Thursday, November 8, 2012

NTB post tax profit up 25 percent

Nations Trust Bank (NTB) closed the 9 months with a post tax profit of Rs. 1,460Mn surpassing the comparative period of last year by 25 percent. Core-earnings posted good growth over 2011 with net revenue increasing by 19 percent, the bank said in a statement yesterday.

"All business pillars performed well in a controlled credit growth environment 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. Quarter on quarter post tax earnings also recorded good growth as a result of progressive revenue growth whilst managing expenses despite investments made on expansion of the delivery network and strengthening of the brand," NTB said.

"Maintaining net interest margins across the businesses was challenging due to the rising cost of funds and interest rate ceilings imposed on certain business lines. Internal pricing strategies to balance risk and rewards on customer assets were reviewed frequently to manage the margin pressure whilst the mobilization effort on deposits continued with emphasis given to acquire low cost deposits. The FIS portfolio also pushed up NII towards the latter part of the period under review, with the maturing of lower yielding securities being replaced with higher yielding assets. Net interest income for the 9 months recorded a growth of 16 percent, with NIMs fractionally falling below prior year levels.

"Non fund based income recorded a robust growth of 26 percent 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. However Credit cards income recorded a commendable growth of 38 percent stemming from both the acquiring and issuing businesses. New cards issuance expanded steadily during the year with both spend and receivables surpassing the comparative periods for the pervious year by 23 percent and 24 percent respectively. Forex income also recorded a notable growth as a result of currency volatility in the market.

"Group cost income ratio stood at 59 percent on par with the previous period. 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. Additionally, as part of its focus on cost efficiency and productivity measures, the Bank also took the first steps in digitalizing a number of its internal processes.

"A sound credit risk management framework in the Bank ensured a healthy NPL ratio of 2.97 percent compared to 2.79 percent 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 9 months was comparatively higher than the previous period which recorded reversals on both categories.

"The Bank also managed to grow its loan book by 15 percent to Rs73Bn and deposits by 25 percent to Rs. 84Bn. With the credit ceiling limiting the expansion of the LKR loan book, some portfolios were prioritized whist maintaining a healthy distribution across customer, product and economic segments. The loan growth for the 9 months was on par with industry whilst deposit growth exceeded the industry. 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 in the backdrop of rising interest rates. The substantial interest differential between savings and time deposits appealed to deposits holders seeking higher returns and a steep shift towards term deposits was seen across the industry. The Bank continued to drive its efforts on acquiring new CASA accounts through the branches and the sales teams.

"The capital position was at a sound Rs.9.6Bn with Capital Adequacy Ratios both at Tier 1 and 2 maintained at comfortable levels."

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