When it comes to core banking, Silk Bank passes the test without a hitch. With an Advances-to-Deposits Ratio (ADR) of 73 percent and Investments-to-Deposits Ratio (IDR) ratio of 19 percent as of June 2014, the banks standing as a core banker seems quite convincing. Unlike its peers, Silk Bank is certainly not under the magic spell of lucrative yields on government securities rather it is excelling by boosting its advances portfolio.
Top line of the bank depicted a staggering growth of 20 percent year on year in 1H CY14, while deposits grew by 10 percent and advances by 13 percent year on year. Increased focus on building up advances and low-cost deposits augured well for the banks Net Interest Margin (NIM), thus resulting in a spread ratio of 38 percent in 1H CY14 (1H CY13: 26 percent).
Further boost to the bottom line was provided by strengthening non-mark-up income that soared by a healthy 27 percent year on year in 1H FY14 on the heels of rising income from fee, commission and brokerage coupled with gains on sale of securities. Thanks to the aforementioned factors, the bottom line landed in green, flattering a profit of Rs72 million from a loss of Rs365 million in 1H CY13.
The only blot at this stage appears to be its unsound coverage ratio of 56 percent (as of June 2014). The bank might have to inflate its provisioning further to enrich its coverage ratio. Higher provisioning, however, will keep a check on Silk Banks profitability in coming periods where banks deep-seated regards towards high-yielding advances will likely keep shoring the fate of Silk's profitability.

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Silk Bank (Profit & Loss Account)
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Rs (mn)                            1HCY14      1HCY13        Chng
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Markup Earned                         4,533      3,786        20%
Markup Expenses                     (2,791)    (2,801)         0%
Net Markup Income                     1,742        985        77%
Provisioning/(Reveral)                 (29)         11          -
Net Markup Income after provisions    1,511        908        66%
Non Mark-up/Interest Income             788        621        27%
Operating Revenues                    2,299      1,529        50%
Non Mark-up/Interest Expenses       (2,223)    (2,024)        10%
Profit Before Taxation                   76      (495)          -
Taxation                                (4)        130          -
Profit After Taxation                    72      (365)          -
EPS (Rs)                               0.03     (0.14)          -
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