Nations Trust Bank (NTB) has closed the first half with a post tax profit of Rs. 893 million, which was a 21% increase over the corresponding period of last year.
NTB said core-earnings posted good growth over 2011 with revenue increasing at a higher rate of 13% compared to an expense growth of 11%. The performance was primarily driven by four strategic business units comprising of retail and SME, credit cards, corporate banking and treasury, which recorded both volume growth and profit growth.
Leasing also performed well despite industry-wide challenges arising from the changes in the import tax structure for vehicles.
The bank continued to progress well in diversifying its portfolio and earnings base while optimising returns in a controlled growth environment.
Maintaining net interest margins across the businesses were challenging due to the rising cost of funds and intensifying competition for deposits. Timely intervention in pricing the asset and liability portfolios and growth in business volumes across all businesses mitigated margin pressure to a great extent and resulted in net interest income recording a growth of 11% over the previous period.
Non fund based income recorded a robust growth of 16% over the previous period. Changes to import tax regulations coupled with the depreciation of the rupee curtailed imports volume, and impacted the bank’s trade finance income.
Credit cards income recorded commendable growth of 32% stemming from both the acquiring and issuing businesses. Both local and destination spend increased by over 25% compared to the 1H of previous year driven by significant expansion in the bank’s card issuances. Forex income also recorded a notable growth as a result of currency volatility in the market.
The bank continued to manage costs, curtailing the increase in expenses to 11% despite investments made in expanding the delivery network and building the brand. No material shifts were seen in the cost composition for the year. Group cost income ratio stood at 59% on par with the previous period.
Continuous emphasis has been made to improve cost efficiency and productivity across the key cost lines, processes and functions of the bank. After six months of rigorous process re-engineering and improvements, the bank is currently reaping the benefits with substantial savings generated from identified expense lines.
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 starting from the 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 number of other similar projects have commenced across the organisation.
A sound credit risk management framework in the bank ensured a healthy NPL ratio of 2.91% compared to 2.79% reported in December 2011. Loan loss provisions which comprises of specific provision write-back and a general provision charge in line with the asset growth for the quarter was comparatively higher than the previous period which recorded reversals on both categories.
The bank also managed to grow its loan book by 13% to Rs. 71 b and deposits by 22% to Rs. 81 b. Whilst loan growth was on par with industry, deposit growth exceeded the market. A significant portion of the funding of the asset book was through deposits, which also improved the loans to deposit ratio, bringing in increased stability to the balance sheet.
Driving low cost deposits continued to be challenging with such deposits contributing to only 11% of the growth recorded for the six months period. The rising interest rates have resulted in a steep shift towards term deposits with customers opting for higher returns on their regular savings and investments. The bank launched a savings campaign to reward customers across the branch network and has seen steady positive results
The capital position was at a sound Rs. 9 b with capital adequacy ratios both at Tier 1 and 2 maintained at comfortable levels.
“We have recorded a noteworthy financial performance in 1H with growth and earnings equally distributed across the business pillars. We anticipate bigger challenges in 2H in the back drop of curtailed credit growth, but remain focused in achieving the goals set for the year,” NTB Director and CEO Saliya Rajakaruna said.
“While it is business as usual for our front-end units, our support units are working relentlessly to create the processes, controls and the compliance platform required to uplift the Nations Trust brand to become a nationwide bank synonymous with sustainable growth,” he added.
In line with the strategy of expanding customer touch points to enhance accessibility and convenience, the branch network expanded its footprint by opening four new branches in Nelliyadi, Kaduruwela, Aluthgama and Wennappuwa. Two SME business centres were also opened in Kurunegala and Anuradhapura with the SME Toolkit being offered at these centres.
Several tie-ups were established with remittance houses across the globe and the retail team made numerous visits to the Middle Eastern and European countries to enhance relationships, and promote the Nations Trust brand as a key player to the Sri Lankan expatriate population.
The bank also received recognition and accolades during the six months under review. NTB was the proud recipient of the award for the ‘Best Private Bank in Sri Lanka,’ presented by World Finance. The NTB Annual Report for 2011 won the Silver Award in the Banks (Asia Pacific) category for the third consecutive year at the US-based LACP Vision Awards.