Cargills Bank : Interim Financial Statements for the quarter ended 31st March 2024

INTERIM FINANCIAL STATEMENTS

FOR THE QUARTER ENDED 31 MARCH 2024

Cargills Bank posts Profit before Tax Rs. 109 Million for the quarter ended 31 March 2024

Financial Highlights

• Profit after Income Tax for the quarter - Rs. 46 Mn
• Bank maintains strong capital adequacy, Total Capital Ratio (CAR) at 22.18%
• Total Assets grow by Rs. 1.6 Bn

There was moderate growth in our Deposit and Loan portfolios amidst stiff competition from our peers. The Bank continued support to its customers to help them meet challenges they faced.

Continuous downward revisions of lending rates, with lagged repricing of deposits, eroded net interest margins and exerted considerable pressure on the Bank's bottom line. This was the main cause of the comparatively lower results in Q1 2024. Focus on business expansion continues, with attention to technological innovations.

In managing its investment portfolio in Q1 2024, the Bank recorded a net fair value gain of Rs. 171 Mn on financial assets measured at fair value through other comprehensive income. The Bank recorded a gain of Rs. 92 Mn on the realization of some of these assets in Q1.

Prudent management of credit exposures continued to be a priority amidst ongoing amendments to debt recovery laws. Impairment provisioning reflected a careful scrutiny of credit exposures in the context of the current operating environment.

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	Cargills Bank PLC	(628,780.00)
	Statement of Profit or Loss	498,911.00
			OK	OK
			For the Quarter ended
			31-Mar-24	31-Mar-23	Change
			Rs. '000	Rs. '000	%
	Interest income		2,345,880	2,674,874		(12)
	Interest expenses		(1,531,638)	(1,842,303)		17
	Net interest income		814,242	832,571		(2)
	Fees and commission income		317,697	338,717		(6)
	Fees and commission expenses		(118,739)	(111,410)		(7)
	Net fees and commission income		198,958	227,307		(12)
	Net gains/(losses) from trading		(3,875)	1,689		(329)
	Net gains/(losses) from financial assets at fair value through profit or loss		84,350	30,507		176
	Net gains/(losses) from derecognition of financial assets		92,052	8,192		1,024
	Net other operating income		16,515	114,217		(86)
	Total other income		189,042	154,605		22
	Total operating income		1,202,242	1,214,483		(1)
	Impairment for loans and other losses
	Loans and advances to customers		(237,893)	(250,571)		5
	Financial assets and other		12,121	(27,622)		144
	Total impairment for loans and other losses		(225,772)	(278,193)		19
	Net operating income		976,470	936,290		4
	Personnel expenses		(315,268)	(264,664)		(19)
	Depreciation and amortization		(81,709)	(82,127)		1
	Other operating expenses		(373,040)	(330,482)		(13)
	Total operating expenses		(770,017)	(677,273)		(14)
	Operating profit/(loss) before taxes on financial services
		206,453	259,017		(20)
	Taxes on financial services		(97,069)	(85,119)		(14)
	Profit/(Loss) before tax		109,384	173,898		(37)
	Tax (expenses)/reversal		(62,847)	(67,432)		7
	Profit/(Loss) for the period		46,537	106,466		(56)
	Basic earnings per share (Rs.)	0.05	0.11		(56)
	Diluted earning per share (Rs.)		0.05	0.11		(56)
			799,453

Page 3 of 16

Cargills Bank PLC

Statement of Profit or Loss and Other Comprehensive Income

	H	OK
	For the Quarter ended
	31-Mar-24	31-Mar-23	Change
	Rs. '000	Rs. '000	%
Profit/(Loss) for the period	46,537	106,466	(56)
Other comprehensive income, net of tax
Items that are or may be reclassified to profit or loss
Financial assets at Fair Value through Other Comprehensive Income (FVOCI)
Fair value gains/(losses) that arose during the period
Treasury Bills	20,172	72,247	(72)
Treasury Bonds	316,086	159,241	98
	336,258	231,488	45
Fair value (gains)/losses reclassified to Income Statement on disposal
Treasury Bills	(3,556)	(5,859)	39
Treasury Bonds	(88,496)	(2,333)	(3,693)
	(92,052)	(8,192)	(1,024)
Net gains / (losses) on re-measuring Financial assets at FVOCI
Treasury Bills	16,616	66,388	(75)
Treasury Bonds	227,590	156,908	45
	244,206	223,296	9
Deferred tax related to the above	(73,262)	(66,989)	(9)
	170,944	156,307	9
Other comprehensive income/(loss) for the period, net of tax	170,944	156,307	9
Total comprehensive income/(loss) for the period, net of tax	217,481	262,773	(17)

