NTB delivers strong performance; continues support to economic revival initiatives

Chairman Gihan Cooray

Director/Chief Executive Officer Priyantha Talwatte

Nations Trust Bank said yesterday it continued to demonstrate its resilience in performance during the year. The loan portfolio increased by Rs. 26 billion, recording a 12% growth during the first six months of the year despite the challenging business environment. 

While continuing to provide working capital loans under the ‘Saubagya’ scheme introduced by the Government, the bank disbursed over Rs. 19 billion new credit facilities under its own revival fund ‘Nations Diriya’ scheme which is dedicated to extending financial support to key industries, enabling such businesses to recommence and rebuild their business operations. 

Understanding the importance of assisting the adversely impacted businesses for their revival, the Bank also offered special payment relief schemes and repayment plans for existing borrowers, in addition to the Central Bank mandated moratorium schemes with low interest rates and restructured repayment plans for some of the identified industries. 

Nations Trust Bank raised $ 40 million from FMO, the Dutch Entrepreneurial Development Bank and $ 25 million from International Finance Corporation during the first half of the year to support the Small and Medium Enterprise (SME) sector affected most by the pandemic. This would help towards the protection of livelihoods and creation of new employment in the economy.  

The bank also raised Rs. 4 billion, Fitch ‘A’ rated, Senior, Unsecured, Unlisted, Redeemable Debenture in July 2021 further strengthening the medium-term funding profile of the bank.

Financial results for IH 2021

The group recorded a Profit Before Tax growth of 49% for the six months ended 30 June 2021 compared to previous year, despite subdued economic conditions experienced during the second quarter.

Net Interest Income continued to decline primarily due to the reduction in the market interest rates while interest rate ceilings introduced by the regulator impacted some business portfolios. Supporting the loan growth and the economic recovery efforts, yields on loans reduced by 360bps. 

A net reduction in yields in the FIS portfolio also contributed to the decline in net interest income. The absence of a one-off interest reversal on moratoriums loans similar to what was recognised in previous year helped to negate the decline in interest income. However, the improvement in CASA ratio to 37% as at end June 2021 from 28% as at end Jun 2020 helped partially offset the decline in interest margins during the period. 

Gains on trading FX increased as a result of FX funding swaps due to a higher depreciation of the rupee during the current period in contrast to the depreciation during the same period last year. The bank also benefited with trading profits on its fixed income securities portfolio with the fall in market rates.

Suspension or refund of certain charges by the bank, considering the current difficulties faced by customers due to the COVID-19 pandemic, negatively impacted the bank’s fee-based income. Cards income declined on account of a decrease in card spend due to changes in customer behavior patterns owing to the restrictions in mobility and overseas travel. However, a positive trend could be seen in trade finance related income with the increase in some of the trade finance related activities.

New underwriting standards and concentration on loan recoveries resulted in positive flows in the past due buckets while bringing the exposures down in most risk buckets, reflecting a 145bps reduction in the non-performing loan ratio. This is also evident in the reduction in impairment charges during the period. Nevertheless, the bank ensured adequate impairment provisions by introducing changes to internal models to cover unexpected risk factors to reflect current volatile environment together with additional provisions made for the exposures to industries with elevated risks.

Containment of expense growth at 2% amidst the revenue growth at 22% is reflective of the cost management culture entrenched across the organisation. Continuation of some of the cost saving strategies and initiatives executed last year along with productivity, efficiency drives and focus on some large cost pools were the main reasons for this favourable outcome. Cost to income ratio improved to 43.7% compared to 51.1% in the same period last year, demonstrating the bank’s ability to considerably enhance efficiency and productivity through digitalisation and new ways of working.

The impact stemming from the income tax rate differential in income tax and deferred tax relating to the financial year ended 31 December 2020 have been reversed by Rs. 314 m and Rs. 103 m, respectively, using the applicable new tax rate of 24%. As a result, the Profit After Tax recorded a growth of 89% for the six months ended 30 June 2021.

The Return on Equity before the exceptional tax adjustment stands at 16.0% for the period under review, compared to 11.73% recorded in 2020. 

The financial position of the Group remained strong as its Tier I Capital and Total Capital Adequacy ratios as at 30 June 2021 stood well above the regulatory levels at 13.46% and 16.44%, respectively. The Statutory Liquid Asset Ratio (SLAR) for the Domestic Banking Unit and the Off-Shore Banking Unit was at 34% and 26%, respectively, as at the reporting date.

COVID-19 challenges

Essential banking services continued to be provided despite some parts of the country being isolated with month-long travel restrictions imposed as a result of a third wave of COVID-19 during the period. 

Nations Trust Bank American Express Card members can now enjoy exclusive benefits and privileges for a range of online and home delivery purchases. The bank has partnered with a range of home delivery establishments as part of the #AmexFromHome campaign to ensure that the card members’ lives remain uninterrupted during the periods of movement restrictions. Despite these challenging times, the bank remains committed to providing convenience and value to loyal Card members as well as supporting merchant business partners to continue their businesses.

The bank also entered a strategic partnership with Paycorp International to launch innovative and safer payment capabilities, benefiting both Nations Trust Bank American Express merchant business partners as well as card members. As an authorised payment aggregator for Nations Trust Bank American Express, Diners Club and Discover Network card payments, Paycorp International supports the bank’s merchant business partners to offer card members a seamless online payment experience that is secure and encrypted.

PCR and antigen tests for identified staff were undertaken by the bank at regular intervals ensuring the safety of staff and customers. In its efforts to contribute towards the nation’s current requirements to fight the COVID-19 pandemic, Nations Trust Bank donated a portable ventilator to the Colombo South Teaching Hospital, Kalubowila. The bank’ s CSR activities continued with its focus on creating ecological consciousness among the public by promoting conservation dialog and support publishing scientific research. The bank continued to host Nations WNPS wildlife lecture series and continued to be the total sponsor of Loris and Warana/Waranum magazines of WNPS.   

Commenting on the results and achievements, CEO/Director Priyantha Talwatte stated, “With the nation-wide vaccination program successfully being rolled out, there is expectancy of a rapid return to economic normalcy and Nations Trust Bank is fully geared to steer ahead more responsively to the external environment by prioritising customer requirements supported by an extremely focused and involved Nations team who has demonstrated their agility to deliver value given the challenging environment. The bank continues to implement its focused business strategy based on a K-shaped economic recovery. We are also committed to growing a healthy asset book and remain focused to delivering our strategic agenda set for the year – to strengthen our balance sheet and enhance digital capabilities with the ultimate intention of achieving customer convenience, cost and process efficiencies, pioneering innovation and thereby, challenging the norm to deliver an unparalleled banking experience to our customers in a new reality. Amidst times of unprecedented change, the team at Nations Trust Bank will continue to create waves of opportunity and initiate positive change to progressively rebuild and grow. We’re focused on increasing the velocity of value to all our stakeholders now and in the years to come.”

He further stressed that the bank will focus its funding to local manufacturing, pharmaceuticals, value-added agriculture, women-led businesses, and export-oriented businesses which in turn will generate the much-needed foreign exchange flow into Sri Lanka.