Amana Bank Sept. profits soar on higher loans and margins

Amana Bank PLC accelerated growth in loans, resulting in higher interest incomes and profits in the three months to September, as the country’s sole Islamic bank delivered robust financial performance in the period in lockstep with the rest of the industry, which mostly defied the pandemic-induced economic malaise. 

The bank reported a net financing income of Rs.1.18 billion, up 41 percent from the same period last year, as the funding costs declined, cushioning the bank’s finance margin, a term referred to the net interest margin in normal banking parlance, while the growth in new loans added more steam in the forgoing fiscal quarter helping its top line. 

This helped the bank to increase its financing income by a robust 20 percent to Rs.2.02 billion from the same period a year ago while narrowing the financing expense by one percent to Rs.844.2 million. 

The bank reported a financing margin of 4.0 percent by September-end, continuously up from 3.7 percent by the end of last year, as the deposits repriced under lower rates compared to last year, in line with the ultra low interest rates in the economy. 

Out of the Rs.91.8 billion total deposit portfolio, the bank has 46.2 percent in low-cost current and savings accounts, which played a bigger role in keeping its funding costs under check.  

The bank gave Rs.4.0 billion worth of new financing and receivables or what is commonly referred to as loans in the quarter, bringing the total new financing and receivables extended during the nine months to Rs.11.0 billion, expanding the portfolio by a robust 17.1 percent. 

The bank, which got off to a robust start in the first quarter with new loans amounted to Rs.6.2 billion, saw its growth faltering in the subsequent quarter to only Rs.0.8 billion worth of loans. 

The bank had a financing and receivables portfolio of Rs.75.3 billion by the end of September.  

Despite the fresh restrictions imposed from mid-August, due to the virus resurgence, the banks in general extended more loans in the most recent financial quarter and delivered better performance than in the June quarter, as in September, the banks’ earnings season comes to a close. 

Amana Bank reported earnings of 6 cents a share or Rs.143.9 million in the July-September quarter, compared to 3 cents a share or Rs.79.9 million in the same period last year. This translated into a robust 80 percent increase. 
For the nine months ended on September 30, 2021, the bank reported earnings of 17 cents a share or Rs.433.2 million, compared to 10 cents a share or Rs.250.4 million in the comparable period last year. 

Despite the growth in loans, the bank saw its fee incomes declining by 8 percent to Rs.67.6 million. The bank however maintained good control of its operating costs, which remained unchanged from the same period last year.  The bank set aside Rs.140 million on possible losses from financing and receivables and other assets during the quarter, down 15 percent from the same period last year.

The bank’s gross non-performing loans ratio was at 3.7 percent, down from 4.0 percent in December 
last year. 

The bank in September announced its fourth scrip dividend of 10 cents a share for 2021, which in total amounted to Rs.260.1 million. 

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 the end of 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 29.97 percent shareholding of the bank.