Amana Bank 2Q profits surge but virus resurgence hurts loan momentum

Amana Bank PLC reported some robust financial performance in the three months to June (2Q21), on improving margins and new loans, albeit the momentum slowed in its fiscal second quarter, due to the virus resurgence. 

The company, operating under the Islamic banking principles, reported a net financing income of Rs.1.1 billion in the April-June quarter, up 63 percent from the same period last year, as the bank started generating incomes from the faster ascent in loans in the March quarter while the deposits started repricing under the lower interest rates, together boding well for the interest margins. 

The financing margin, which refers to the net interest margin in the general banking parlance, expanded to 3.9 percent, from 3.7 percent at the start of the year, the cause of which the bank attributed to the faster advances growth. 

The bank gave Rs.7.0 billion new loans, which Amana Bank refers to as financing and receivables, out of which Rs.6.2 billion was extended during the March quarter, reflecting that the dour economic conditions, which marred most of the June quarter, had a bearing on the bank’s lending drive it set off to. 

Amana Bank, which has assets of Rs.108.7 billion, completed 10 years of operations in Sri Lanka on August 1, 2021.

“I believe that in line with our five-year strategic plan, which is enabled by our well-engaged and optimised team whilst upholding the principles of our universal value proposition, this growth momentum will be sustained throughout the year despite various challenges faced by the country’s economy,” said Chief Executive Officer Mohamed Azmeer in a statement, projecting optimism amid the current general adversity. 

The bank’s reported gross non-performing loans ratio was 3.9 percent, a slight decline from the 4.0 percent stood at the start of the year. 

However, the bank provided Rs.173.5 million in the quarter for possible bad loans, increasing by a hefty 139 percent from the same period last year, in a sign of the bank’s early preparedness for possible asset quality stress from the current spell of gloomy economic conditions resulted from the upsurge in the virus, which appears lingering.  

The bank reported earnings of 6 cents a share or Rs.158.6 million in the April-June quarter, compared to 2 cents a share or Rs.40.6 million in the corresponding period last year. 

For the six months ended in June, the bank reported earnings of 11 cents a share or Rs.289.3 million, compared to 7 cents a share or Rs.170.4 million in the same period in 2020. 

The bank reported a 47 percent increase in fee incomes to Rs.81 million in the quarter, both as a result of the recovery in business in the incumbent period and the broad-based fee waivers in the year earlier period, which were afforded to the pandemic-affected borrowers. 

The bank meanwhile has raised Rs.7.3 billion in deposits, of which Rs.3.2 billion came in during the June quarter.  
The bank has adequate capital and liquidity to sustain the growth momentum but it is required to enhance the minimum core capital levels to Rs.20 billion, from its current Rs. 11.2 billion by end-2022, under the Monetary Board’s deferred time frame allowed last year, considering the pandemic-induced stresses. 

Jeddah-based IsDB Group, being the principal shareholder, has a 29.97 percent shareholding of the bank by June-end.