This performance was underpinned by a growth of 8.0% in operating income which reached Rs 7.7 billion. Net interest income rose by 8.0% essentially due to higher investment in Treasury Bills and Government securities amidst persisting excess liquidity, with an improvement in average yields also observed. On the other hand, net fee and commission income dropped marginally with a reduction in contribution from regional trade finance due to the impact of low oil prices being partly compensated by higher revenues from wealth management and payment activities. Other income rose by 23.1%, driven by higher profit on exchange on the back of a rise in the volume of transactions and by increased revenues in some non-banking business lines.

Operating expenses rose by 6.8% with our cost to income ratio falling to 41.3% as compared to 41.8% for the corresponding period in the previous year. For its part, allowance for credit impairment stood at Rs 525.5 million, representing an annualised rate of 60 basis points of our gross loan portfolio, compared to 57 basis points as at 30 June 2016.
The share of income from associates grew by 19.1% mainly due to improved performance of PAD Group.

Our capitalisation level remains comfortable with shareholders’ funds increasing to Rs 42.9 billion, contributing to a capital adequacy ratio of 18.3% as at December 2016, of which 15.6% in the form of Tier 1.

Outlook

The operating environment remains difficult, with the domestic banking system still being subject to high liquidity conditions both in rupee and in foreign currencies. However, the expansion of our loan portfolio is an encouraging sign which is being confirmed by our pipeline of projects. The latter should be further boosted in the periods ahead if domestic public and private investment projects are executed as planned. On the whole, full year results are expected to improve compared to last year.

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