Amãna Bank PLC Financial Summary and Investment Analysis

Executive Overview

Amãna Bank PLC is a licensed commercial bank operating a non-interest-based, development-focused banking model, with particular emphasis on SMEs, retail customers, trade finance and financial inclusion. It has no subsidiaries or associates.

Periods covered: Q3 2023 through Q2 2026, including CY2023, CY2024 and the audited CY2025 Annual Report. The latest Q2 2026/H1 2026 statements are unaudited.

The underlying financial trajectory has strengthened materially. CY2025 produced record Profit After Tax (PAT) of LKR 2.481 Bn, up 40%, while H1 2026 PAT increased another 25% YoY to LKR 1.125 Bn. Advances expanded particularly rapidly during 2025, while asset quality remained strong. The principal counterbalance is declining capital headroom as the balance sheet expands, alongside tightening liquidity/rate conditions and geopolitical uncertainty.

The CY2025 financial statements received an unmodified audit opinion stating that they presented a true and fair view.

Financial Performance

Revenue and Profitability Trends

For a bank, conventional revenue, gross profit and gross margin are not meaningful; Net Financing Income (NFI) and Total Operating Income (TOI) are more appropriate.

LKR Mn

Q2 2026 was strong: TOI increased 22% YoY and approximately 5.8% QoQ, while PAT rose 33% YoY and 24% QoQ. H1 2026 PBT reached LKR 1.874 Bn, +22%, and PAT reached LKR 1.125 Bn, +25%.

CY2025 NFI rose 21% to LKR 8.320 Bn, fee and commission income rose 27% to LKR 1.369 Bn, TOI rose 16% to LKR 10.061 Bn, PBT rose 47% to LKR 4.091 Bn, and PAT rose 40%.

Part of late-2025 profitability was supported by impairment reversals: Q4 2025 recorded approximately LKR 527.9 Mn of impairment reversals. Q2 2026 instead recorded a LKR 67.5 Mn impairment charge, making the latest profit growth less dependent on reversals.

From CY2023 to CY2025, PAT CAGR was approximately 33.8%, versus TOI CAGR of approximately 4.5%, demonstrating substantial improvement in operating and credit-cost efficiency.

Balance Sheet Analysis

LKR Bn

CY2025 was exceptionally expansionary: advances increased 36%, versus deposits +11% and assets +12%. From 2023-2025, advances grew at approximately 29.8% CAGR, much faster than deposits at 13.8%.

H1 2026 growth was more balanced: net advances +4%, deposits +5%, assets +5% and equity +4%. Net advances/deposits stood near 87%.

Traditional current and debt/equity ratios are not appropriate measures for a commercial bank because deposits and financing are core operating items; regulatory capital and liquidity ratios provide the more meaningful solvency assessment.

Cash Flow Analysis

CY2025 negative operating cash flow primarily reflected LKR 39.02 Bn of financing/advance growth, partly funded by LKR 17.59 Bn of deposit growth; this is different from negative operating cash flow in an industrial company.

H1 2026 operating cash flow recovered to LKR 1.147 Bn, versus negative LKR 3.949 Bn in H1 2025.

H1 capital expenditure increased sharply: LKR 2.994 Bn for property/plant/equipment and LKR 246 Mn for intangible assets, largely associated with the new corporate office. Conventional free cash flow is therefore not particularly useful for evaluating the Bank.

CY2025 dividends paid were LKR 729.7 Mn against PAT of LKR 2.481 Bn, consistent with a moderate payout profile.

Key Financial Ratios and Growth Indicators

Capital remains compliant but is the main balance-sheet metric to monitor. At Q2 2026, Total Capital was 13.8% versus the 12.5% minimum, leaving only 1.3 percentage points of regulatory headroom, compared with 5.1 points at end-2024.

Liquidity remains exceptionally above regulatory minima despite LCR declining as funds are deployed into financing.

CY2025 EPS was LKR 4.50, NAV/share LKR 45.52, dividend LKR 1.30, payout ratio 28.9% and dividend yield 4.3%.

At the 2026-08-14 close of LKR 26.40, against Q2 2026 NAV of LKR 47.30, the share traded at approximately 0.56x book value. Reported Q3 2025-Q2 2026 EPS totals approximately LKR 4.91, implying an indicative trailing P/E around 5.4x.

Economic and Market Context

Management described 2025 as increasingly favourable for credit growth due to economic recovery, lower financing rates, improved business confidence, greater exchange-rate stability and the reopening of vehicle imports in 2025-02.

