• Posts robust income growth; operating cost management
• Total operating income up 74% to Rs. 4.28 b
• Profit Before Tax up 156% to Rs. 206 m; Profit After Tax up 276% to Rs. 488 m

Cargills Bank has reported a profit before tax of Rs. 206 million for the financial year 2022, recovering from a loss before tax of Rs. 369 million in the previous year, driven by robust growth in operating income that offset erosions due to increased provisioning and operating costs.

Total operating income rose 74% year-on-year to Rs. 4.28 billion on account of growth in both Interest and Fee-based income in similar proportion. The bank prudently managed its lending portfolio with the intention of preserving liquidity and maintaining asset quality, leading to a slight decline in the portfolio. However, the bank was able to expand its net interest margins over the previous year, resulting in significant growth in interest income. Meanwhile robust performance in card operations, trade finance and remittances resulted in 75% year-on-year growth in fee-based income.

Mindful of the challenging environment and its impact on customers, the bank proactively increased its provision cover ratio, resulting in a 114% year-on-year growth in impairment to Rs. 1.46 billion. The bank’s Stage 3 Loans (Net of Stage 3 Impairment) to Total Loans ratio consequently improved from 6.43% in 2021 to 4.85% in 2022.

The bank prudently managed its operating costs to limit the increase to 16% year-on-year, resulting in the bank’s Cost to Income ratio improving from 82.8% in 2021 to 55.4% in 2022. Consequently, the bank reported an operating profit before taxes on financial services of Rs. 448 million.

The bank maintained healthy capital and liquid asset ratios during the year, reporting a Total Capital Ratio of 22.85% and Liquid Asset Ratio – Domestic Banking Unit of 26.70% as at 31 December 2022.

Managing Director/CEO Senarath Bandara said: “Cargills Bank navigated the uncertain economic climate of 2022 with resilience and pragmatism. The bank adopted an agile approach in response to the challenges to seek growth and stability in spite of external pressure. Our approach has borne fruit with the bank achieving profitability within the year under review, while also pursuing our long-term growth aspirations to create sustainable value for all stakeholders.”

The bank continued to expand its network, opening two new branches in Negombo and Anuradhapura, and complemented branch expansion by opening eight new MINI service locations in Cargills Food City outlets. Furthermore, in line with its objectives to promote financial inclusion and financial deepening, the bank launched a mobile branch vehicle to serve underbanked customers in the Central, North Central and Northern Provinces. These channels are complemented by the bank’s access to the Cargills Food City network that allows customers to make deposits and withdrawals from Cargills Food City outlets island-wide, and its digital offerings which include customer onboarding and mobile banking for personal banking customers and internet banking services for corporates.

The bank was recognised at the LankaPay Technnovation Awards 2023, receiving two Gold Awards and a Merit Award. Cargills Bank won Gold Awards for Bank of the Year for Financial Inclusivity and Excellence in Customer Convenience in its respective categories, and a Merit Award for being the Acquirer Bank for the Best Mobile Application for Retail Payments via JustPay.

Cargills Bank’s supported National Long-Term Rating assigned by Fitch Ratings Lanka was downgraded from A+ (lka)/RWN to A (lka)/RWN following the sovereign downgrade and recalibration of the agency’s Sri Lankan national rating scale. The rating is nevertheless on par with, or better than, banking sector peers.

Ranjit Page stepped down as Chairman of the Board of Cargills Bank in January 2023, having served the maximum term permitted by the Central Bank as a Director on the Board of a bank.

Reflecting upon the purpose for which the Cargills group decided to set up a Bank, Page said “Understanding the need of the country, we decided to invest more aggressively in building infrastructure to support the agriculture and dairy farming communities and sought a banking license to support the ecosystem we were building. We applied for a license under the banner of Cargills Agriculture & Commercial Bank, reflecting our vision to be the most inclusive bank by improving financial access for underserved communities across Sri Lanka.”

Richard Ebell, who previously held the position of Senior Director, was appointed as Chairman of the Board highlighting the merits of the bank’s ecosystem-based business model, said: “Our access to the Cargills ecosystem benefits the bank, and at a societal level, gives its customers increased convenience and ease of banking, opening doors to previously underserved sectors of the population. Through this access, the bank seeks to bring vibrantly alive its motif ‘Banking on the Human Spirit’.”

In other changes to the Board during the past year, Faisal Salieh, Senior Director, retired from the bank’s Board in August 2022 having reached 70 years of age, in line with the directions on Corporate Governance issued by the Central Bank. Furthermore, Prabhu Mathavan retired from the Board in January 2023 having served the maximum permitted term of nine years on the Board. Mathavan remains with the bank as Chief Operating Officer. Asoka Pieris, Managing Director, Cargills Foods Company Ltd., was appointed to the Board in January 2023 as a Non-Executive Director.