In the interim financials released to the Colombo Stock Exchange on 25th February 2010, Nations Trust Bank PLC announced that the Group closed 2009 with pre-tax profits of 1.6Bn, a substantial 40% increase over 2008. Post tax profits at 686Mn, a 16% increase over the previous year was equally significant. 2009 final quarter results were similarly pleasing with pretax profits increasing by a substantial 36%.

Showing resilience and strength in core activities, the Group reported increased volumes and improved margins across all its business lines. Equally growth was broad based with good momentum across all core-business segments. Specific performance improvements are visible in areas of deposit mobilization, interest margins, fixed income securities trading and managing operating expenses. Conversely, contraction of the loan book and resulting high liquidity, experienced across the banking industry, was a drag on earnings reported for the year.

Reflecting timely re-pricing strategy of assets and liabilities, group interest costs decreased at a faster rate than interest income. As a result healthy margins, growing from 24% in 2008 to 31% in 2009, were maintained in the core banking book throughout the year. Other operating income also showed a sizeable increase of 8% despite below par foreign exchange earnings and trade related fee income due to slower import/export trade finance volumes reflecting stressed global economic conditions. Capital gains arising from the fixed income-trading portfolio helped bridge the vacuum created by the foreign exchange loss that was announced mid-year 2009.

Operating expenses increased by 7% during the year, a far slower pace than the increment seen in 2008. Despite the impact of capital investments made in 2008 on the branch network and other infrastructure developments being counted in full in the current year and other inflationary pressures, a visible improvement was seen in the cost to income ratio which reduced to 62%, some 6% below the level reported in 2008.

While the Bank managed to grow business volumes, income and contain operating expenses, the adverse economic environment and conservative lending policies contributed to increased NPLs and specific provisioning. For the year under review, NPLs increased from Rs.2.4Bn to Rs.3.8Bn and the net NPL Ratio deteriorated from 4.8% to 8.5%, reflecting both industry trends and management desire not to expand business under weak economic conditions.

In an intensely competitive market, the deposit base grew by 29% to Rs.44.4Bn with low cost funds contributing a healthy 26%. As indicated above, the loan portfolio contracted by Rs.3.0Bn, a 7% decrease, with lower demand, high rates and cautious lending, all playing a part. In terms of Balance Sheet footings, asset base increased by 4% to an aggregate Rs. 70.5Bn, while capital position strengthened to Rs.4.8Bn enabling the reporting of a healthy Capital Adequacy Ratio of 16.1%.

Commenting on the results, Saliya Rajakaruna, Director/CEO stated "Amidst challenges and adversities, we have delivered a creditable performance with the core businesses firing on all cylinders ready for 2010 – the first year of a future like no other. As we close the year 2009, the Bank remains financially strong with its funding and capital position intact. Our plans for the future recognize that we are a regulated business aiming to deliver sustainable profits over the longer term within a sound risk management framework whilst focusing on customer service and convenience as a differentiator to both gain and retain market share”.

Nations Trust Bank has grown rapidly over the last ten years through a strategy of organic growth and acquisitions. These included the tie up with American Express credit cards and the merger with Mercantile Leasing Ltd. In keeping with the vision of the Bank "Making life simple by being the benchmark of convenience", Nations Trust Bank provides customer convenience through pioneering concepts such as ‘365 Day Banking’, mini branches, Personal Banking Centers, ‘Bank At Your Doorstep’ and extended banking hours which have helped to win over and maintain a strong customer base. Over the next few years it aims to enhance its presence and pace in the SME, Corporate Banking and Capital Market operations.