Review of the Performance of the Company and its Principal Subsidiaries
The Group's profit from operations before allowances for the 18 months ended 31 December 2016 was $10.1 million, 1.8% higher vis-à-vis the same period last year. This was a result of strict discipline in the management of operating costs in the light of lower income. Net interest income contracted by $2.4 million or 7.2% as the rise in interest costs more than offset the growth in interest income. The drop in net interest income was partially compensated by higher non-interest income particularly fee and commission income and gain on sale of investments.
Net allowances for loan losses amounted to $4.7 million for the 18 months ended 31 December 2016. This is a reflection of the prevailing challenging economic conditions, especially in some sectors, like the oil and gas sector. For the same period last year, there was a net charge for loan allowances of $1.9 million. The Group continues to set aside adequate specific and collective allowances for the loan portfolio.
The Group has also made impairment loss on investments of $0.7 million due to prolonged decline in the market value of quoted equity investments. The investments have been disposed during the first quarter of 2016.
The Group registered a profit after tax of $3.9 million for the 18 months ended 31 December 2016. Notwithstanding the weaker performance, the Group's shareholders' funds remains strong at $252 million as at 31 December 2016, and is more than adequate to buffer further volatility in the current economic slowdown. Our capital adequacy ratio continues to be well above the regulatory minimum requirement.
Total loan net of allowances decreased by 10.4% to $838 million compared to $935 million as at 30 June 2015 in the midst of a challenging economic environment. To match the lower loan balance, total customers' deposits was managed downwards by 12.4% to $857 million as at 31 December 2016.
In the opinion of the Directors, no item, transaction or event of a material and unusual nature has arisen which is likely to affect substantially the results of the operations of the Group and the Company in the interval between the end of the financial period and the date of this report.
Comments on Significant Trends and Competitive Conditions in the Industry
Statistics from the Ministry of Trade and Industry ("MTI") showed that the Singapore economy grew by 2.9% on a year-on-year basis in the fourth quarter of 2016, faster than the 1.2% growth in the previous quarter. On a quarter-on-quarter seasonally-adjusted annualised basis, the economy expanded by 12.3%, a turnaround from the 0.4% decline in the preceding quarter. For the whole year of 2016, the economy grew by 2.0%, above MTIís earlier announced GDP growth forecast of "1.0% to 1.5%".
For 2017, MTI has maintained the GDP growth forecast at "1.0% to 3.0%". Singapore's economy is expected to remain subdued with local economic restructuring challenges and slowdown in the global trade and the uncertainties of any policy changes from the newly elected US Administration. Nevertheless, the Group will continue to be prudent in seeking new business opportunities and be proactive in managing our credit exposure and operating expenses to remain competitive.