Sanasa FY15 net profit up 15%

Licensed commercial bank, Sanasa Development Bank PLC (SDB), saw its December quarter net profits falling by 21 percent to Rs.149 million over the corresponding period last year due to a significant increase in operating expenses and the fall in non-fund-based incomes, the interim results showed.

The core-banking operations, despite doing well, came under pressure during the latter part of the year as the cost of funds rose higher than the fund incomes as the interest expenses rose by as much as 60 percent yearon- year (YoY) while the interest income rose by only 37 percent YoY. The net interest income for the quarter rose 19 percent YoY to Rs.878.5 million.

The earnings per share for the quarter fell to Rs.3.70 from Rs.7.52 a year ago. The SDB share closed at Rs.140.20 at last week’s close falling 40 cents or 0.28 percent. The operating expenses rose staggering Rs.198.2 million to Rs.716.1 million from a year ago, of which the personnel expenses rose by Rs.131 million or 56 percent YoY, partly due to the 208 new employees who came on board and perhaps also due to the year-end bonuses and other incentives.

The non-fund incomes fell sharply by Rs.136 million to just Rs.39.2 million as the net fee and commission declined by two thirds to Rs.26 million. Meanwhile, the bank made only a paltry gain of Rs.3.1 million from its short-term investments – shares and/or treasury bills – against a gain of Rs.18.6 million made a year ago. This is perhaps due to the mark-tomarket losses made on its share investments due to the poor performance in the stock market and/or rise in interest rates of the government securities.

The other operating incomes (net) fell 88 percent YoY to Rs.10.4 million. Impairments demonstrated a reversal of Rs.59.6 million against an impairment charge of Rs.85.3 million a year ago. For the year ended December 31, 2015, the bank posted a net profit of Rs.729 million, up 45 percent, amid above average growth in the loans and advances, higher margins and lower impairments. The earnings per share rose to Rs.18.69 from Rs.13.49.The return on equity rose to 14.55 percent from 12.01 percent a year ago.

The net interest income rose by 38 percent to Rs.3.37 billion while the net interest margin rose to 7.13 percent from 6.97 percent. The bank expanded its loans and receivables by 43 percent or Rs.13.7 billion to Rs.45.8 billion but the asset quality improved as the gross non-performing loan ratio declined to 2.37 percent from 3.76 percent a year ago.

The growth in loans was largely matched by the growth in deposits which grew by 42 percent or Rs.12.8 billion to Rs.43 billion. In December 2015, the bank issued a Rs.4 billion debenture and other borrowings also rose by Rs.2 billion to Rs.6.6 billion. Both Tier I and tier II capital adequacy ratios weakened to 10.61 percent and 11.05 percent from 14.89 percent and 15.33 percent, respectively due to the aggressive growth in advances. But they remain adequately elevated above the minimum 5 percent and 10 percent requirements. As of December 31, 2015, the high-net-worth investor, Dr. T. Senthilverl held a 10.44 percent stake in the bank being the single largest shareholder.