Amana Bank posts stronger 1Q earnings as impairments ease, SME lending expands

MD/CEO  Mohamed Azmeer

Amana Bank PLC reported a stronger performance for the three months ended March 2026, supported by lower impairment charges, steady financing income growth and an expansion in its SME-focused financing portfolio, despite the mounting macroeconomic pressures from geopolitical tensions and adverse weather disruptions.
The bank reported a profit before tax of Rs.0.8 billion for the March quarter, up 14 percent from a year earlier, while profit after tax rose 16 percent to above Rs.0.5 billion. 
The performance came amid what the bank described as a challenging operating environment, shaped by the fallout from Cyclone Ditwah and instability in the Middle East, which contributed to higher energy prices and exchange rate volatility.
The bank’s net financing income rose 14 percent year-on-year (YoY) to Rs.2.2 billion, supported by a financing margin of 4.4 percent, while the fee and commission income grew at a faster pace of 25 percent to Rs.0.4 billion, signalling a stronger transactional banking activity. Total operating income increased 13 percent to Rs.2.7 billion.
A key contributor to earnings growth was the sharp reduction in impairment charges, which fell 31 percent from a year earlier, helping the net operating income rise 16 percent to Rs.2.6 billion. 
The improvement suggests a comparatively stable asset quality profile at a time when several banks have been turning more cautious on provisioning, due to the renewed external shocks and weakening economic visibility.
Amana Bank’s stage three impairment ratio stood at 1.2 percent at end-March, remaining among the lowest in the banking industry. The bank attributed this to its underwriting standards and risk management practices.
The bank continued to expand its financing book during the quarter, with customer advances reaching Rs.152.3 billion, largely driven by SME financing. 
The focus on SMEs comes as the banks increasingly position themselves to capitalise on the gradual recovery in domestic business activity and private sector credit demand. 
Customer deposits stood at Rs.170.8 billion, while the CASA ratio remained relatively strong at 44 percent, supporting lower funding costs.
However, the rising operating pressures continued to weigh on efficiency. The bank’s cost-to-income ratio increased to 54 percent amid the inflationary pressures linked to global commodity and currency volatility. Even so, operating profit before taxes rose 11 percent YoY to Rs.1.1 billion.
The bank’s effective tax burden also remained elevated, with total tax contributions amounting to Rs.0.6 billion or 56 percent of operating profit before taxes, underscoring the continued pressure of Sri Lanka’s higher tax regime on the banking sector profitability. Amana Bank’s return on equity improved to 8.1 percent, from 7.6 percent a year earlier, while return on assets stood at 1.7 percent. 
Meanwhile, the capital and liquidity buffers remained comfortably above the minimum regulatory requirements, indicating adequate resilience against the potential external shocks.
Chairman Asgi Akbarally said the bank delivered its “best-ever 1Q performance”, despite the external pressures.