Banks have had a pretty good CY16 result season, and Sindh Bank Limited (SBL) was the latest to join. SBL is a small bank by all counts, yet, it was able to overcome the tough operating conditions that prevailed for most of CY16. The topline understandably remained flattish, owing to thins earning spreads and record low interest rates.
It was the balance sheet growth that stood out. Sindh Bank managed to expand its deposit base by a massive 42 percent. Granted, that the growth is coming from a relatively smaller base, but the fact that deposits were added in the right direction, should bode well for Sindh Bank in the days to come. Smaller banks have had trouble improving their CASA mix, but SBL seems to have done a commendable job, increasing the share of current account in the mix.
Investments in government securities continue to form the bulk of earning assets, but the growth in cY16 was minimal, at only 2 percent over December 2015. Advances, on the other hand, grew more rapidly, by 18 percent over December 2015. That said, the ADR still slipped from 52.6 percent last year to 43.7 percent.
The most telling contribution to the bottomline growth came from a massive decrease in provision charges. That said, the NPLs seem to have resurfaced from Rs290 million last year to over Rs1.5 billion at the end of CY16. Although, the infection ratio is still in the single digits, the provision for the same is way behind industry average. Sindb Bank would do well to exercise caution in terms of loan quality, as it adds more advances to its books.
The non-core income, as often has been the case this season, stayed on the flatter side. The administrative expenses were on the higher side, disturbing the cost to income ratio for the worse. Sindh banks cost of deposits has come down and should serve it well in the quarters ahead.
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