Nations Trust Bank continues to support nation’s initiatives during these unprecedented times

Chairman Gihan Cooray

Director/Chief Executive Officer Priyantha Talwatte

Nations Trust Bank maintained essential banking services uninterrupted during the period of lockdown, contributing to efforts by the Sri Lankan government to manage the impact of the COVID-19 pandemic. 

Its investments in digital technology continued to benefit customers during this hour of need. This was proven by the extensive use of the Bank’s digital platforms by its customers. Further, the Bank implemented relief schemes in line with the Government directives to support customers affected by the economic downturn as a result of the pandemic.

One of the key priorities of the Bank at this time is to ensure a strong liquidity position enabling it to meet ongoing commitments. Mechanisms to manage fund outflows, facility rollovers and utilisation levels as well as the arranging of additional funding lines were implemented.

The Bank has taken all recommended measures to ensure the safety and wellbeing of its employees, customers and all other stakeholders during these unprecedented times and continues to adhere to the guidelines issued by the Government and health authorities.

Financial results for the 2nd quarter of 2020

The Group’s Operating profit before all taxes declined by 4%, while Profit after Tax increased by 24% due to the removal of the Debt Repayment Levy and NBT on financial services. 

Net Interest income declined by 15% due to the lack of growth in the loan book and interest ceiling imposed from April 2019 together with the impact on the moratorium loans. Average Weighted Prime Lending Rate reduced by 288 basis points as at end of 2Q 2020 compared to 2Q 2019. Reduction in Net Interest margins was contained to 80bps as a result of effective fund management strategies supported by the growth in current and savings account balances.

Fee based income dropped mainly due to reduction in cards spend coupled with lower Trade Finance volumes. However, gains on trading FX increased from forward FX funding swaps due to the depreciation of the rupee during the period, in contrast to appreciation in the same period last year which helped offset some of the revaluation losses, which arose from the balance sheet position on same reason accounted under Net other operating income. The bank was also able to book some trading profits on its’ fixed income securities portfolio with the drop in market rates, containing the operating income reduction to 12%.

The Bank considered the potential impact of the COVID-19 pandemic on customers as well as the relief package introduced in the form of a debt moratorium by the government when assessing the impairment provisions Additional impairment provisions were made for identified customer segments impacted due to COVID-19 related developments, by assessing potential delays to the cash flow expectations based on currently available information.

Operating expenses were curtailed by Rs. 528 million, a 10% reduction over last year. This is attributed to the various cost saving strategies and initiatives that in turn reduced the impact on the bottom line. Special focus on some of the large cost pools by respective Cost champions coupled with productivity and efficiency improvements were the main reasons for the savings.

The Group remained strong as its Tier I Capital and Total Capital Adequacy ratios as at 30 June 2020 stood well above the regulatory levels at 12.74% and 16.75% respectively. With prevailing conditions, the CBSL reduced the Capital Conservation buffer by 0.5% with effect from 27 March 2020. The Statutory Liquid Asset Ratio (SLAR) for the Domestic Banking Unit and the Off-Shore Banking Unit was at 30.82% and 24.31% respectively as at the reporting date.

Despite the headwinds present in the operating environment the Bank will cautiously explore new business opportunities that may present itself from time to time. Further, the bank will continue to take relevant measures to curtail costs with various cost initiative strategies.

The bank is also confident to endure any potential impact that may arise as a result of the current crisis supported by its strong capital base, healthy liquidity buffers and the robust risk management models that are in place. The bank also keeps a close tab on the developments in the operating environment to enhance growth with any opportunities available whilst supporting the government with the initiatives taken in reviving the economy.