NTB ends 2012 with continued growth momentum

Nation Trust Bank closed the year with a post tax profit of Rs. 1,951 million, surpassing the comparative period of last year by 21%. With the macroeconomic conditions being conducive for business, the bank managed to improve performance in all areas, notably in deposit mobilisation and core earnings in a controlled credit growth environment.  

All business segments put up solid performances 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.   

Across the industry, NIMs depleted due to the rising cost of funds and intensifying competition. For Nations Trust in particular, the impact of rising cost of funds was greater due to having a relatively lower CASA balance and a disproportionately high share of customer assets being subject to interest rate ceilings.  

Internal pricing strategies to balance risk and reward 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.

Despite interest costs increasing at a faster rate than interest income and narrowing NIMs, the growth in business volumes  compensated for the negative impact as net interest income recorded for the year was 31% compared to previous period.

Non fund based income recorded a robust growth of 26% over the previous period. Primary drivers of NFB income growth was credit cards at 36% and fees and commission income from loans and deposits at 30%. The growth in these areas reflected the conducive macro economic factors which prevailed during the year with increased consumer spend and transactional mobility. In contrast, changes to import tax regulations coupled with the depreciation of the rupee curtailed imports volume, and negatively impacted trade finance income which recorded a drop of 17% over previous year.  

The bank managed to convert opportunities arising from the movement in the yield curve towards the latter part of year recording trading and mark to market gains on the FIS book amounting to Rs. 90 million.  This, in comparison to losses of Rs. 218 million recorded in the previous year, positively impacted the overall NFB growth.

The bank continued its aggressive cost management strategies across business and support functions alike, realising the evermore important need to improve productivity and maintain profitability in a competitive environment.

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, such as printing, stationary and travelling.

Benefits of these initiatives have already materialised as the bank managed to limit the increase in some of the large cost pools despite significant increases in the volumes processed. 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. Group cost income ratio stood at 57%.

The loan book grew by 20% for the year, reaching Rs. 73 billion. As the credit ceiling limited expansion of the LKR book, some portfolios were prioritised for growth ensuring a healthy distribution across customer, product and economic segments. A significant portion of the funding of the asset book was through deposits which also improved the loans to deposit ratio, bringing increased stability to the balance sheet.

Impaired loans to total loans ratio stood at of 2.5% for 2012 compared to 2.4% for 2011. Impairment for loans and advances for current year was Rs. 431 million compared to a reversal of Rs. 241 million for the previous year.

The capital position was at a sound Rs. 10 billion with Capital Adequacy Ratios both at Tier 1 and 2 maintained at comfortable levels.