14-Dec-2327

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Cargills Bank PLC

Statement of Financial Position

As at		31-Mar-24	31-Dec-23	Growth
			(Audited)	%
Assets		Rs. '000	Rs. '000
Cash and cash equivalents	10	1,368,390	1,963,321	(30)
Balances with Central Bank of Sri Lanka	11	668,107	432,805	54
Placements with banks		245,229	-	-
Securities purchased under resale agreements		721,154	730,566	(1)
Derivative financial instruments	13	2,382	6	39,600
Financial assets measured at fair value through profit or loss	14	3,052,059	2,468,401	24
Financial assets at amortized costs - Loans and advances to other customers	15	41,580,406	40,559,438	3
Financial assets at amortized costs - Debt and other instruments	16	1,999,571	2,050,119	(2)
Financial assets measured at fair value through other comprehensive income	]	18,837,859	17,779,520	6
Property, plant & equipment		419,106	462,705	(9)
Intangible assets		255,147	283,445	(10)
Deferred tax assets		267,141	284,090	(6)
Other assets	18	1,947,988	2,721,878	(28)
Total assets		71,364,539	69,736,295	2
Liabilities and equity
Due to banks	19	419,042	717,667	(42)
Derivative financial instruments		6,279	27	23,156
Financial liabilities at amortized cost - Due to depositors	20	52,548,952	50,728,853	4
Financial liabilities at amortized cost - Due to other borrowers	21	2,508,090	3,669,925	(32)
Retirement benefit obligation	22	108,733	108,605	0
Lease liability		298,800	335,781	(11)
Other liabilities	23	3,314,378	2,232,654	48
Total liabilities		59,204,274	57,793,512	2
Equity
Stated capital		11,894,421	11,894,421	-
Statutory reserves		78,775	78,775	-
Other reserves		1,317,499	1,146,555	15
Retained earnings/(losses)		(1,130,431)	(1,176,968)	4
Total equity attributable to equity holders of the Bank		12,160,265	11,942,783	2
				-
Total liabilities and equity		71,364,539	69,736,295	2
Contingent liabilities & commitments		18,479,921	16,697,057	11
Net assets value per share (Rs.)	######	12.86	12.63	2
Memorandum information:
No. of employees		640	623
No. of branches		24	24

Certification:

These Financial Statements have been prepared in compliance with the requirements of the Companies Act No. 07 of 2007. Sgd.

1. Gajanayaka
   Head of Finance

We, the undersigned, being the Managing Director and the Chairman of Cargills Bank PLC, certify jointly that;

1. the above statements have been prepared in compliance with the format and definitions prescribed by the Central Bank of Sri Lanka,
2. the information contained in these statements have been extracted from the unaudited financial statements of the Bank, unless indicated as audited.

Sgd.	Sgd.
K B S Bandara	R A Ebell
Managing Director/Chief Executive Officer	Chairman
08 May 2024
Colombo

