Savings giant NSB capitalises on peace dividend

Savings giant NSB has announced impressive financial results for 2010, which the bank attributed as a direct result of benefits of the peace dividend.

“2010 was clearly a milestone year for NSB. With sound macroeconomic fundamentals, today we are witnessing signs of our economy moving towards accelerated growth.

The commendable performance of NSB in 2010 is a clear manifestation of the peace dividend received by the country. In line with this positive financial performance and improvement of market conditions, NSB continues to introduce innovative products and services and focus on balance sheet management,” NSB General Manager and CEO Hennayake Bandara said.

The total assets of National Savings Bank reached Rs. 403 billion in 2010 passing another benchmark and total deposits of the bank were recorded at Rs. 355 billion. NSB’s PBT recorded a growth of 41% to reach Rs. 9.8 billion and post-tax profit increased by 45% to Rs. 5.4 billion over the last financial year. The bank has opened 29 new branches during the year and most of these branches were concentrated in rural areas.  

Income and profitability

The bank’s income passed another land mark of Rs. 50 billion recording a marginal growth of 1% even under the low interest rate regime. This is a notable growth in view of more than 70% of bank’s investments being in Government securities which are being re-priced at lower rates.

As a result of the decline in the bank’s deposits rates in line with market trends, interest expenses decreased by 13% when compared to year 2009. Due to the above factors, Net Interest Income (NII) of the bank grew by 28% to reach Rs. 16.6 billion in 2010. The bank maintained its net interest margin at 4.4% in the year 2010 compared with 4.0% in the year 2009.

Operating expenses increased to Rs. 5.7 billion recording a growth of 28% and this was mainly due to the increase in premises, equipment and establishment expenses and other operating expenses. The expansion of branch network, refurbishment of branches, the new project with Sri Lanka Post and provision for staff retirement benefits are the main factors for increase in operating expenses.

Profit before taxes (Financial VAT & Corporate Tax) increased by 39 % to Rs.12.8 billion the main contributor to this increase was Rs. 1.3 billion exceptional capital gains earned from equity market trading.  Profit before tax grew by 41% to Rs. 9.8 billion recording the highest ever PBT for Bank and PAT recorded a growth of 45% compared to the last financial year.

Taxation

VAT on financial services increased by 33% while corporate tax increased by 36%. Effective tax rate was 45% without VAT and 58% with VAT.

Contribution to coffers

The bank paid Rs. 2.6 billion as dividends to the Treasury for the financial year 2010 as per the new dividend policy agreed with the Treasury and this is the highest-ever dividend amount paid by a bank. With financial VAT and corporate tax, the bank has altogether contributed over Rs. 10 billion to the coffers.

Deposit mobilisation

In spite of the low interest rate regime, the bank attracted Rs. 42 billion of new savings during the year and its efforts were mainly focused on rural areas.  Total deposits of the bank grew by 14% to Rs. 355 billion compared to Rs. 313 billion a year earlier.

Savings deposits recorded the highest-ever growth of 18% and has contributed to improve the deposit mix. Fixed deposits recorded a growth of 12% to reach Rs. 260 billion.

Assets, investments and loans

The bank’s total assets were up by 14% to Rs. 403 billion at the end of 2010 reflecting primarily, the increase in investments in government securities and loans and advances.

Loans and advances grew by 20% to Rs.82 billion at the end of 2010, notably housing loan disbursements recorded a growth of 120% compared to last year and non-performing loans reduced by 9.0%. Asset quality remains strong with the non-performing loan (NPL) ratio of 2.5% as at 31 December 2010, reducing from 3.5% as at 31 December 2009. The decline in the NPL ratio was mainly due to increase in total loans & advances and efforts on recovery.

“Led with a clear vision for future growth, we believe that NSB has performed admirably in 2010, our strong financial performance over the past 12 months reflects our renewed focus on prudence and conservatism, allowing us to book a high-quality portfolio of investments and loans.  At the same time, we have set ourselves a challenging plan for this year and we remain committed to continue to launch our unique products and services that encourage financial inclusion of the people,” the CEO said.

Group

The Group’s Operating Profit from Ordinary Activities before Taxes increased to Rs. 13.4 billion recording a growth of 26% over the year 2009, while Profit after Tax for the period increased to Rs.5.6 billion recording a growth of 25%. The lower growth in group profits was due to decline in market interest rates which resulted in lower capital gains of the subsidiary compared to last year. 

“More importantly, the outlook for the bank remains positive and by positioning NSB to continue to contribute to the economic growth and through our commitment to ethical practices and transparency, we look forward to continued sustainable expansion in the years to come,” NSB CEO Hennayake added.