SILKBANK takes huge strides

SilkBank Limited (SBL) posted its financial results for CY16, and it made a strong comeback. The topline increased in the double digits, which is a commendable feat in times of thin spreads and low interest rates. Recall that most banks this season have posted flattish topline. SBL managed to grow its balance sheet steadily, and that trickled down to the bottomlline.

SBL is one of the very few commercial banks with an asset mix tilted more towards advances. Both asset categories, investments and advances, grew steadily at 6 percent over last year. SBLs ADR stands at a healthy 75 percent much higher than the industry average. What is good is the face that the loan quality has gradually improved and that has reflected positively on the profits.

Deposits also grew steadily by 7 percent over December 2015. More importantly, the deposit mix has started to improve quarter after quarter, and the cost of deposits has steadily come down. That said, there is still a long way to go to match the likes of big banks. But the direction is there, and SBL reduced the fixed deposits, and focused more on adding low cost deposits, in the process, improving the CASA ratio.

The most telling contribution to the bottomline came from a massive reversal in provision expenses for the year. This is testament to SBLs efforts of cleaning its books. The infection ratio is also on the mend, although, the bank could do better in terms of providing for the same.

The non-core income continued to contribute significantly, despite a drop in gain on sale of securities. SBLs cross selling activities yielded good dividends. Another feather in the cap was remarkable reduction in administrative expenses improving the cost to income ratio.

All in all, SBL had a tremendous year, both in terms of profit and healthy balance sheet building. The bank seems well poised for growth, as economic indicators are on the mend.