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Cargills Bank PLC

Statement of Changes in Equity

			Fair Value
	Stated capital	Statutory	through Other	Retained	Total
	reserve	Comprehensive	earnings/(losses)
			Income Reserve
	Rs. '000	Rs. '000	Rs. '000	Rs. '000	Rs. '000
Balance as at 01.01.2023-Audited	11,394,421	56,774	(132,751)	(1,598,139)	9,720,305
Total comprehensive income for the period ended 31.03.2023
Profit for the period	-	-	-	106,466	106,466
Other comprehensive income, net of tax	-	-	156,307		156,307
Total comprehensive income/(loss) for the period	-	-	156,307	106,466	262,773
Transactions with owners in their capacity as owners
Issue of shares	-	-	-	-	-
Transfer to statutory reserves	-	-	-	-	-
Total transactions with owners	-	-	-	-	-
Balance as at 31.03.2023	11,394,421	56,774	23,556	(1,491,673)	9,983,078
Total comprehensive income for the period 01.04.2023 to 31.12.2023
Profit for the period	-	-	-	333,554	333,554
Other comprehensive income/ (loss) net of tax	-	-	1,122,999	3,152	1,126,151
Total comprehensive income/(loss) for the period	-	-	1,122,999	336,706	1,459,705
Transactions with owners in their capacity as owners
Issue of shares	500,000	-	-	-	500,000
Transfer to statutory reserves	-	22,001	-	(22,001)	-
Total transactions with owners	500,000	22,001	-	(22,001)	500,000
Balance as at 01.01.2024 - Audited	11,894,421	78,775	1,146,555	(1,176,968)	11,942,783
Total comprehensive income for the period ended 31.03.2024
Profit for the period	-	-	-	46,537	46,537
Other comprehensive income/(loss), net of tax	-	-	170,944	-	170,944
Total comprehensive income/(loss) for the period	-	-	170,944	46,537	217,481
Transactions with owners in their capacity as owners
Issue of shares	-	-	-	-	-
Transfer to statutory reserves	-	-		-	-
Total transactions with owners	-	-	-	-	-
Balance as at 31.03.2024	11,894,421	78,775	1,317,499	(1,130,431)	12,160,264

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Cargills Bank PLC

Statement of Cash Flows

		1
		For the period ended
	N	31-Mar-24	31-Mar-23
		Rs. '000	Rs. '000
Cash flows from operating activities
Profit/(Loss) before income tax	#	109,384	173,898
	#
Adjustments for:	#
Non-cash items included in profit/(loss) before tax	#	380,853	377,858
Interest paid on lease liability	#	(11,436)	(10,113)
Dividend income	#	-	(373)
Benefits paid on defined benefit plans	#	(5,898)	(5,330)
Change in operating assets	#	(2,481,182)	(5,578,162)
Change in operating liabilities	#	2,609,451	7,230,371
Net cash generated from/(used in) operating activities	#	601,171	2,188,149
	#
Cash flows from investing activities	#
Net purchase of property, plant and equipment	#	(4,971)	(10,794)
Net purchase of intangible assets		(4,841)	(9,776)
Dividend received		-	373
Net cash generated from/(used in) investing activities		(9,812)	(20,197)
	#
Cash flows from financing activities	#
Payment of lease liability		(36,982)	(13,556)
Change in securities sold under repurchase agreements	#	(1,161,835)	(1,687,000)
Net cash generated from/(used in) financing activities		(1,198,817)	(1,700,556)
Net increase/(decrease) in cash and cash equivalents		(607,458)	467,396
Cash and cash equivalents at the beginning of the period		2,026,908	1,260,340
Cash and cash equivalents at the end of the period		1,419,450	1,727,736
Less: Provision for impairment		(51,061)	(37,394)
Cash and cash equivalents as per Statement of Financial Position (Net)		1,368,389	1,690,342

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Cargills Bank PLC

Classification of Financial Assets and Financial Liabilities

	Fair value	Fair Value	Amortized	Total
	through P/L	through OCI	cost
Rs. '	Rs. '000	Rs. '000	Rs. '000	Rs. '000
As at 31.03.2024
Financial assets
Cash and cash equivalents	-	-	1,368,390	1,368,390
Balances with Central Bank of Sri Lanka	-	-	668,107	668,107
Placements with Banks	-	-	245,229	245,229
Securities purchased under resale agreements	-		721,154	721,154
Derivative financial instruments	2,382	-	-	2,382
Financial assets measured at fair value through profit or loss	3,052,059	-	-	3,052,059
Financial assets at amortized costs - Loans and Advances to other customers	-	-	41,580,406	41,580,406
Financial assets at amortized costs - Debt and other financial Instruments	-	-	1,999,571	1,999,571
Financial assets at fair value through other comprehensive income
Debt securities	-	18,817,171	-	18,817,171
Equity securities	-	20,688	-	20,688
Other assets*	-	-	1,408,475	1,408,475
Total financial assets	3,054,441	18,837,859	47,991,332	69,883,632
Financial liabilities
Due to banks	-	-	419,042	419,042
Derivative financial instruments	6,279	-	-	6,279
Financial liabilities at amortized cost - Due to depositors	-	-	52,548,952	52,548,952
Financial liabilities at amortized cost - Due to other borrowers	-	-	2,508,090	2,508,090
Lease Liability	-	-	298,800	298,800
Other liabilities**	-	-	2,873,230	2,873,230
Total financial liabilities	6,279	-	58,648,114	58,654,393
As at 31.12.2023 - Audited
Financial assets
Cash and cash equivalents	-	-	1,963,321	1,963,321
Balances with Central Bank of Sri Lanka	-	-	432,805	432,805
Placements with Banks	-	-	-	-
Securities purchased under resale agreements	-	-	730,566	730,566
Derivative financial instruments	6	-	-	6
Financial assets measured at fair value through profit or loss	2,468,401	-	-	2,468,401
Financial assets at Amortized costs - Loans and Advances to other customers	-	-	40,559,438	40,559,438
Financial assets at Amortized costs - Debt and other financial Instruments	-	-	2,050,119	2,050,119
Financial assets at fair value through other comprehensive income
Debt securities	-	17,758,832	-	17,758,832
Equity securities	-	20,688	-	20,688
Other assets*	-	-	2,174,512	2,174,512
Total financial assets	2,468,407	17,779,520	47,910,761	68,158,688
Financial liabilities
Due to banks	-	-	717,667	717,667
Derivative financial instruments	27	-	-	27
Financial liabilities at amortized cost - Due to depositors	-	-	50,728,853	50,728,853
Financial liabilities at amortized cost - Due to other borrowers	-	-	3,669,925	3,669,925
Lease Liability	-	-	335,781	335,781
Other liabilities**	-	-	1,710,916	1,710,916
Total financial liabilities	27	-	57,163,142	57,163,169

