Nations Trust Bank records a resilient performance

The Group closed the year ending 31 December 2018 with a post-tax profit of Rs. 3,702 million, up by 10% over the previous year in a difficult operating environment, which witnessed increased non-performing loans, tightening of liquidity, moderation of credit growth, and higher taxes and levies. The Bank strategically steered its resources in consolidating of selective portfolios and managing impairment.

Chairman Gihan Cooray

CEO & Executive Director Renuka Fernando

Net interest income increased by 27%, mainly attributed to growth in volumes (up by 21%) and better management of NIMs, despite tight liquidity in the market exerting pressure on cost of deposits. Concerted efforts towards increasing fee-based activity resulted in the Group’s non-interest income increasing by 18% during the year. Trade, Card and Bancassurance, together with structured financing fees, contributed primarily towards this growth. Net trading losses narrowed (dropped by 24%) during the period under review, mainly due to lower amount of losses arising from FX funding SWAPs. Bank continued to adopt the strategy of utilising FX SWAP book to fund its rupee loan growth, due to the benefit arising from the relatively lower funding costs of the FX SWAPS compared to high cost rupee deposits. Additionally, FX income arising from customer and trading also recorded a good growth for the year, arising from both increased volumes and favourable exchange rate movements.  

Impairment charges for the current year increased significantly due to growth in the loan book, cash flow stresses witnessed in some segments stemming from subdued economic conditions, and due to the implementation of SLFRS 9, with the more forward-looking “expected credit loss” model, which requires banks to exercise judgement on how changes in economic factors may affect expected credit loss. The Bank further strengthened edits underwriting and post disbursement monitoring, with better alignment of collection processes.

Expenses recorded a growth of 15%, mainly due to expenses arising from ongoing investments for the future in areas of digital, infrastructure, training and development, and brand visibility. The Group’s cost to income ratio continued to record consistent improvement, declining below 50% for the first time to record 47.81% in 2018, from 51.57% reported in the previous year. The improvements in cost efficiencies reflect the Bank’s continuous investments in lean culture, productivity enhancements, and Robotic Process Automation over the recent past.

Loan book growth was mainly driven by Corporate Banking (+46%), followed by Credit Cards (+25%) and Leasing (+20%). Growth in the Consumer and SME segments were relatively moderate at 15% and 11% respectively, reflecting stressed market conditions, and the Bank’s efforts in consolidating these portfolios. Deposits recorded a growth of 19% faster than the industry average of 15%, with fixed deposits growing by 24%, while CASA recorded a subdued growth of 7%. Furthermore, the Bank continued to diversify its funding base by securing a $50 million funding line from a DFI in August 2018.  

The Group’s Tier 1 and overall Capital Adequacy Ratios strengthened to 12.15% and 15.59% by year end, following the capital raised through a Rs. 3.20 billion rights issue and a Rs. 3.5 billion 5-year debenture issue in April 2018. The elevated capital ratios and capital buffers would afford a strong platform for future growth. 

Commenting on the results and achievements, CEO/Executive Director Renuka Fernando stated: “Our performance for the year demonstrates our resilience during testing times and our ability to progress towards our medium term strategic goals. We have built a strong strategic foundation, an agile business model driven by a passionate team. It is with great optimism that we embrace the future as we look forward to building a new era in banking.”