Soneri Bank was able to keep its bottom line intact in 1Q CY14. High non-mark-up expenses appear to be the culprit that offset the positive impact of other actors. Net Interest Margin (NIM) of the bank grew by 15 percent year on year that culminated into a spread ratio of 36 percent in 1Q CY14 vis-à-vis 35 percent in the similar period of last year.
The detailed financial statements are not available to comment on the grounds of spread growth; however, a glimpse of the past performance shows that Soneri is a core banker with its Advances-to-Deposit Ratio (ADR) lingering well above its Investment-to-Deposit Ratio (IDR).
Besides, CY13 financial statements show that Soneri is highly focused on mustering current deposits which grew by 28 percent year on year in CY13. Until December 2013, the bank’s Non-Performing Loans (NPLs) were showing an uptick and the bank’s provisioning expense kept growing tremendously all through CY13. In 1Q CY14, Soneri booked 17 percent lower provisioning than it booked in CY12. We await the detailed financial statements to figure out if the lower provisioning is the effect of any revival on the asset quality front or just a strategic move.
Soneri also made significant gains via non-core business specially gain on sale of securities and fee based income. However, 35 percent year-on-year growth in non-mark-up expenses stole the charm resulting in bottom line showing a negligible growth of 0.5 percent year on year.
With respect to asset and liabilities, Soneri Bank appears well-tracked; however, with growing private sector advances comes weakening asset quality and this appears to be the major hitch in Soneri’s case too. NPLs which were growing at a modest pace until CY13 need to be tackled to ward-off any hurdles against bottom line growth.

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Soneri Bank Limited (Unconsolidated P&L)
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Rs (mn)                              1QCY14    1QCY13      chg
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Markup Earned                         3,750     3,365      11%
Markup Expensed                       2,389     2,177      10%
Net Markup Income                     1,361     1,188      15%
Provisioning/(Reversal)                 167       205     -19%
Net Markup Income after provisions    1,194       983      21%
Non Mark-up/Interest Income             672       515      30%
Operating Revenues                    1,866     1,498      25%
Non Mark-up/Interest Expenses         1,406     1,040      35%
Profit Before Taxation                  459       457     0.4%
Taxation                                158       158     0.2%
Profit After Taxation                   301       300     0.5%
(Loss)/earnings per share              0.27      0.27
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