Amana Bank 4Q earnings hurt by higher provisions, operating expenses

Amana Bank PLC reported some tepid financial performance in the three months ended in December, as the bank had to deal with higher provisions against the possible defaults and the rising operating costs amid the pressure on margins.

The bank, which operates on Islamic banking principles, reported a net financing income of Rs.1.66 billion in the three months to December, up 54 percent from the same period a year ago. 

However, the financing margin of the bank came under somewhat pressure, due to its deposits being repriced at a faster pace than its advances, the bank said.  

The margin therefore got trimmed by two basis points to 3.6 percent by the end of December, from 3.8 percent at the start of the year. 

Although the bank reported a robust total operating income of Rs.2.11 billion for the quarter, which was up by 42 percent from the same period in 2021, the large impairment provisions cut into the net operating income. 
The bank’s impairment charges for the quarter were at Rs.879.92 million, compared to Rs.370.99 million a year ago. 

Meanwhile, the operating expenses, which rose by 22 percent weighed on the before tax profits of the bank, which slipped by 6 percent to Rs.412.24 million. 

The bank reported earnings of Rs.187.68 million or 7 cents a share in the October-December 2022 quarter, compared to earnings of Rs.391.49 million or 14 cents a share in the year earlier period. 

“It has been an eventful year for Amana Bank, where despite the multitude of external challenges, the bank made strong headway in reinforcing its value proposition while also making inroads in the bank’s digital footprint,” said Amana Bank CEO Mohamed Azmeer in a statement released to the press. 

The profits received support from fee incomes, which rose by 56 percent to Rs.234.1 million, mostly coming from trade-related areas.

The bank saw its advances portfolio growing from Rs.78.19 billion to Rs.87.11 billion within last year.
The bank’s impaired Stage 3 loans, a measure of non-performing loans equivalent, rose to 2.1 percent, from 1.7 percent at the start of the year. 

The bank’s deposits grew from Rs.96.16 billion to Rs.112.55 billion in the year. 
Jeddah-based IsDB Group, being the principal shareholder, held a 29.97 percent stake in Amana Bank, as at December 31, 2022.