Thursday Sep 19, 2024
Thursday Sep 19, 2024
Tuesday, 11 November 2014 01:28 - - {{hitsCtrl.values.hits}}
Return on equity improved to 21.55% for the current year showcasing a well balanced performance. The year commenced with a lackluster demand for credit across the industry and mirroring industry performance, the bank witnessed a sluggish growth in the loan portfolio in the first half of the year which picked up considerably in the current quarter. The loan book recorded a 10% increase for the nine months and a 15% YoY increase.
The reduction in interest rates saw both asset and liability yields declining. However the drop in cost of deposits outweighed the drop in loan yields thereby contributing to improved NIMs. The bank relentlessly pursued strategies to improve the mix in higher yielding assets whist pushing for growth in low cost deposits. Low cost funds recorded a growth of 22% for the nine months with CASA improving to 30% of deposits.
Net fees and commission recorded a growth of 10% mainly attributable to the solid performance demonstrated by credit cards throughout the period. Acquisition of new cards and increased spend during the period contributed towards higher fee generation in cards. The bank endured many challenges in growing trade finance income owing to slow growth in corporate assets and import volumes in the economy. Focused effort put in to revive trade finance business through multiple channels resulted in growing trade income during the current quarter.
Net trading income on account of foreign currency recorded marginal losses on funding SWAPs due to the adverse movement in forward premiums. However, the losses recorded for the current period is far lower than for the previous year. Both trading and M2M gains on the FIS portfolio was significantly higher than the previous period.
The impairment charge for the current nine month period amounted to Rs. 788.9 million with the higher incremental impact over the previous period arising from credit card and leasing portfolios. Retail and SME have shown a significant improvement in portfolio quality whilst impairment on pawning is also at manageable levels. Bank has undertaken appropriate measures to strengthen its leasing and credit card recovery processes to stabilise these portfolios and the resulting impairment charge.
Operating expenses recorded an increase of 16% over the previous period mainly on account of the expansion strategy. YoY increase of 24% in the branch network together with the growth in off-site ATMs and technology investments have contributed to the increase in the operating cost base.
The higher increase in revenue has had a positive impact on bringing down the cost income ratio to 52% from the 56% in the corresponding period. Bearing in mind the impact of additional expenses directly attributable to the core banking upgrade, which would materialise in the last quarter, cost management initiatives have been further strengthened. A noteworthy achievement is the consecutive trending down of the cost income ratio in every quarter during the current year. The bank is firmly committed towards driving its C:I ratio to below 50% in the medium term.
The capital position was sound at Rs. 14.5 billion with the Capital Adequacy Ratios, despite a drop over December 2013 being maintained at comfortable levels. The drop is mainly attributable to the expansion of the balance sheet of the bank.
During the past nine months, the bank reaffirmed its business strategies on providing customer convenience and product innovation through the branch expansion strategy, launch of new products and the successful implementation of the state of the art new core banking solution. 14 new branches and 4 offsite ATMs were opened in key geographies thereby taking its customer touch points to 118 locations.
New products targeting various customer segments were launched including Nations Leasing Plus, Nations Trader, FCY Home Loans, Travel card on both Amex and Master, Dual Currency deposits and Fx Options.
Commenting on the results and achievements, Renuka Fernando Director/CEO stated, “The first nine month results are very encouraging and we are very much on track to achieve the targets set for the year. Our focus for the remainder of the year is to bring stability in our new core banking solution thereby realising its technical capabilities to the fullest to support our enterprise level priorities. The improved trends in the business landscape are expected to continue and we are hopeful that the positive trends seen in credit growth will continue beyond 2014. We look forward to concluding yet another rewarding year.”
