NTB posts yet another record year

The Nation Trust Bank (NTB) has closed the year 2011 with a post-tax profit of Rs. 1.5 billion, a growth of 41% over 2010.  

Current year achievement was driven by a noticeable growth in business volume, modest growth in top line revenue despite falling NII margins, controlled growth in operating expenses, provision reversals and lower taxation.

Across the industry NII margins contracted with intensifying competition. Whilst lending rates were driven down by lower market interest rates and revival of loan growth, funding costs trended upwards as competition increased and liquidity diminished alongside credit growth. Bank also witnessed narrowing NIMs but shifting the asset mix to more high yielding assets softened the impact of falling NII margins.

The interest rate cap on credit cards which came into full force during the year, shaving off 12% of the NII margin on the product also contributed significantly to the falling NIMs which was somewhat mitigated with the growth in the card receivables portfolio. Reconfiguration of the cards business model also supported the improvement of yields on cards portfolio towards the second half of the year.

Non-fund based (NFB) income on cards and trade recorded good growth against the previous period. Improvements in macro economic factors relating to import/export volumes, tourism and consumer spend bolstered these growth levels. Trade finance volumes, both on imports and exports picked up significantly compared to the previous year with the resultant income increasing by 34%. Credit card related non-fund based income grew by 29%. With the re-configuration of the cards business model coming into force, greater attention was paid to increase business drivers on spend and card acquisitions.

Foreign exchange income for the year recorded a moderate growth of 9% with increased customer values contributing significantly to the overall number. However, despite commendable performance of the core NFB income lines, overall non-fund base income growth for the current year was lower that 2010 due to large trading gains booked in 2010 on the Fixed Income Securities portfolio.

The Bank continued to manage costs, curtailing the increase in cost to 6% despite rolling out an expansion strategy with investments made in people, premises, systems and the NTB brand. Group cost income ratio was at 63% compared to 59% for the previous period, mainly due to lower NII margins and mark to market losses in the current year.

The Bank has laid down strategies towards managing the cost to income ratio below 50% in the medium term.

The sound risk management framework coupled with the conducive economic environment resulted in the Bank recording a healthy NPL ratio at 2.8% compared to 4.82% reported in December 2010. Whilst absolutes NPLs contracted by 23% over previous year levels, growth in the loan book also assisted in lowering of the NPL ratio. Focused credit management was reflected in provision reversals during the year.

The balance sheet recorded a growth of 23% and crossed the Rs. 100 billion mark for the first time, a landmark by any standards for a Bank in its 12th year of operations. The single most challenge during the year has been funding the asset book with the optimal sources of funds as demand for funds exceeded the mobilisation of deposits for greater part of the year, which was the case across the industry. However in anticipation of the interest rate hike towards the 4th Qtr, Bank pushed for deposit growth for the medium term which resulted in recording a growth of 39%, outpacing industry growth. The Bank also managed to grow its loan book by 39% to Rs 62Bn, again out performing industry growth. The growth in credit was driven primarily by retail and SME, leasing and consumer finance.

The capital position also strengthened to Rs.8.6Bn with the conversion of the second tranche of warrants leading to a comfortable Group Capital Adequacy Ratios both at Tier one and two levels. The Bank also concluded an issue of unsecured, subordinated debenture amounting Rs. 2 billion which augurs well for further expansion of the loan book.

Commenting on the performance CEO/Director Saliya Rajakaruna stated: “Our bank had its best year ever in 2011, not only were we able to report a significant uplift in earnings but also a stable balance sheet recording a balanced growth in deposits and advances. The Bank’s growth over the recent past and performance in 2011 is a continuation of this progressive growth somewhat mirroring the growth of Sri Lanka.  As a relatively young player in financial services, NTB is proud of the innovations we have brought to the market and the trust we have garnered. We now look to participate in the evolution of a stable, secure and vibrant financial services industry in Sri Lanka.”