One factor that hugely influenced ANSA Merchant Bank Ltd's 2013 results was the 81.5 per cent reduction in its provision for impairment of investments.
Asset movements
Total assets expanded by ten per cent to reach $6.1 billion from $5.5 billion as at December 2012. Cash and short-term funds increased by $245.7 million to reach $1.05 billion from the previous year's balance of $806 million.
The "pure cash" element declined to $465 million from the earlier period's $510 million. In contrast, short-term deposit with other banks more than doubled; this figure closed 2013 at $512.8 million from the 2012 balance of $248.5 million. In addition, due to higher levels of customers' deposits, Central Bank reserve deposits increased from $47.2 million in 2012 to $73.7 million last year.
The bank's holdings of leased assets and other instalment loans increased by 20.6 per cent, moving from $760.9 million in the 2012 session to last year's net balance of $917.5 million. These changes reflect the continuing popularity of the company's "In One" system for vehicle payment, insurance coverage and servicing.
The largest change in performing loans was observed under the hire purchase category; this balance improved from $707.7 million in 2012 to $847.6 million last year, an increase of 19.8 per cent. Finance leases rose by 15.5 per cent to $271.2 million from the previous level of $234.9 million.Total holdings of investment securities declined by $198.1 million to $2.6 billion; in 2012, this figure was $2.8 billion. These investments are grouped under two heading, (a) fair value through statement of income and (b) amortised cost.
Under the first heading, its total holdings declined from the previous level of $1.41 billion to last year's $1.24 billion. Significant movements occurred in its holdings of unquoted equities, which jumped to almost $202 million from a paltry $6 million in 2012. The bank's stock of quoted equities increased to $440.9 million from the previous level of $349.7 million. Its holdings of government bonds fell to $149.5 million from the 2012 balance of $530.4 million.
Under the latter heading, the most significant drop occurred with its holdings of corporate bonds; the balance closed 2013 at $403.8 million from the previous year's figure of $584.4 million. Meanwhile, there was a $122 million increase in its stock of state-owned company securities; here, year-end balances increased to $652.5 million from $530.5 million as at December 2012.
The value of other debtors and prepayments jumped from a mere $33.2 million at December 2012 to $279.5 million as at year-end 2013. The largest component related to proceeds from investment maturities and repayments, which increased to $261.7 million from the 2012 balance of $21.7 million.
Liability changes
Total liabilities rose by 8.8 per cent to $4.36 billion from 2012's $4 billion. Customers' deposits and other funding instruments increased from $1.77 billion as at year-end 2012 to $2.1 billion as at December 2013.
The largest increase of $209.3 million was attributable to amounts from pension funds, credit unions and trustees; their balances moved from $338.8 million in 2012 to last year's $548.1 million. A smaller increase of $117 million was recorded by private companies, estates and financial institutions; in this case, the balance moved to $855.8 million from $738.9 million as at year-end 2012.
Insurance contract liabilities posted a 4.9 per cent increase, moving from $1.08 billion as at December 2012 to $1.13 billion last year. The biggest increase was in the life insurance segment. Here, the value of contracts increased to $859.4 million from $809.7 million as at December 2012.
General insurance contracts moved from $185.8 million at year-end 2012 to $184.4 million last December. The premiums component increased to $87.2 million from $81.1 million in the previous year. On the other hand, the claims element declined from $104.7 million in 2012 to $97.2 million last year.
Equity improvements
Shareholders' equity increased from $1.53 billion in 2012 to $1.73 billion last year. This improvement was primarily driven by the increase in retained earnings, which rose to $880 million from slightly less than $704 million as at December 2012.Based on that change, the book value of each share moved up to $20.24 from $17.88 as at December 2012.
Income and profit
Total operating income increased to $797 million from the 2012 base of $747.2 million, or by 6.7 per cent. With the exception of investment income, all major components exhibited higher numbers over what was reported for 2012.Net insurance revenue rose by 7.5 per cent to $293.5 million from $273 million in 2012. Gross premiums for 2013 amounted to $450.7 million with reinsurers taking up 151.2 million. After negative adjustments for unearned premiums and unexpired risks of $6 million, the net figure came in at $293.5 million.
In 2012, gross premiums registered at $411.4 million with reinsurers assuming $133.3 million of that income. Thereafter, negative adjustments for unearned premiums and unexpired risks consumed $5 million, bringing down the net figure to $273 million.
Finance charges, loan fees and other interest income rose by 23.8 per cent to $154.4 million from $124.7 million in the prior year. Although interest income on loans and advances declined to $19.9 million from $22.7 million in 2012, increases in other components more than made up for this shortfall.
Earned finance charges advanced to $111 million from $95.8 million, representing an increase of 15.9 per cent. However, the largest improvement was recorded in the "other income" line; here, the 2013 result came in at $23.5 million, which was far greater (by 275 per cent) than the $6.3 million earned for 2012.Other income increased by $18.1 million to $79.9 million from 2012's $61.8 million. The bulk of this increase was concentrated in two areas, "administrative fees and commissions" and "foreign exchange trading and gains".
The former increased from $24.3 million in 2012 to $29.1 million last year. In the case of the latter, income advanced to $18.3 million from $3.8 million in the prior year. The most significant decline occurred under the "other" heading; this fell to $7 million last year from $11.2 million in 2012.The decline in investment income to $269.2 million from the previous year's $287.7 million was influenced by significant swings of two line items but in opposite directions.
First, interest and dividend income from other financial assets declined to $96.1 million in 2013 from the previous year's $142.6 million. On the other hand, there was a positive change in the realised gains on investments held at year end designated at fair value through statement of income; this value improved to $67.2 million from the 2012 level of $48.4 million.
Net operating income improved by 43 per cent to $504.6 million from the 2012 figure of $352.8 million. Helping to drive this increase was the 81.5 per cent reduction in its provision for impairment of investment values; this provision declined to $19 million from the 2012 level of $102.8 million. Also helping the result was the fall in interest expense, which registered at $72.4 million last year, from $89.4 million in the previous period.
Selling and administrative expenses, at $165.6 million, were only slightly higher than the $164.6 million recorded for 2012.These changes saw 2013 pre-tax profits come in at $338.9 million. This result was 80.1 per cent greater than the 2012 result of $188.2 million. With little change in the effective tax rate of just over 21 per cent for both years, the 2013 net profit closed at $266.4 million. This represented a 79.5 per cent increase over the 2012 result of $148.4 million.
Segment profitability
AMBL structures its business along four major segments, banking services, general insurance, life insurance and mutual fund management. The table above highlights data for both 2012 and 2013. Although not severely impacted by the provision for impairment of investment assets, the life insurance segment produced a strong improvement in its pre-tax profit, moving from a modest $19.5 million in 2012 to a more robust $68.4 million last year.
The 2012 impairment provision resulted in the mutual fund segment incurring a loss of $12.4 million. In 2013, this position was strongly reversed and this segment recorded a profit of $23.5 million. The company's decision to close the Euro denominated income fund certainly helped the result.Despite generating lower operating income, the banking services segment produced a strong increase in its pre-tax profit. This result was helped by the significantly lower impairment provision in 2013.
EPS and share price
AMBL's EPS improved from $1.73 in 2012 to last year's $3.11. The total dividend paid for 2013 amounted to $1.00. This was an improvement over the $0.85 paid in respect of the 2012 result.At its recent price of $38.49, investors would enjoy a yield of 2.6 per cent.