*Other assets only include other receivables

**Other liabilities exclude accrued expenditure and impairment on commitments and contingencies

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Cargills Bank PLC

Classification of Financial Assets and Financial Liabilities

Fair Value Hierarchy

The Bank measures the fair value using the following fair value hierarchy, which reflects the significance of the inputs used in making the measurement.

• Level 1 : Fair value measurement using unadjusted quoted market prices

Inputs that are quoted market prices (unadjusted) in an active market for identical instruments.

• Level 2 : Fair value measurement using significant observable inputs

Inputs other than quoted prices included within Level 1 that are observable either directly (i.e., as prices) or indirectly (i.e., derived from prices). This category includes instruments valued using;

1. quoted prices in active markets for similar instruments,
2. quoted prices for identical or similar instruments in markets that are considered to be less active, or
3. other valuation techniques in which almost all significant inputs are directly or indirectly observable from market data.
   •Level 3 : Fair value measurement using significant unobservable inputs
   Inputs that are unobservable.

This category includes all instruments for which the valuation technique includes inputs not based on observable data and the unobservable inputs have a significant effect on the instrument's valuation.

Fair value estimates obtained from models are adjusted for any other factors, such as liquidity risk or model uncertainties, to the extent that the Bank believes that a third party market participant would take them into account in pricing a transaction.

Financial instruments measured at fair value - fair value hierarchy

The following table provides an analysis of assets and liabilities measured at fair value as at the reporting date, by the level in the fair value hierarchy into which the fair value measurement is categorised. These amounts were based on the values recognised in the Statement of Financial Position:

	Level 1	Level 2	Level 3	Total
	Rs. '000	Rs. '000	Rs. '000	Rs. '000
As at 31 March 2024
Financial Assets
Derivative financial instruments	-	2,382	-	2,382
Financial assets measured at fair value through	-	3,052,059	-
profit or loss	3,052,059
Financial assets measured at fair value through
other comprehensive income
Debt securities	18,817,171	-	-	18,817,171
Equity Securities	-	-	20,688	20,688
Total assets at fair value	18,817,171	3,054,441	20,688	21,892,300
Liabilities
Derivative financial instruments	-	6,279	-	6,279
Total liabilities at fair value	-	6,279	-	6,279
	Level 1	Level 2	Level 3	Total
	Rs. '000	Rs. '000	Rs. '000	Rs. '000
As at 31 December 2023 - Audited
Financial Assets
Derivative financial instruments	-	6	-	6
Financial assets measured at fair value through	-	2,468,401	-
profit or loss	2,468,401
Financial assets measured at fair value through
other comprehensive income
Debt securities	17,758,832	-	-	17,758,832
Equity securities	-		20,688	20,688
Total assets at fair value	17,758,832	2,468,407	20,688	20,247,927
Liabilities
Derivative financial instruments	-	27	-	27
Total liabilities at fair value	-	27	-	27

