Sanasa Development Bank PLC (SDB bank) nearly tripled its profits in the three months ended in March 2021 (1Q21) on robust growth in loans, but the bank is running thin on capital adequacy and liquidity buffers without fresh capital being infused in order to maintain the
growth momentum.
The licensed specialised lender reported earnings of Rs.3.30 a share or Rs.302 million for the quarter under review, up 190 percent from Rs.1.85 a share or Rs.103.9 million reported for the same period in 2020.
The bank gave loans worth of Rs.5.5 billion in the three months, recording 5.2 percent growth from the levels at the end of 2020.
The bulk of the loans were extended to retired senior citizens under the bank’s Upahara scheme, which recorded Rs.1.9 billion growth, and loans categorised as other personal loans grew Rs.1.1 billion.
However, the bank will need more capital and liquidity to sustain the growth in its loan book in the remainder of the year as both matrices are at the lower end of regulatory minimums.
For instance the Tier I and Tier II capital adequacy ratios were at 9.44 percent and 12.71 percent by the end of March 2021.
The bank has to maintain a minimum of 8.00 percent and 12.00 percent respectively in 2021. While there is no imminent need for fresh equity capital, which forms the Tier I, the bank might require Tier II qualifying capital to maintain the growth momentum. SDB bank raised Rs.1.53 billion in a rights issue in November 2020, but it had to retire Rs.1 billion debenture in January 2021. As of March 31, 2021, the bank had Rs.9.3 billion in core capital.
SDB bank raised Rs.4.0 billion in fresh deposits during the three months under review, which could support its liquidity.
The bank’s statutory liquid assets ratio as of March-end was 20.7 percent, slightly above the regulatory mandated 20 percent. Meanwhile, the bank reported a net interest income of Rs.1.63 billion for the quarter under review, up 11 percent from the same period in 2020.
Meanwhile, the fee income also rose by a robust 139 percent, reflecting that its fees are closely tied to its loans. The bank slightly improved its asset quality as reflected by its gross non-performing loans ratio, which declined to 4.47 percent from 4.54 percent in 2020.
The bank provided Rs.156.1 million against possible bad loans, substantially down from Rs.413.8 million in the same period in 2020.
Ayenka Holdings Private Limited has 14.86 percent stake in Sanasa Development Bank being its single largest shareholder while the International Finance Corporation, among other foreign funds has 5.91 percent stake in the bank being its fourth largest shareholder.
