. This is despite the bank increasing its net interest margin to 4.01 percent, compared to 3.88 percent in December 2020.
The bank with Rs.47 billion in assets gave Rs.2.9 billion in fresh loans, logging a robust 9.1 percent growth for the quarter, signalling that the bank was on a
path of faster growth, which could possibly turn the bank into black during the current financial year.
But the prospects suddenly turned dour with the healthcare bureaucrats insisted on a lockdown of the country, which disrupted business and consumer activities. As a result, the banks are once again extending relief on their borrowers, who became casualties of these myopic and disastrous
Early this week, the restaurant and bar industry collective, one of the largest employers in the country, called for relief by way of working capital loans at 4 percent and an extension of the moratorium through 2022-end, as they are on the brink of collapse, due to two years of poor business, which was then exacerbated by the lockdowns, as they cannot entertain in-door diners, their largest revenue-generating segment. . Cargills Bank managed to bring down its already high gross non-performing loans ratio to 12.54 percent in March 2021, from 14.42 percent in December 2020, resulted from its exposure to a large corporate facility, which went sour.
The bank during the quarter provided Rs.183.7 million for possible bad loans, compared to Rs.279.1 million in the same period in 2020, in which time the banks provided the bulk of provisions against the possible fallout from the pandemic-induced stresses on their borrowers.
The bank, which is rich on capital adequacy, last year postponed its planned initial public offering to June this year and the company is yet to announce if it still stays the course or have changed
their minds. However, the bank needs to up its minimum core capital to Rs.20 billion, from its current Rs.8.6 billion by December 2022.
The bank reported a net loss of Rs.167.7 million for the January-March 2021 quarter, compared to earnings of Rs.242.6 million in the year earlier period.
The Cargills group together with CT Holdings has a 65 percent stake in Cargills Bank while the Monetary Board of the Central Bank has another 4.98 percent stake on behalf of the Employees’ Provident Fund.