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NSB Deputy General Manager – Finance and Planning Kithsiri Wijeyaratne – Pic by Lasantha Kumara
By Charumini de Silva
Q: What are your thoughts on NSB’s performance, key highlights and how they were achieved?
A: We have a very strong financial position. We reported a net profit of Rs.3,095 million in the first quarter of the year, which is an increase of 3.87% on y-o-y basis. The bank also showed a competitive loan growth of 3.22% by the end of the quarter. Asset quality was further improved to 2.37% at the end of first quarter compared to last year same period which was 7.19%. Mark to market losses of both Equity and Government security trading portfolios unfortunately increased to Rs. 1,167 million when compared to a loss of Rs. 450 million recorded in the corresponding period last year.
Commission fee and fee base income grew by 32.84% on a y-o-y basis. Net Interest Margin declined marginally to 3.12% in 1Q 2016 from 3.32% recorded at the end of 2015 due to relatively higher interest cost. The main highlight was the profit before tax (PBT) of Rs.3,095 million compared to Rs. 2,980 million reported in the same period last year. Profit after Tax (PAT) reached Rs. 2,350 million compared to Rs. 1,840 million reported during the corresponding period last year.
In 2015, NSB recorded Rs.13,033 million PBT, which is the highest ever profit the bank achieved. Despite of the market losses, we maintained a strong financial base to achieve these key targets. In terms of the balance sheet, the bank posted a loan growth of 3.22%, expanding its loan book at the end of the first quarter. NSB loan portfolio is primarily consists of personal and housing loans which accounts 21.36%. NSB reported a deposit base of Rs.615 billion at the end of 1Q this year, compared to Rs.596 billion at the end of 2015 recording a growth of 3.24%.
Savings and time deposits stood at Rs.171 million and Rs.445 million at the end of 1Q 2016 as against Rs.163 million and Rs.432 million at the end of 2015. The total mobilisation for the period was Rs. 20,265 million which consisted of Rs. 7,518 million in savings deposits. The loan to deposit ratio increased to 45.6% at 31 March 2016, which was supported by the higher loan growth. The bank’s Tier 1 capital adequacy ratio stood at 17.09% while the total capital adequacy for the reviewed quarter was 16.08%.
These ratios however, remain well above the regulatory standards for well capitalised banks. The liquidity ratio of the bank stood at 78.74% by the end of March 2016, which is well above the regulatory requirement of 20%. The total assets of the bank increased to Rs. 856 billion during the first quarter (1Q) of 2016 compared to Rs.848 billion at 31 December 2015.
Q: NPL ratio showed a tremendous improvement. What steps did you all take to turnaround it?
A: Our non performing assets were declined. Hence the NPL ratio has improved. The main reason for this was that the reduction of NPL portfolio on pawning.As a result of pawning auction were carried out continuously. Therefore gross NPL ratio reduced from 3.46% to 2.33% in 31 December 2015. Net NPL ratio dropped to 2.2% as at 1Q 2016 compared to 3.35% as at 31 December 2015.
Q: What are the bank’s deposits, loans, profits growth targets for this year?
A: In terms of deposits, we are expecting to increase by about 11.5%. With regards to loans we would like to maintain the overall present loan growth of 12% to 13%. In addition, we have targets for housing loan around 9.6%, while targeting 50% in personal loans. The profitability of the year would have some adverse impact as net interest margin would dip as a result of deposits rates increasing higher than the lending rates. However, with the implementation of new initiatives we would be able to maintain the same or slightly higher profitability by the end of the year. Everything depends on policy rates of the Central Bank.
Q: What new initiatives has NSB taken to increase the profitability this year?
A: We have taken a few new initiatives this year which includes new business relationship for inward remittances, grow the fee-based banking services, enhance corporate image through effective marketing communication and improve productivity, customer delivery capabilities through enhanced integrated IT infrastructure, development of staff.
Q: What measures have the bank taken in terms of risk management compliance and credit control?
A: The bank has separate divisions for risk managementand compliance. It is preparing for Basel III implementation by 2018. We have an action plan. Accordingly we are building up capital as well as other measures necessary. Adopting Basel III requirements, as the management has taken proactive measures and has identified necessary areas that need special interest. We have closely monitored the credit portfolio especially for the recovery process. Our quality of assets has been improved as the NPL ratios have come down, which is one of the major advantageous to the bank.
Q: What’s the bank’s position in adopting international standards of reporting, capital adequacy, provisioning and risk management?
A: NSB hasalreadycomplied with International Financial Reporting Standards (IFRS) and Sri Lanka Accounting Standards (SLFRS) and is preparing our financial statements based on the latest accounting guidelines. New guidelines have already been issued for Financial Instrument which is IFRS9. There are few processes which need to be changed and some models need to be implemented to adopt and adjust our systems. We are in the planning stage and working on those changes.
In 2013 and 2014 the bank issued two international bonds, and our annual reports are now going to those international investors as well. Therefore our financial statement should be complied with all new standards.The bank’s capital adequacy ratios remain well above the regulatory standards for well capitalised banks and we have the highest core capital as well as liquid assets.
Q: What would be the interest rate scenario in the next six months?
A: It’s a tricky question to answer. Currently, the interest rates are slightly high and also there is a volatility of the interest rates of the Government Securities.. Everything is depending on policy maker’s decisions as well as foreign investments coming into the country. As predicted by many economists, probably by the end of the third quarter, the interest rates would establish.
Q: In going forward what can you say about the stability of the bank?
A: We are a State owned bank and NSB is the only bank where the deposits and interest thereon is guaranteed by the Government. The main reason for setting up this bank n 1971 was to inculcate the habit of savings among people in the country. We are the only bank in Sri Lanka which has been rated ‘AAA (lk)’ for 13 consecutive years. Another important aspect is that we have 248 branches; we have more than 4,000 touch points with the postal network. You can imagine how broad our range is and we have over 271 ATMs. Everything augurs well for the bank.