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Cargills Bank PLC

Selected Performance Indicators

As at

Regulatory Capital (Rs'000)

Common Equity Tier 1

Total Tier 1 Capital

Total Capital

Regulatory Capital Ratios (%) (Refer Note 3)

Common Equity Tier 1 Capital Ratio - (Minimum Requirement - 7%) Total Tier 1 capital Ratio - (Minimum Requirement - 8.5% )

Total Capital Ratio - (Minimum Requirement - 12.5%)

Leverage Ratio - (Minimum Requirement - 3%)

Regulatory Liquidity

Statutory Liquid Assets, (Rs. '000) - Bank

Statutory Liquid Assets Ratio - Total Bank, % - (Minimum Requirement - 20%) Total Stock of High-Quality Liquid Assets (Rs '000)

Liquidity Coverage Ratio, % - (Minimum Requirement - 2023 - 100%) Rupee, %

All currency, %

Net Stable Funding Ratio (%) - (Minimum Requirement - 2023 - 100%)

Assets Quality (Quality of Loan Portfolio)

Stage 3 Loans (Net of Stage 3 Impairment) to Total Loans Stage 3 Impairment to Stage 3 Loans (Stage 3 Provision Cover)

Profitability

Interest Margin, %

Return on Assets (before Tax), %

Return on Equity, %

31-Mar-2024	31-Dec-2023
10,910,720	10,910,720
12,410,720	12,410,720
12,693,941	12,693,941

19.0719.89

21.6922.63

22.1823.15

14.3714.67

20,231,192

19,717,993

1. 39.82

21,231,568 19,149,507

1. 359.50

1. 289.04

1. 123

1. 8.63

1. 46.69

1. 5.61

0.581.10

1.544.12

Explanatory Notes

1. The Financial Statements of the Bank have been prepared in accordance with the Sri Lanka Accounting Standards (SLFRSs/LKASs) issued by The Institute of Chartered Accountants of Sri Lanka (CA Sri Lanka). There were no changes to Accounting Policies and methods of computation since publication of the Annual Report for the year ended 31 December 2023.
2. These Interim Financial Statements of the Bank have been prepared in compliance with the requirements of the Sri Lanka Accounting Standard - LKAS 34 on 'Interim Financial Reporting' and provide the information as required in terms of Listing Rule 7.4 of the Colombo Stock Exchange.
3. The Bank should maintain Total Tier 1 Capital Ratio 250 basis points above the minimum applicable until it complies with the regulatory minimum capital requirement of LKR 20 Billion by end 2025.
4. The Bank continued to reassess its individually significant loan portfolio as of 31 March 2024 and incorporate adequate impairment provisions on identified customer segments to reflect increased credit risk since initial recognition. Accordingly, the impairment provision also includes management overlays where higher impairment charges were considered as a prudential measure in assessing the elevated risk profiles of borrowers.
   Additionally, the Bank revised the cash flow assumptions for customers who were previously impaired, ensuring that any deterioration in the credit quality of such customers has been appropriately addressed during the period.
   The Bank estimated its Expected Credit Loss (ECL) for collective impairment as at the reporting date based on the updated Probability of Default flow rates as at 31 December 2023 and Economic Factor Adjustment (EFA) & Loss Given Default (LGD) values as at 31 March 2024.
   The exchange impact on impairment charges on loans and advances denominated in foreign currency was recognised in Net Other Operating Income where the corresponding exchange gains/losses are recognised.
5. Income Tax - Year of Assessment 2013/2014
   The Commissioner General of Inland Revenue (CGIR) issued a Notice of Assessment for the Year of Assessment 2013/2014. The Bank has appealed before the Court of Appeal and the Bank awaits the hearing of the Appeal from the Court of Appeal.
   Income Tax - Year of Assessment 2017/2018
   The CGIR issued a Notice of Assessment for the Year of Assessment 2017/2018. The Bank has lodged an appeal against the said assessment. The appeal is currently at the IRD hearing stage.
   Management is of the opinion that the outcome of the above will not have a material impact to the Financial Statements.
6. During the quarter, there were no material changes in the composition of assets, liabilities and/or contingent liabilities, other than those disclosed above.
7. There was no pending litigation of a material nature against the Bank.
8. All known expenses including management fees and similar expenses have been provided for in these Interim Financial Statements.
9. No circumstances have arisen since the reporting date which would require adjustment to or disclosure in the Financial Statements.

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