Amana Bank 4Q net down on credit costs arising from...
Amana Bank PLC profits fell as a result of higher credit costs stemming from the first time adoption of the new accounting standard on financial instruments and the general deterioration seen in the asset quality across the banking sector in 2018, the interim results showed.
Amana Bank, Sri Lanka’s first non-interest based Islamic bank reported earnings of seven cents a share or Rs.126.5 million for the quarter ended December 31, 2018 compared to 13 cents a share or Rs.235.9 million reported for the same period a year ago.
The bank’s financing expenses or the cost of interest bearing liabilities including customer deposits rose faster than the increase in the financing income - the return earned from the financial assets which include loans - during the December quarter.
The financing income rose by 26 percent year-on-year (YOY) to Rs.1.94 billion while the financing expense rose by 31 percent YOY to Rs.979.4 million resulting in a net financing income of Rs.957.3 million, up 20 percent YOY.
The pre-provision operating profit of the lender rose by 28 percent YOY to Rs.1.21 billion.
However, the credit costs or the provisions made against possible bad loans measured under the expected loss method prescribed through the International Financial Reporting Standard 9 stood at Rs.193.7 million for the three months.
This is compared to Rs.55 million impairment charge made against loans and other losses during the year earlier period.
Meanwhile, the bank’s non-performing assets ratio rose to 2.82 percent from 1.89 percent through the year.amana Bank gave loans worth of Rs.10.5 billion and collected deposits of Rs.10.8 billion, up 24.2 percent and 21.2 percent, respectively.
Meanwhile, for the year ended December 31, 2018 (FY18) the bank reported earnings of 22 cents a share or Rs.556.5 million, up 11 percent from 29 cents a share or Rs.502.8 million recorded for FY17.
The net financing income rose by 22 percent YOY to Rs.3.36 billion as bank stretched its financing margin to 4.4 percent from 4.2 percent.
The credit cost for the year was Rs.476.8 million. The return on equity remains low at 4.6 percent, down from 5.8 percent.
Although the bank stays comfortably above the BASEL III minimum capital levels, it is uncertain if the shareholders stand ready to double its existing capital when the licensed commercial banks are required to double their minimum core capital to Rs.20 billion by end of 2020.
By the end of December 2018, Amana Bank had core capital of Rs.10.5 billion.
In 2017, Amana Bank raised Rs.4.75 billion from Islamic Corporation for the Development of the Private Sector (ICD), the fund manager of IB Growth Fund (Labuan) LLP - (IBGF), who raised its stake in the bank to 23.65 percent.