Core operations growth underpins Cargills Bank’s solid 1Q performance

• Begins preparations for Initial Public Offering this year in line with regulatory commitments

Cargills Bank reported a profit after tax of Rs.106 million for 1Q2023, vs. a loss of Rs.58 million in 1Q2022. The results were driven by strong progress in its core business and lower impairment charges during the quarter. 
Net Interest Income rose 52 percent YoY to Rs.863 million, driven by the high interest rate environment prevalent during the quarter and expansion of the bank’s Total Assets by 11 percent QoQ to Rs.60 billion, with Loans & Advances increasing 8
percent QoQ.
The bank reported Net Fee & Commission Income of Rs.227 million, up 56 percent YoY, with growth in transaction volumes reported in the business lines of card services, trade and remittances. Meanwhile, Total Other Income declined 42 percent YoY to Rs.124 million due to lower foreign exchange gains during the quarter. 
As a result of the resilient operating performance, Total Operating Income rose 31 percent YoY to Rs.1.2 billion.
The bank reported impairment charges of Rs.278 million in 1Q2023, down 32 percent YoY. Nevertheless, managing credit quality remains a challenge as the weak economic environment continues to impact customers’ ability to meet their scheduled payments. 
Total Operating Expenses rose 23 percent YoY to Rs.677 million, largely on account of a 47 percent YoY increase in Other Operating Expenses due to the impact of currency depreciation on the expense base and higher utility and other costs. Nevertheless, with the higher growth reported in income over expenses, the bank’s Cost to Income ratio moderated to 56 percent in 1Q2023 from 60 percent in 1Q2022.
The bank reported an Operating Profit before taxes of Rs.259 million, a sharp improvement from the loss before taxes of Rs.31 million reported in the corresponding quarter.Profit after tax, at Rs.106 million, was impacted by higher taxes on account of both VAT on financial services and corporate income tax. A net fair value gain of Rs.156 million on investments in financial assets, reflected in Other Comprehensive Income, brought the bank’s Total Comprehensive Income for the quarter to Rs.262 million.
Senarath Bandara, Managing Director/CEO of Cargills Bank commenting on the performance of the bank stated, “We are pleased to carry the positive earnings trend into 2023 in what continues to remain a challenging near-term environment. Our focus has been to manage portfolio quality and the narrowing interest spreads while selectively growing our portfolio to maintain the positive earnings trajectory.
The bank has commenced preparations for its Initial Public Offering in 2023 in line with our regulatory commitments. Further details will be shared in the coming months, culminating in the listing targeted in 4Q2023.”
“We welcome Ravi Jayawardena, Group Chief Executive Officer of Maliban Biscuits (Pvt) Ltd, to the Board as an Independent Non-Executive Director. Jayawardena has extensive expertise in the areas of Human Resources, Marketing and Market Development, and we look forward to his contribution to realize the vision of Cargills Bank,” he added.