Mercantile Investments and Finance has recorded a steady pre-tax profit of Rs 314 million and a post- tax profit of Rs 202 million for the financial year ending March 31, 2017.
However both pre and post-tax profits reported a notable decline of 61% and 60% respectively, when compared with the previous year mainly on account of recording impairment charges.
Further, as witnessed across the finance industry, the continued upward movement in interest rates and its resulting re-pricing effect impacted the cost of funding and core business margins which pegged back profitability levels against what was envisaged, Mercantile Investments and Finance Chairman Saro Weerasuriya told shareholders in company’s Annual Report for the financial year 2016/17.
“We experienced steady growth in our lending volumes which resulted in the loan book growing buoyantly by 14% year-on-year. In contrast, the deposit base grew moderately increasing by 8% year-on-year.
In the backdrop of rising market interest rates, we were conservative in the mobilisation of deposits that were deemed relatively more costly than other sources of funding available, and hence, we were able to access less costly sources of funding through borrowings on the strength of our brand.”
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