Cargills Bank reports weaker March quarter as other income slumps

Cargills Bank PLC reported a significant drop in quarterly earnings for the three months ended March 2026, as a steep decline in investment-related income offset stronger core banking performance driven by loan growth and wider interest margins.

The bank reported a profit before tax of Rs.185 million for the quarter, down 42 percent from the corresponding period in 2025, largely due to a Rs.381 million decline in total other income.

The weaker bottom line came despite a stronger performance in its core lending business, with net interest income rising 20 percent year-on-year to Rs.1.04 billion, supported by loan growth and repricing of deposits and advances in line with market conditions.

The bank’s net interest margin improved to 4.46 percent during the quarter from 4.38 percent a year earlier.

However, the gains from core banking operations were overshadowed by a sharp fall in non-interest income. Total other income fell 96 percent to Rs.15 million, mainly due to lower realised capital gains on derecognition of financial assets and reduced gains from financial assets measured at fair value through profit or loss, compared to a high base in the corresponding quarter last year.

The Treasury and Investments segment reflected this slowdown, with operating profit before tax declining sharply to Rs.18 million from Rs.362 million a year earlier.

Meanwhile, the Banking segment emerged as the key earnings driver during the quarter, with operating profit before tax rising to Rs.282 million from Rs.129 million in the same period last year, supported by a 36 percent increase in segment net interest income to Rs.944 million.

Net fee and commission income edged down 3 percent, or Rs.7 million, partly due to one-off fee income related to loans and advances recorded in the first quarter of 2025 and a marginal reduction in trade-related fee income.

Operating costs also continued to rise, with total operating expenses increasing 7 percent to Rs.979 million. Personnel expenses rose 15 percent due to salary increments and market-based adjustments aimed at retaining talent, while depreciation and amortisation costs climbed 36 percent following investments in information technology and infrastructure upgrades.

As a result, the bank’s cost-to-income ratio deteriorated to 75 percent from 71 percent a year earlier.

Asset quality indicators, however, showed improvement during the quarter. The total impairment charge fell to Rs.24 million from Rs.126 million a year earlier, while the Stage 3 loans ratio improved to 6.44 percent from 8.18 percent in March 2025.

The bank’s balance sheet continued to expand, with total assets rising 6 percent from December 2025 to Rs.97.5 billion by end-March. The net loan book grew 6 percent during the quarter to Rs.67 billion, marking a 37 percent increase from a year earlier.

Customer deposits rose 5 percent from end-2025 to Rs.69.4 billion, reflecting a 22 percent year-on-year increase.

During the quarter, the bank also raised Rs.2.5 billion through a rights issue to strengthen its capital base, meet regulatory requirements and support future loan growth.

Cargills Bank’s total capital ratio improved to 19.01 percent by end-March from 17.12 percent at end-2025, while liquidity ratios remained well above regulatory minimum requirements.