Silk goes silky

When government papers are doing the job, forget about ‘core banking. But Silk Bank has proven to be an exception. With an unusually high advances-to-deposits (ADR) ratio of 78 percent as of March 2015, the bank passes the banking test with flying colours.
Although, the recent quarter saw a slight shift in its lending strategy as its advances inched down a tad from December 2014 levels, Silk’s ADR continues to be on the higher side when weighed against other banks in the industry.
At a time when other banks are reporting flaunting double-digit top line growth during this quarter, Silk’s top line rather stayed modest, rising by 4 percent year-on-year. This is the outcome of bank’s asset composition being in favour of advances, while other banks enjoyed lucrative gains from their holding of virtually risk-free government securities.
Given the bank’s strategy to tone down its cost of deposits by building up its low-cost deposits, its CASA has been on the mend, having risen to 56 percent as at December 2014. While the advances growth lagged behind this time, the deposit growth was routed towards building the investment portfolio that grew by 15 percent from December 2014 levels.
Silk Bank’s treasury department did a fantastic job yet again with income from dealing in foreign securities, capital gains on sale of securities and fee, commission and brokerage income making a hefty contribution towards bottom line growth. As interest rates drop down further, the bank shall stand favourably relative to its peers. Besides, continuity towards the improvement in CASA by focusing on low-cost deposits can serve it well going forward.

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Silk Bank (Profit & Loss Account)

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Rs (mn)                              1HCY14    1HCY13     Chng

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Markup Earned                         4,533     3,786      20%

Markup Expenses                     (2,791)   (2,801)       0%

Net Markup Income                     1,742       985      77%

Provisioning/(Reveral)                 (29)        11        -

Net Markup Income after provisions    1,511       908      66%

Non Mark-up/Interest Income             788       621      27%

Operating Revenues                    2,299     1,529      50%

Non Mark-up/Interest Expenses       (2,223)   (2,024)      10%

Profit Before Taxation                   76     (495)        -

Taxation                                (4)       130        -

Profit After Taxation                    72     (365)        -

EPS (Rs.)                              0.03    (0.14)        -

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Source: KSE announcement