Nations Trust Bank maintains growth momentum

In the interim financial statements released to the Colombo Stock Exchange, Nations Trust Bank (NTB) closed the nine month period ending 30 September 2011, with post-tax profits of Rs. 1, 170 million, up 38% over the corresponding period in 2010, while pre-tax profits grew from Rs. 2, 020 million to Rs. 2, 127 million, an increase of 5%.

Group net interest income was below the previous year due to narrowing margins which was anticipated for the current year and visible across the industry.

Its impact, however, was mitigated by the sustained growth in business volumes especially in the second and third quarters, timely re-pricing of deposits and a shift in the deposit mix towards low cost funds.

Non-funds based income from all core lines of business including credit cards, trade service and treasury service businesses recorded good growth against the previous year. Impact of the reduction in corporate and personal taxation was reflected in increased import/export business volumes and consumer spending together with increased tourist arrivals bolstered these growth levels.

Trade finance volumes, both on imports and exports picked up significantly compared to the previous year with the resultant income increasing by 28%. Credit card related non-fund based income recorded healthy growth for the period under review due to increased consumer spend and the roll out of new card acquisition programs.

Foreign exchange income too showed significant growth despite the relatively stable exchange rate that prevailed during the period.

During the period, group operating expenses recorded an increase of five per cent over the corresponding period in 2010. The increase is in line with the expansion drive initiated in the latter part of 2010 where investments were made in people, premises and systems to support the growth prospects and strengthen risk management.

Five new branches were opened during the nine months to September 2011 with four more to be opened before the year end.  The increase in operating expenses also reflects investments made during the period to strengthen the NTB brand.

As a result the group cost income ratio increased from 55% to 59% over the previous period. The lower tax rates applicable for the current year resulted in the higher post tax profit.

Group NPL Ratio stood at 3.45% compared to 4.82% recorded in December 2010 and 4.8% in June 2011. Growth in the loan book through prudent credit underwriting assisted in lowering the NPL Ratio, despite the upward pressure via a more stringent regulatory environment in respect of NPL classifications coming into force at the beginning of the year.

Focused management of collections is reflected in provision reversals during the period.

For the period under review, gross loans and advances recorded a growth of Rs. 12.3 billion up 26%. On a YOY basis, the uplift by 30 September 2011 was over 30% distributed across various industry segments with no particular concentrations.  Such growth in loans was supported by the deposit base increasing by Rs. 12 billion to Rs. 61 billion, recording a growth of 25% for the year with low cost deposits growing at a healthy pace of 20%. In terms of capital, the position strengthened to Rs. 8.2 billion with the conversion of the second tranche of warrants leading to a comfortable Group Capital Adequacy Ratio of 14.02%.

The bank also concluded an unsecured subordinated debenture issue amounting Rs. 2 billion in readiness for further expansion of the loan book.

In keeping in line with the strategy of expanding customer touch points to enhance accessibility and convenience, the branch network expanded its footprint by opening full service branches in Horana, Kalmunai Anuradhapura, Malabe and Piliyandala by 3Q and another branch in Ratnapura by end of October 2011 extending the network coverage to 46 branches.  

The Branches are also expected to play a vital role in the bank’s concerted effort to tap into the burgeoning SME sector of the economy where growth opportunities are significant.   Although not directly impacting business revenues in the short term, several initiatives influencing the very foundations of the business of banking is currently taking root. Among them is the application of IFRS across the local banking system.

It requires the banks to report their financials on a fair-value basis that will, among its many attributes, enable wider comparison. We have taken several steps towards its implementation and to be compliant at the beginning of 2012.

Equally the Central Bank of Sri Lanka has issued directions covering the implementation of BASEL II and a Customer Charter. In implementing BASEL II, the regulator is looking to place the banking system on stable and firm footing for the future.  

The Customer Charter equally looks to providing a more open and even market place for engaging in business with banks. On both directions, we have undertaken substantial work to be compliant by the due dates.  

Commenting on the results and achievements, Director/CEO Saliya Rajakaruna stated, “We have performed creditably during the nine months of 2011 and recorded a noteworthy financial performance. More importantly, the results reflect continuing growth and sustainable returns.

The outlook for the rest of the year is expected to put pressure on margins, on deposits to fund loan growth and liquidity. We are also conscious of uneven global trends and possible local impact. We believe we remain well equipped with a strong balance sheet, comfortable capital position, a sound risk management framework and most importantly, an energetic skilled workforce to handle all such ups and downs. Overall the macro environment factors remain conducive for continuing business momentum and we look forward to closing the year on a high note.”

NTB has grown rapidly over the last ten years through a strategy of organic growth and acquisitions. These included the tie up with American Express cards and the merger with Mercantile Leasing Ltd. In keeping with the vision of the Bank “Making life simple by being the benchmark of convenience,” NTB provides customer convenience through pioneering concepts such as ‘365 Day Banking’, mini branches, Personal Banking Centres, ‘Bank At Your Doorstep’ and extended banking hours which have helped to win over and maintain a strong and growing customer base.