Conditions became less straightforward in early 2026. Cyclone Ditwah, Middle East instability, elevated global energy prices and exchange-rate volatility increased operating pressures. Management also expects strong private-sector credit demand to tighten rupee liquidity and potentially create upward pressure on financing/policy rates.

Future Potential and Outlook

Key growth avenues identified include:

• Continued emphasis on SME financing, value-chain financing and advisory services.
• Vehicle/EV and housing financing following reopening of the vehicle market.
• Export industries, manufacturing, local vehicle production and major developments including Port City.
• Expansion of trade finance and international correspondent relationships.
• Digitalisation through Amãna Bank Connect, WhatsApp banking, RPA and an automated credit-origination system.
• Customer reach expansion: customers increased from 485,654 to 540,543 during 2025, while Self Banking Centres increased from 34 to 41.
• The new LKR 2.7 Bn corporate office and planned disposal of the former property; management expects the disposal to strengthen financials, although no gain has yet been quantified.

Risks and Challenges

• Capital compression: rapid asset growth and the corporate-office acquisition have reduced capital buffers.
• Credit-cycle risk: exceptionally fast advances growth could eventually pressure asset quality despite the current low Stage 3 ratio.
• Off-balance-sheet growth: commitments and contingencies increased from LKR 44.20 Bn at end-2025 to LKR 61.57 Bn at Q2 2026, approximately +39%.
• Funding/rate risk: tighter rupee liquidity and rising financing rates may weaken SME borrowing demand and raise stress.
• Earnings volatility: trading income and impairment reversals can materially affect quarterly profitability.
• Cost pressure: H1 operating expenses rose 19%, similar to the 18% TOI increase.
• Cybersecurity: the Bank reported increased global phishing/cyber activity in 2025, although no material impact occurred; ISO 27001 controls and enhanced monitoring are in place.
• Climate/ESG risk: physical climate events can transmit into credit and operational risk; climate risk has been integrated into the broader risk framework.

Shareholder and Corporate Information

At 2026-06-30 there were 551,222,806 shares. IB Growth Fund (Labuan) LLP held 24.90%. Senthilverl Holdings-linked accounts through Sampath Bank and Cargills Bank represented 14.48% and 5.27% respectively. Bank Islam Malaysia and AB Bank each held 3.80%, while Islamic Development Bank held 3.33%.

Public holding was 44.66%, with 10,269 public shareholders and float-adjusted market capitalisation of LKR 6.67 Bn. Managing Director/CEO Mohamed Azmeer held 300,000 shares; other listed directors held nil.

Over the latest 90 trading sessions to 2026-08-14, the share declined 2.58%, trading within LKR 25.60-29.40. Foreign ownership remained effectively unchanged at approximately 39.4%.

Investment Decision Indicators

Strengths

• Sustained double-digit profit growth and stronger operating efficiency.
• Rapid expansion of the core financing portfolio.
• Low net Stage 3 ratio and improving coverage.
• Strong CASA of approximately 45% and very high regulatory liquidity.
• Increasing fee income and SME/trade-finance penetration.
• Market price materially below reported NAV.

Weaknesses

• Capital ratios are declining toward regulatory thresholds.
• H1 2026 expense growth remained high.
• Recent earnings include some volatility from impairment and trading movements.
• Large corporate-office expenditure increased fixed assets and capital consumption.

Opportunities

• SME, trade, vehicle, EV, housing and export-sector financing.
• Digital/process automation and broader self-banking distribution.
• Potential value release from disposal of the previous corporate office.

Threats

• Rising financing rates, tighter liquidity, energy/FX volatility and geopolitical disruptions.
• Credit deterioration if rapid loan growth outpaces underwriting capacity.
• Growing off-balance-sheet exposures and cyber/climate risks.

Overall Assessment

The reports show a bank that has transitioned into a substantially stronger profitability phase, with CY2025 and H1 2026 confirming that improvement was not confined to a single quarter. Asset quality, liquidity and funding composition remain major strengths, while the current market valuation is substantially below reported book value.

The principal metric requiring close monitoring is capital adequacy: advances and assets have expanded much faster than equity, reducing Total Capital from 17.6% at end-2024 to 13.8% by Q2 2026. Future investment outcomes therefore depend heavily on whether Amãna Bank PLC can continue converting rapid financing growth into sustainable earnings and retained capital without meaningful deterioration in credit quality.