Nations Trust continues steady performance

Nations Trust Bank closed the first six months ending 30 June 2015 with a post-tax profit of Rs. 1,257 million, a growth of 9% over the corresponding period.  

The results for the quarter were significantly better with post-tax profits recording a commendable growth of 26%. Operating margins improved during the first six months as core revenue recorded a faster rate of growth than operating expenses. 

However, the improved operating margins did not translate into a similar bottom line growth owning to higher impairment charges. Loans and advances recorded a steady growth of 5% for the first six months amidst high market liquidity and intense price competition.

Net interest income recorded a growth of 8% over the previous period with NIMs narrowing marginally. The drop in interest expenses of 20% outweighed the drop in interest income of 6% thereby improving NII. 

The challenges present in the current low interest rate operating environment were somewhat mitigated by timely re-pricing of assets and liabilities. Portfolios such as Corporate and Leasing in particular felt the pinch of declining yields and narrowing NIMs. The bank continued its push for growth in low-cost deposits which recorded a 6% growth with CASA improving to 31% of deposits.  

Net fees and commission income grew by 17% for the period under review. Good growth was recorded across the spectrum of fee-based products and services. Fee-based income from cards recorded a growth of 18% followed by an 11% growth in other areas including remittances, bancassurance and transactional fees. 

Trade-related fee income also recorded a moderate growth of 11% as import/export volumes picked up considerably in the 2Q. Foreign exchange income recorded good growth with enhanced customer volumes and favorable rate movements benefitting proprietary trading. Trading income attributable to FIS portfolio recorded a loss for the period owing to marked to market losses as a result of unfavourable movements in the underlying Government Securities yields.

The impairment charge for the period amounted to Rs. 732 million, which is a 65% increase compared to the corresponding period of 2014. This comprised of a one-off provision booked during 1Q for specific facilities. 

Impairment charge excluding this one-off provision improved by 21% compared to the corresponding period. The drop in collective impairment for the current period is mainly attributable to reversals made on account of the pawning portfolio compared to the higher charges made in the corresponding period. Collective impairment on credit cards also recorded a significant drop. 

Operating expenses were contained at a growth of 5% with Cost Income ratio trending down to 52% from 54% reported for the corresponding period. Continued focus on process efficiencies and digitalised workflows has assisted in yielding productivity improvements across the bank.  The higher growth of 39% in depreciation and amortisation charges is due to the core-banking upgrade which was implemented in 3Q of 2014.

The capital position was sound at Rs.16.6Bn with Capital Adequacy Ratios both at Tier 1 and 2 maintained at comfortable levels. Drop in ROE is due to the relatively lower post-tax profit for the six months. An upward trend in ROE is expected with the anticipated growth in quarterly profits. 

Commenting on the results and achievements, Director/ CEO Renuka Fernando stated: “The positive macro outlook is expected to continue and we are confident that the positive trends seen in credit growth will continue beyond 2015. The banking landscape is fast changing with the low interest rate regime bringing about many challenges but at the same time opportunities. We are embracing new concepts of banking such as digitalisation, lean, analytics and making them part of our culture to maintain relevance. People continue to be our biggest strength and we believe that the development and retention of our talent is vital. This will be one of the key areas of focus for Nations Trust Bank as we look towards concluding yet another rewarding year.” 

Nations Trust Bank Plc is one of the fastest growing banks in Sri Lanka today, operating 91 branches and an ATM network covering 127 locations and is the issuer and sole acquirer for American Express® Cards in Sri Lanka.