Saturday Dec 28, 2024
Saturday Dec 28, 2024
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| Chairman Dr. Harsha Cabral PC |
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| GM/CEO Shashi Kandambi
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The National Savings Bank (NSB) said yesterday it demonstrated its mettle amidst challenges by recording a Profit after Tax (PAT) of Rs. 7.2 billion for the fiscal year ended December 31, 2023.
NSB said the performance in FY23 was a testament to its adept management and highly skilled workforce in a year which saw the aftermath of pandemic followed by largest economic crisis in post-independence history, and socio-political uncertainties and monetary tightening.
The Banks’ achievement of Rs. 7.2Bn PAT mainly surged by 31% increment of Interest Income. The Bank strategically allocated more than 60% of its customer deposits investing in Government Debt Securities capitalizing on the higher interest rates prevalent in 2022. This prudent investment strategy yielded a substantial interest income of Rs. 137.7Bn which was an upswing of 36%. Interest received through Loans and Advances also grew by 36.3%, an increment of Rs. 23.4 Bn.
Net Gain from trading rose up to Rs. 3.7Bn at the group level which was a 206% increase from last year where they recorded a loss from trading. However, NSB was able to turn around the situation with professional due care and commitment, underscoring NSB’s adeptness in capitalising on market opportunities.
The Bank however, encountered challenges in net fee and commission income, witnessing a 34% decline due to subdued demand for loans and advances amid higher interest rates then prevailed. Fee and Commission Income was mostly contributed from Retail Loans and Corporate Banking. Both lines of business were clogged due to unwholesome micro financial conditions.
Exceeding the growth rate of Interest Income, the Interest Expense of the Bank also increased by 41% year-over-year (YoY). This rise in the cost of funds, particularly from Fixed Deposits which represent the largest portion (81%) of NSB’s deposit base, contributed to a congestion in the positive growth of Net Interest Income due to the lag effect of liability repricing.
Impairment charges of the Bank decreased by 12% in 2023 compared to the same period last year. The Bank closely monitors and considers the impact of the economy to business operations and performance.
In terms of Asset Quality, with all the obstacles, NSB has one of the lowest Impaired Loans (Stage 3) Ratio 2.41% (net of stage 3 impairment) compared to the industry rate of 7% at the end of fiscal year 2023. Further, the Bank maintains above industry impairment coverage ratio of 53.3%.
Personnel and other expenses were increased by 17% and 16% respectively being in consistent with inflationary situations globally. The Bank recorded a PBT of Rs. 4.3 billion which was a 5% decrease from last year. Recording deductible temporary difference of Deferred Tax there was a credit of Rs. 2.5 Bn to Income Tax Reversal and created deferred tax. Accordingly, the Bank was able to spot Rs. 7.2 billion PAT.
Despite the challenges posted by micro financial conditions and moving to low-interest-rate set-up, the Bank was able to grow its deposit base by Rs. 5.8 billion. On the back of 100% ownership of Government of Sri Lanka (GoSL) and the 100% explicit guarantee provided by the GoSL for the money deposited with the Bank and the interest thereof through the National Savings Bank Act, NSB continued to assure the customer confidence on their deposits.
The Bank’s investment portfolio grew by Rs 62.4 billion amidst the low demand for loans and receivables and the Bank’s strategic move to flow its interest earning assets to a most profitable alternative available. As perfectly described earlier these investments in Government Securities could earn Rs. 137.7 billion Interest Income. Surpassing the industry average of Investment to Total Asset Ratio of 35.8%, NSB recorded 62.4% in 2023.
Total Asset base amounted to Rs. 1.7 trillion in 2023 showing a 4% increase. The Bank generated 9.36% of ROE and 0.26% of ROA (Before Tax) in 2023.
The Bank maintained a highly liquid asset portfolio when compared with the banking industry. Surpassing the minimum requirement of 20%, NSB has 55% of Statutory Liquid Asset Ratio where the industry average is 44.9% at the end of the year 2023. Liquidity Coverage Ratio (All currency) of NSB is 293.7% which is far more than the minimum requirement of 100% at the end of the year 2023.
The Bank is cushioned adequately to cover potential losses to protect the interests of the Bank’s depositors and other lenders. Accordingly, NSB marked well above regulatory minimum in terms of Capital Adequacy Ratios. The Banks’ Common Equity Tier 1 Capital Ratio was 15.3% at the end of 2023 (minimum requirement -7%) where industry score was 13.4%. Tier 1 Capital Ratio of NSB was 16.9% (minimum requirement – 8.5%) where industry score was 13.8% at the end of 2023. Total Capital Adequacy Ratio of NSB at the end of 2023 was 19.3% where the industry marked it to 16.9%.
As such, NSB continued to stamp its position as “Safest Bank in Sri Lanka” in every aspect such as liquidity, balance sheet management, performance and credit and market risk management. The Lanka Rating Agency (LRA) has assigned the Bank with the issuer rating of [SL] AAA with Stable Outlook. The Bank has been awarded the 6th most valuable brand in Sri Lanka by Brand Finance Lanka Ltd in 2023. NSB also ranked among the Top 10 Women Friendly Workplaces in Sri Lanka for the third consecutive year in 2023.
