Nations Trust kicks off 2014 with commendable performance

Thursday, 8 May 2014 00:00 - - {{hitsCtrl.values.hits}}

Nations Trust Bank (NTB) said yesterday it closed the first quarter ending 31 March with a post-tax profit of Rs. 550 million, a growth of 10% over the corresponding period in 2013. In a statement NTB said First quarter achievement was driven by good growth in top line revenue which was somewhat hindered by higher impairment charges and slower growth in customer advances which mirrored industry performance. The year commenced with private credit growth falling further, despite market interest rates continuing to trend downwards following further easing of monetary policy. Share of pawning advances in total advances further reduced whilst significant increase in NPLs was also noted for the industry during first quarter of the year.

Net interest income recorded a growth of 22% over previous period with improved NIMs. Higher yielding asset portfolios grew moderately to partly off-set declining commercial loan interest rates whilst cost of liabilities reduced further with the re-pricing of shorter tenor deposits. Continuous efforts to grow low cost deposits improved the deposit mix which assisted in reducing the cost of liabilities. The low interest rate operating environment brought many challenges on our corporate portfolio with spreads thinning considerably coupled with a lacklustre demand for new credit. Leasing and credit card portfolios grew remarkably to ease off the pressure on declining yields. Net fees and commission income recorded a growth of 21% for the period under review. Credit cards contributed considerably towards this growth whilst new products launched during previous year such as Nations Shopping Card and MasterCard also showing great support for fee generation. Net trading income recorded exceptionally higher growth due to SWAP premiums favourably impacting FX income which in previous period recorded a loss. Impairment charge for the current period amounted to Rs. 307 million with the major impact arising from the pawning portfolio. There was no impairment on the pawning portfolio in the first quarter of 2013 since the sharp decline in the market price of gold began in April 2013. However since then, the bank’s exposure to pawning has been managed at 2.4% of the overall loan book whilst the loan to value ratio has been appropriately adjusted to reflect the market value and no further significant impairment charges are expected from the pawning portfolio. Operating expenses recorded an increase of 19% over previous period stemming mainly from the expansion of the branch network, accelerated growth in the offsite ATMs and corresponding increase in head count in branches and sales areas. Execution of the key initiatives of the five-year strategic road map rolled out last year is in full swing, consuming resources and increasing operating costs. However, since revenue growth for the quarter has been at a higher rate of 25% in comparison to the 19% growth in operating expenses, the bank has considerably improved its operating margin whilst lowering its cost income ratio from 58% to 55%. The bank is firmly committed towards driving its C:I ratio below 50% in the medium term. The capital position was sound at Rs. 15.2 billion with capital adequacy ratios both at Tier 1 and 2 maintained at comfortable levels. While striving to achieve the financial targets set for the quarter, the bank continued pursuing its strategic initiatives of opening new branches and launching new products. The Kottawa branch and a Kolonnawa offsite ATM was added during the quarter taking the ATM network to 102. ‘Nations Savings Month’ was launched in January with the objective of creating awareness of the range of savings products that are on offer. The ‘Leasing Plus’ product was also launched to all leasing customers, to enhance cross selling where every new lease facility entitled the customer to a pre-approved overdraft. Sri Lanka’s first chip and PIN protected USD travel card was launched providing an array of benefits and convenience for cardholders travelling overseas. Commenting on the results and achievements, Executive Director Sarath Piyaratna stated: “We have recorded yet another noteworthy financial performance in the quarter, reflecting our strategy to continue the growth momentum to generate sustainable returns. We have remained focused on our strategy and much work is being done to ensure we continue to drive it forward. On the business front, we remain optimistic of a possible turn around in demand for credit whilst acknowledging fresh challenges that may arise in a slow credit growth, low interest rate environment.” Nations Trust Bank PLC is one of the fastest growing banks in Sri Lanka today. Its market positioning of being the benchmark of customer convenience is ably supported by a host of financial products and services that is offered to a wide customer segment. The bank now operates 76 branches, an ATM network of 107 locations and is the sole issuer and acquirer for American Express cards in Sri Lanka.