Soneri Bank Limited announced its 2021 financial results, registering 19 percent year-on-year growth in after-tax profits. The result was accompanied with 15 percent cash dividend too, as the bank managed to consolidate the balance sheet growth, to counter the impact of interest margins’ compression.

The markup earned was down 12 percent year-on-year and understandably so, as the average rates on earning assets remained considerably lower in 2021. Asset reprofiling, particularly within the investment portfolio restricted the slide and slightly improved deposit mix also yielded a positive year-on-year growth in net markup income.

The total asset base expanded by 19 percent over December 2020 at Rs579 billion – remaining well above Rs500 billion over the course of the year. Almost the entire growth in asset base stemmed from the expansion of investment portfolio, which saw a jump of 31 percent over December 2020 at Rs327 billion, taking the investment to deposit ratio to over 80 percent.

Advances on the other hand remained muted, showing a meager 1 percent growth over December 2020. The ADR went down to slightly over 41 percent, from 47 percent a year earlier. On the liabilities side, 2021 was a tale of two halves. Having shown negative growth by the end of 1HCY21, deposits changed direction for the better, registering a strong 17 precent growth over December 2020, crossing Rs400 billion mark in the process.

The non-funded income continues to be a strong support to total income, with fee, commission income leading the way. Expenses were curtailed despite higher inflationary pressures, as the Bank managed a healthy cost to income ratio by the end of the year. The biggest difference to the bottomline was nonetheless made by significant reversal on account of provisioning charges – leading to an impact of Rs1.5 billion alone to pretax profits.

With the interest rate cycle expected to be completely different in 2022, and with an ever-expanding balance sheet, the ongoing year could well be the one where Soneri Bank ventures more aggressively on the advances front. The deposit growth has been healthy, with ever-present room for improvement in CASA ratio, which should keep the profits coming.