NTB’s growth momentum continues

9 months post-tax profit up 25% to Rs. 1.46 b

Nations Trust Bank (NTB) said yesterday its growth momentum was continuing as the Group closed the nine months with a post tax profit of Rs. 1,460 m, surpassing the comparative period of last year by 25%.  

Core-earnings posted good growth over 2011 with net revenue increasing by 19%. All business pillars performed well in a controlled credit growth environment and contributed evenly to the bottom line.

Specific challenges faced during the early part of the year with the rising interest rate scenario, devaluation of the currency and the changes in the import tax structure for vehicles was well managed with prudent positioning of portfolios and timely execution of alternate strategies.  

Quarter on quarter post tax earnings also recorded good growth as a result of progressive revenue growth whilst managing expenses despite investments made on expansion of the delivery network and strengthening of the brand.

Maintaining net interest margins across the businesses was challenging due to the rising cost of funds and interest rate ceilings imposed on certain business lines. Internal pricing strategies to balance risk and rewards on customer assets were reviewed frequently to manage the margin pressure whilst the mobilisation effort on deposits continued with emphasis given to acquire low cost deposits.

The FIS portfolio also pushed up NII towards the latter part of the period under review, with the maturing of lower yielding securities being replaced with higher yielding assets. Net interest income for the nine months recorded a growth of 16%, with NIMs fractionally falling below prior year levels.

Non fund based income recorded a robust growth of 26% over the previous period. Changes to import tax regulations coupled with the depreciation of the rupee curtailed imports volume, and impacted the Bank’s Trade Finance income. However Credit cards income recorded a commendable growth of 38% stemming from both the acquiring and issuing businesses.

New cards issuance expanded steadily during the year with both spend and receivables surpassing the comparative periods for the previous year by 23% and 24% respectively. Forex income also recorded a notable growth as a result of currency volatility in the market.  

The bank continued to drive its cost management measures, whilst investing in expanding the delivery network and building the brand. No material shifts were seen in the cost composition for the year. Group cost income ratio stood at 59% on par with the previous period.

The increases in fuel prices and electricity tariff which occurred during the early part of the year has certainly escalated the operating cost base and the bank has taken specific initiatives towards addressing the cost structures and processes to manage some of the key operational cost lines. Additionally, as part of its focus on cost efficiency and productivity measures, the bank also took the first steps in digitalising a number of its internal processes.

A sound credit risk management framework in the bank ensured a healthy NPL ratio of 2.97% compared to 2.79% reported in December 2011. Loan loss provisions which comprises of specific provision write-back and a general provision charge in line with the asset growth for the nine months was comparatively higher than the previous period which recorded reversals on both categories.

The bank also managed to grow its loan book by 15% to Rs. 73 b and deposits by 25% to Rs. 84 b. With the credit ceiling limiting the expansion of the LKR loan book, some portfolios were prioritised whist maintaining a healthy distribution across customer, product and economic segments.

The loan growth for the nine months was on par with industry whilst deposit growth exceeded the industry. A significant portion of the funding of the asset book was through deposits which also improved the loans to deposit ratio, bringing in increased stability to the balance sheet. Driving low cost deposits continued to be challenging in the backdrop of rising interest rates.  

The substantial interest differential between savings and time deposits appealed to deposits holders seeking higher returns and a steep shift towards term deposits was seen across the industry. The bank continued to drive its efforts on acquiring new CASA accounts through the branches and the sales teams.

The capital position was at a sound Rs. 9.6 b with Capital Adequacy Ratios both at Tier 1 and 2 maintained at comfortable levels.

Several ties–up were established with remittance houses across the globe to ramp up the business which has seen satisfactory results in respect of both volumes and number of transactions with in a span of one year. A well mapped out strategy to expand the delivery network which commenced two years ago saw the roll out of eight new branches during the current year taking the network to 56.

The bank is now well represented across the key geographies and customer footfall and is progressing towards being recognised as a nationwide bank. Furthermore, five SME business centres were also opened offering a wide range of SME products.

Commenting on the results and achievements, Director/CEO Renuka Fernando stated: “We have recorded a noteworthy financial performance during the first nine months of 2012 which reflects continuing momentum and sustainable returns. The positive macro environment factors conducive for doing business will support our goals for remainder of the year and we are well on track to close the year on a high note. Our expanding branch network, enhancing brand image and the energetic team will steer the bank to even greater heights in the years to come.”