Nations Trust Bank Q3 Performance

Nations Trust Bank Q3 Performance

30th October 2015

The Bank closed the 9 months ending 30thSeptember 2015 with a post-tax profit of Rs.1,939Mn, down by 2% over the previous period. The performance for the quarter was negatively impacted by the marked to market losses recorded on the FIS portfolio in contrast to significant gains made in the corresponding period last year. Nevertheless, core earnings recorded a moderate growth for the period with net interest income and fees growing by 7% whilst the growth in operating expenses and impairment charges was managed within 5%.Loans and advances posted a growth of 14% for the period with a larger share of the growth recorded in the current quarter mirroring industry trends.

 

Narrowing NIMs slowed net interest income growth particularly in the current quarter. The Bank strategically pushed for higher loan growth with incremental new business booked at relatively lower margins. Portfolios such as Corporate and Leasing in particular, felt the pinch of declining yields and heavy competition. The Bank aggressively pursued strategies to grow CASA to keep borrowing cost low. Low cost deposits recorded a 6% growth with the CASA mix improving to 33% of deposits.

 

Net fees and commission income grew by 17% for the period under review primarily driven by credit card fee based income and transactional fees. Concerted efforts put into penetrate trade hubs paid off with trade related fee income posting a commendable growth of 16%. Net trading income recorded a significant drop owing to marked to market losses recorded on the FIS portfolio as a result of unfavorable movements in the yields of the underlying Government Securities. The loss recorded for the current period amounted to Rs.233Mn compared to a gain of Rs.169Mn for the corresponding period last year. Foreign exchange income recorded an impressive growth of 20% with enhanced customer volumes and favourable rate movements benefiting proprietary trading. Other operating income mainly comprising of recovery of loan write-offs recorded a drop of 13% for the current period.

 

The impairment charge for the period amounted to Rs.809Mn which comprised of aone off provision booked during 1Q for specific facilities under individual impairment. The drop in collective impairment for the current period is mainly attributable to reversals made on account of the pawning portfolio compared to the higher charges made in the corresponding period. Collective impairment on both credit cards and leasing portfolios also recorded a significant drop.

 

Operating expenses were contained at a growth of 6% with a Cost Income ratio of 54%. The Cost Income ratio increased over the corresponding period owing to lower growth in revenue arising from narrowing margins and the marked to market losses on the FIS portfolio. The higher growth of 39% in depreciation and amortization charges is due to the core-banking upgrade which was implemented in the 3Q of 2014. Personnel expenses and other overheads recorded a lower growth as savings materialized on many planned expenses owing to cost management initiatives and lean initiative implementations.

 

The capital position was sound at Rs.16.3Bn with Capital Adequacy Ratios both at Tier 1 and 2 maintained at comfortable levels.

 

During the past 9 months, the Bank pursued its business strategies on providing customer convenience through its branch network whilst leveraging on the state of the art new core banking solution. The Bank, known for its innovative and pioneering approach in the banking and payments landscape in Sri Lanka partnered with Diners Club International in becoming the exclusive issuer and acquirer for Diners Club credit cards in the country.

 

Commenting on the results and achievements, Renuka Fernando Director/CEO stated “The first nine month results have been encouraging for our core businesses despite challenges faced in a few areas which I believe is part of doing business. Our focus for the remainder of the year is to continue the momentum on credit growth and end the year with a strong financial position thereby enabling the Bank to take on higher growth in the forthcoming year as Nations Trust Bank steers ahead to become the primary banker for our target customers”.