NSB’s growth momentum continues in 1Q

National Savings Bank (NSB) said yesterday  its asset quality, capital and liquidity positions remain strong, reflecting prudent approach to business and effective risk management framework.

Commenting on the bank’s performance and future outlook Chief Executive Officer Hennayake Bandara said NSB is continuing to focus on enhancing its service quality and expanding branch network to meet the growing needs and expectations of its customers.

 Its Government Securities and Other Investments portfolio, which account for nearly 80% of the total investments and loans and advances increased to Rs. 315.2 b as at 31 March 2011 from Rs. 292.6 b as at 31 December 2010 recording 8% growth.

Government securities portfolio increased to 295.5 b as at 31 March 2011 from Rs. 275.1 b recording a growth of 7% while Other Investments portfolio increased by 12% to Rs. 19.7b. Loans and advances as at 31 March 2011 stood at Rs. 81.1 b compared to Rs. 84.1 b as at 31 December 2010, the decrease being mainly due to the maturity of large value loans granted to corporates and conversion of administrative borrowings to long term Treasury Bonds.

However, retail lending portfolio of the bank recorded 5% growth and housing loans and pawning advances recorded 3% and 11% growth respectively during the first three months. Customer deposits increased from Rs. 355.4 b as at 31 December 2010 to Rs. 368.7 b, recording 4% growth.

Even though interest income from loans and advances recorded a growth of 6%, total interest income of the bank decreased by 5% compared to first quarter of 2010. This was mainly due to the significant decline in interest income from investments in government securities which are re-priced at lower yield. Although the bank’s government securities portfolio increased by 7% during the period, the impact from decrease in yields was higher than the growth in volume.

The net income for the period increased by 9% to Rs. 4.5 b compared to Rs. 4.2b for the corresponding period of the previous year, which is attributable to better balance sheet management. Other income for the first quarter 2011 was Rs. 417.6 m compared to Rs. 190.5 m for the corresponding period of the previous year.

As a result of increased expenses on branch expansion and refurbishment, operating expenses increased to Rs. 1.5 b in first quarter from Rs. 1.4 b of the same period of 2010.

Operating Profit from Ordinary Activities before Taxes increased by 11% to Rs. 3 b, mainly due to increase in net interest income. Both profit before tax and after tax increased mainly due to reduction of applicable tax rates. As a result, the effective tax rate of the bank decreased from 59% to 39%.

The Group’s Operating Profit from Ordinary Activities before Taxes increased to Rs. 3.2 b, recording a growth of 11% over the first quarter of year 2010, while Profit after Tax for the period increased to Rs.1.9 b, recording a growth of 66%. The lower growth in group profits was due to decline in market interest rates which resulted in lower capital gains compared to last year.

The bank was ranked in the Silver category in the Corporate Accountability Index 2011 developed by STING Consultants Sri Lanka and was also bestowed with ‘AAA’ Brand Rating and declared as the third leading local brand in Sri Lanka in 2010 by Brand Finance Lanka.

“With the new business plan along with other initiatives, the bank is strongly positioned for future growth,” concluded the General Manager/CEO.