Nations Trust begins year with commendable performance

The bank closed the financial quarter ending 31 March 2013 with a post-tax profit of Rs. 502 million, a growth of 15% over the corresponding period in 2012. The first quarter achievement was driven by good growth in top line revenue, well diversified across business segments and underpinned by the growth in loans and advances portfolio.

The bank recorded improved NIMs over the previous period due to well managed asset and liability re-pricing strategies along with the shifting of the asset mix to more high yielding assets. Net interest income recorded a growth of 21% over the previous period.

Liquidity diminished alongside the push for growth in customer advances whilst deposit growth was strategically managed during the quarter. The bank continued its efforts to grow low cost balances which reaped good results recording an 8% growth and improving low cost mix over the level reported for the year end 2012.

Fees and commission income recorded a moderate growth of 15% whilst net trading income recorded a significant drop for the current year. Credit cards recorded a growth of 38% mainly attributable to higher card fees and merchant commission income. Card business drivers on spend, new cards and receivables increased over 20% compared to previous period.

The bank also witnessed negative growth in foreign exchange and trade finance income due to challenging market dynamics. In contrast to the market volatility experienced in the previous period due to the currency devaluation resulting in exceptionally high FX income, subdued market activity prevailed during the current quarter.

Both FX income and trade finance income were also impacted by the slow movement in imports, with exports yet to show increasing trends by end of the quarter. Trading gains on FIS portfolio for the current year compared to a corresponding loss for the previous year had a favourable impact on the net trading income for the bank.

Operating expenses recorded an increase of 19% over previous year with the cost of expansion, branding and tariff increases adding up to the operating cost base. Highest increase over the previous year was on account of other operating expenses mainly attributable to consultancy fees whilst depreciation recorded a drop due to most of pre-2009 acquired assets being fully depreciated. Group cost income ratio stood at 58%, with the bank remaining committed in driving this ratio below 50% in the medium term.

The bank’s NPL ratio stood at 3.1% compared to 2.9% reported in December 2012. The impact of the growth in absolute NPLs by 15% was somewhat mitigated by the growth recorded in the loan book. The bank continued efforts in improving its risk management framework with close monitoring of portfolios.

The capital position was at a sound Rs. 12.5 billion with capital adequacy ratios both at Tiers 1 and 2 maintained at comfortable levels.

As the bank steadily expanded reach, with the island-wide expansion of the branch network two new branches were added taking the network to 59 branches. The bank also conducted a promotional tour with their brand ambassador Kumar Sangakkara in Qatar and Bahrain with a view of promoting remittances and establishing the Nations Trust brand.

Many activities were arranged in these markets to coincide with the tour. The bank has signed up with a number of remittance partners worldwide to offer fast and convenient remittance services across the branch network.  

The bank entered into a public private partnership (PPP) with Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) GmbH to improve access to finance for small and medium sized enterprises (SMEs) under its SME development program. Through this partnership, Nations Trust plans to further increase its outreach to the SME sector which is considered to be the backbone of an emerging economy and hence a strategically important customer segment for the bank.  

Commenting on the results and achievements, Renuka Fernando Director/CEO, stated: “We have recorded a noteworthy financial performance in the quarter which reflects continuing momentum and sustainable returns. We have also embarked on our five year strategic plan aligned to the medium term growth prospects of the country. "

“2013 being the year of execution will no doubt be challenging, but we are confident that results of strategy execution will have a significant impact in a short time frame on our growth and profitability to become one of the leading players in the banking industry in Sri Lanka,” she added.