November 30, 2020 (MLN): Silk Bank has witnessed turnaround in profitability, as the bank reported net profits of Rs 150.84 million for the nine months ended September 30, 2020 against the loss of Rs 2.769 billion incurred in the same period last year.
Similarly, the earnings per share of the bank clocked in at Rs 0.02 per share compared to the loss per share of Rs 0.30 per share in Jan-Sep CY19.
During the period, cumulative cut of 625 bps in policy rate from 13.25% to 7% has enabled the bank to earn 52.78% YoY higher interest income, as a result of which, the bank’s net interest income (NII) surged by 27.3% YoY. However, its interest expenses also rose by 56.5% YoY which limited the upside in bank’s NII.
On the positive side, the bank realized a capital gain of Rs 5.4 billion which helped in lifting its non-interest income by 261.2% YoY. In addition to this, the bank also received some breather via increase in its income from derivatives by 419.85% YoY.
On the expense side, the bank’s operating expenses went down by almost 3.6% YoY and other charges declined by 84.64% YoY, as result, its non-mark-up /interest expenses shrank by around 6% YoY.
Moreover, with regards to bank's ratings, VIS credit rating agency had placed Bank’s ratings on Rating Watch-Negative Status given weakening in asset quality and capitalization indicators.
As per the VIS, revision in rating outlook reflects weakening in capitalization indicators of the Bank. Capital Adequacy Ratio (CAR) of the bank was reported at 8.36% as at end-June 2020, against minimum requirement of 11.5%. Non-compliance was on account of sizeable losses incurred during 2019 and 1Q20 on account of regulatory provisioning against delinquent loans which depleted equity of the Bank.
Timely achievement of compliance with regulatory CAR requirements along with necessary buffer for growth is considered important from a ratings perspective. Upon completion of the rights share issuance process within communicated timeline, ratings will be reviewed, the rating agency said.
|
Profit and Loss Account for the Nine months ended September 30, 2020 ('000 Rupees) |
|||
|---|---|---|---|
|
|
Sep-20 |
Sep-19 |
% Change |
|
Mark-up/return/interest earned |
18,203,936 |
11,915,429 |
52.78% |
|
Mark-up/return/interest expensed |
(16,269,534) |
(10,396,639) |
56.49% |
|
Net mark-up/ interest income |
1,934,402 |
1,518,790 |
27.36% |
|
NON-MARK-UP/INTEREST INCOME |
|
|
|
|
Fee, commission and brokerage income |
1,634,969 |
1,704,591 |
-4.08% |
|
Dividend income |
– |
3,425 |
– |
|
Income from dealing in foreign currencies |
(389,830) |
193,648 |
– |
|
Income from derivatives |
722,389 |
138,960 |
419.85% |
|
Gain on sale of securities – net |
5,428,279 |
19,599 |
27596.71% |
|
Other income |
(239,291) |
(78,984) |
202.96% |
|
Total non-mark-up /interest income |
7,156,516 |
1,981,239 |
261.21% |
|
NON-MARK-UP/INTEREST EXPENSES |
|
|
|
|
Operating expenses |
(5,638,459) |
(5,852,637) |
-3.66% |
|
Workers Welfare Fund |
(12,274) |
– |
|
|
Other charges |
(28,434) |
(185,066) |
-84.64% |
|
Total non-mark-up /interest expenses |
(5,679,167) |
(6,037,703) |
-5.94% |
|
Other (provisions)/(write-off)/reversal – net |
(2,810,318) |
(1,467,090) |
– |
|
Extra-ordinary/unusual items |
– |
– |
– |
|
Profit before taxation |
601,433 |
(4,004,764) |
– |
|
Taxation |
(450,589) |
1,235,669 |
– |
|
Profit after taxation |
150,844 |
(2,769,095) |
– |
|
Earnings per share (basic and diluted) |
0.02 |
(0.30) |
– |
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