Amãna Bank ended 2019 financial year on a strong footing to record a resilient performance, whilst rewarding shareholders with an above-market dividend yield, despite the headwinds the country and its economy had to go through.
The Bank’s Deposits recorded an outstanding growth of 16% to end at Rs 71.6 billion from Rs 61.7 billion during the year, which was double the industry growth of 8%. This growth is a clear indication of the growing customer confidence and demand for the Bank’s people-friendly banking model. Such growth was further enabled by the Bank significantly expanding its reach through strategic partnerships and collaborations, which resulted in the deposit network increasing from 50 to over 750 points. This move certainly bodes well for the Bank in its journey towards reaching out to provide its services to all citizens of the country.
The Bank continued to grow its Total Asset base, amidst various challenges, to record a 12% growth to close at Rs 86.6 billion from Rs 77.2 billion. Customer Advances too posted a steady growth of 9%, in the backdrop of industry credit growth being 5%, to close at Rs 57.7 billion from Rs 52.9 billion.
Having been able to maintain its profit momentum, the Bank rewarded its shareholders once again in 2019 with a dividend payment of Rs 200.1 million, which translated to a dividend yield of 3.5%, higher than the market dividend yield of 3.2% for 2019.
Financing Income recorded a sound growth of 12% to reach Rs 7.7 billion from Rs 6.9 billion in 2018. This was after absorbing the effects of the downward pressure on market financing rates especially in the last quarter. Net Financing Income however, declined to Rs 3.2 billion from Rs 3.4 billion due to the higher growth in customer deposits and the resultant increase in financing cost. The Bank continued to enjoy a CASA ratio of 40%, notably higher than the industry, which places the Bank at an advantageous position. This helped in curtailing the dilution to Bank’s financing margin, lowering it to only 3.9% from 4.4%, which however continues to be higher than the industry margin of 3.6%.
With the Bank remaining very keen on increasing its share of fee based income to total income, fee and commission income improved in the year under review by 11% to record Rs 329.0 million. Aggregated with all other sources of fee based and non-fee based income, the Bank’s Total Operating Income reached Rs 4.2 billion for 2019. Following the implementation of SLFRS 9 on Financial Instruments in 2018, industry impairment charges on customer advances increased drastically which had a direct impact on its profitability. However, the Bank’s conscious efforts to ensure high credit quality with effective collection and recovery well supported by the Bank’s business model, paved the way for a substantial reduction in impairment charges this year to Rs 288.9 million from Rs 476.8 million. After providing for the above, the Bank closed the year with a Net Operating Income of Rs 3.9 billion compared to Rs 3.6 billion in 2018 which is an increase of 9%. Non performing advances (NPA) in the industry saw a sharp increase during 2019. However, the Bank, through timely customer engagements contained its NPA in an effective manner to maintain its ratios extremely well compared to the industry levels at year end, recording a net NPA ratio of 1.5% and a gross NPA ratio of 3.7%, against the industry average of 2.8% and 4.7% respectively.
With the addition of new branches, Self-Banking Centres and digital enhancements, the operating expenses of the Bank rose by 12% to Rs 2.6 billion from Rs 2.3 billion. After considering the above, the Bank's Operating Profit before all taxes grew by Rs 54 million or 4%, to record Rs 1.38 billion in 2019. Value Added Tax on Financial Services, Nation Building Tax and Debt Repayment Levy amounted to Rs 531.8 million resulting in a Profit Before Tax of Rs 844.8 million. As income tax expenses amounted to Rs 383.9 million, the Bank ended 2019 with a Profit After Tax of Rs 460.9 million, whilst the aggregate of all tax expenses amounted to Rs 915.7 million for the year, which is effectively 67% of Operating Profit before all taxes.
Sharing his views on the financial performance, Chairman of Amãna Bank Osman Kassim said “Despite a challenging twelve months, the Bank displayed great perseverance to achieve the reported results, through prudent strategic planning and execution. I am thankful to my fellow Board of Directors, Senior Management and Staff for strengthening our resilience to achieve a performance well above industry norms.”
Sharing his comments on the Bank’s performance, Chief Executive Officer Mohamed Azmeer said “Due to 2019 being a sluggish year, which challenged the country’s economic progress across all sectors and the financial services sector in particular, a prudent review of Bank’s strategies and plans was undertaken in making the right choices, which was deemed very crucial. Our efforts on deploying funds towards focused areas, enhancing credit quality and well rooted governance structures helped us sustain growth and reward our valued shareholders for the second consecutive year. Our results clearly reflect the growing acceptance of our unique model of people friendly banking which motivates us to expand our reach and make banking more convenient. I am thankful to our shareholders, customers, employees and valued collaborators, who have been a pivotal force in our resilience. I remain positive about the Bank’s prospects in 2020, and look forward to capitalise on them to enhance value to all our stakeholders.”
Another significant milestone achieved in 2019 was the launch of the Bank’s flagship CSR venture ‘OrphanCare’. Towards creating an enduring impact on society and as an initiative towards ‘giving back to society’, Amãna Bank OrphanCare was inaugurated as an independent trust that aims to address a very important yet mostly unattended need of orphan children; which is securing the fate of orphans once they reach the age of 18 and are compelled to leave institutional care. With over 14,000 registered orphans reported in Sri Lanka, the Trust has to-date enrolled over 2,600 orphans represented by 75 Orphanages Island wide, irrespective of their cast, creed, religion or ethnicity, guided by Article 2 of the United Nations Convention on the Rights of the Child.
Amana Bank PLC is a stand-alone institution licensed by the Central Bank of Sri Lanka and listed on the Colombo Stock Exchange with Jeddah based IsDB Group being the principal shareholder having a 29.97% shareholding of the Bank. The IsDB Group is a ‘AAA’ rated multilateral development financial institution with a membership of 57 countries. In June 2019 Fitch ratings affirmed Amana Bank’s National long term Rating of BB (lka) with a positive outlook. Amãna Bank is a standalone entity which does not have any subsidiaries, associates or affiliated institutions, other than the ‘OrphanCare’ Trust.