Irrespective of size, banks continue to march on the profit making spree. Soneri Bank Limited made good use of the resources at disposal, posting an impressive profit growth for 9MCY15. Analyzing banks without balance sheet means very little, but the last available 1HCY15 numbers say why Soneri Bank is in a decent position.
The deposits have grown at a modest pace, keeping pace with the industry-wide deposit growth. Unlike many others, Soneri still lends more to businesses than it lends to the government. Although, the ADR by the end of 1HCY15 had came down a wee bit, but was still higher than the industry average in excess of 50 percent.
The yields are understandably lower as interest rates slow down. Regulations on return on deposits have been tightened, yet the NIMs show impressive reading. The bank’s relentless effort to correct its deposit mix seems to be doing the trick for Soneri, as cost of deposits has been managed fairly well through adding the right kind of deposit, instead of welcoming fresh deposits just for the sake of it.
Soneri’s asset quality has been improving continuously and the infections ratio as per the last available numbers stood at a relatively manageable 10 percent. The bank would however do well to provide more adequately than what it currently does. Non mark-up income forms a decent chunk of revenues and timely decisions on account of available for sale securities have resulted in hefty gains on that front, contributing well to the bottom line.
Keeping administrative expenses growth to single digits is no mean feat and gels well with the bank’s overall strategy. Going ahead, interest rates may already have bottomed out and spreads might improve. Soneri would not mind enhancing its advances portfolio – although it may happen gradually.
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