NTB growth momentum continues in 1Q

Nations Trust Bank (NTB) closed the quarter ending 31 March 2012, with a post tax profit of Rs. 406 million surpassing the previous period by 8%. Current year quarter was driven by a noticeable growth in business volumes, modest growth in top line revenue and controlled growth in operating expenses.

All business pillars contributed to PBT in equal measure resulting in a well balanced result. With the mandatory credit ceiling coming into effect, business portfolios were re-positioned to optimize returns in a controlled growth environment.

Core-earnings posted good growth over 2011 with revenue increasing at the higher rate of 9% compared to growth in expenses of 4%. In the current quarter, the Bank recorded a mark to market loss of Rs. 46 million in contrast to the gain of Rs. 36 million recorded in the corresponding quarter of previous year. Loan loss provisions which comprises of specific provision write-back and a general provision charge in line with asset growth for the quarter was comparatively higher than the previous period which recorded reversals on both categories.   

Net Interest Margins were challenging yet again with rising cost of funds and intensifying competition. Timely intervention in pricing across asset and liability portfolios and growth in business volumes resulted in net interest income recording a growth of 9% over the previous year. Non funds based (NFB) income too recorded a 9% growth over the previous period.  

Trade finance income recorded a drop due to IPO guarantee commission income generated during the previous period being absent in the current period. Credit cards recorded good growth of 29% stemming from acquiring commission income and card fees. Both local and destination spend increased over 20% compared to the 1Q of 2011 with the number of new cards issued doubling.

Forex income also recorded a notable growth as a result of currency volatility in the market.  A sizeable vacuum was created in NFB income as trading losses were recorded on the FIS portfolio for the current period compared to gains recorded for the previous period. The continuous upward movement in the yield curve negatively impacted the FIS trading portfolio which has been mitigated to some extent by shortening its duration.

The Bank continued to manage costs, curtailing the increase in expenses to 4% despite rolling out an expansion strategy with investments made in people, premises, systems and the NTB brand. Group cost income ratio stood at 60% on par with the previous period. Cost efficiency and productivity has taken a predominant role in the day to day operations of the Bank with initiatives being implemented not only to reduce waste and consumption but also by exploring ways and means of inculcating a culture of working smarter amongst employees across all functions.  

The bank also took the first step in initiating the move into a paperless boardroom. With the introduction of the iPad Board Application, the Bank eliminated costs in terms of paper usage, printing and couriering whilst giving Board Members access to all past and current board papers at the click of a button, enabling both simpler and faster decision making.

A sound credit risk management framework coupled to an expanding loan portfolio resulted in a healthy NPL ratio of 2.81% compared to 2.79% reported in December 2011. The Bank also managed to grow its loan book by 7% to Rs. 69 billion and deposits by 12% to Rs. 75 billion.  Whilst the loan growth was on par with industry, deposit growth exceeded the market. The growth in credit was driven primarily by Retail SME, leasing and credit cards.  The year also commenced with a focused approach to grow low cost funds and an attractive savings promotion was launched during the quarter to grow the existing balances and acquire new customers. The benefits of the promotion are already visible with savings balances growing at a very healthy pace.  

The capital position was at a sound Rs.8.5Bn. Accordingly the Bank was able to maintain comfortable Capital Adequacy Ratios both at Tier 1 and 2 levels.

In keeping in line with the strategy of expanding customer touch points to enhance accessibility and convenience, the branch network expanded its footprint by opening a full service branch in Kaduruwella extending the network coverage to 49 branches.  

Initiatives were also rolled out to scale up remittances’ business as the volume of inward remittances into the country continued to play a crucial role in supporting economic activity. The Retail team visited Bahrain and Dubai to enhance relationships, and promote the NTB brand as a key player to the Sri Lankan expatriate population.

Commenting on the results and achievements, NTB Director/CEO Saliya Rajakaruna stated, “We have performed creditably during quarter and recorded a noteworthy financial performance. More importantly, the results reflect continuing growth and sustainable returns. The market forces operating today, both externally and internally, are no doubt challenging and we will continue to see volatility in Forex and Interest Rates. Based on what can be controlled, we are focused on achieving the goals set out at the beginning of the year and remain optimistic about prospects for the remainder of the year. The distribution network now totalling 51 branches located in key cities and geographies of the country will uplift our Nations Trust brand to become a nationwide bank.  Underpinned by such national coverage, the first quarter 2012 performance is a stepping stone for posting yet another record outcome for the year.”