Nations Trust Bank plc (NTB) closed the six month period ended June 30, 2011 with pre-tax profits up 19% year on year (YoY) to Rs.1,124 mn. and post-tax profits up 49% to Rs.736 mn., the interim financial statement released to the Colombo Stock Exchange at Group level showed.
Group net revenue recorded a 5% increase YoY, the key contributory factor being the increase in non-funds based income. Group net interest income was fractionally below the previous year due to narrowing margins though this impact was mitigated by business volumes growth, timely deposits re-pricing and a shift in the deposit mix towards low cost funds. The focused approach to enhance non-funds based income resulted in a substantial 23% YoY growth. The bank generated non-funds based income from capital market activities as well as from trade and credit card related business lines. Trade finance volumes, both on imports and exports picked significantly YoY with the resultant income increasing by 36%. Credit card related non-fund based income grew by 22% in the review period with increased consumer spend and the roll out of a new card acquisitions programme. Foreign exchange income too showed a significant growth despite the relatively stable exchange rate that prevailed during the period.
During the period group operating expenses recorded a 15% YoY increase. The increase is in line with the expansion drive initiated in the latter part of 2010 where investments were made in people, premises and systems to support growth prospects and strengthen risk management. Adding further value, the increase in operating expenses also reflects investments made during the period in further enhancing the NTB brand.
Loan loss provision for the period recorded a Rs. 68 mn. net write back compared to a Rs. 205mn. charge the previous year as a result of focused recovery efforts. Group NPL ratio stood at 4.8% compared to similar levels prevailing during December 2010, a reduction from 6% in March 2011. Although loan book growth via selective credit underwriting during the second quarter (2Q) assisted in lowering the NPL Ratio, upward pressure was put via a more stringent regulatory environment in respect of NPL classifications which came into force at the beginning of 2011. Net of provisions, the NPA ratio stood at 2.74%.
The Bank accelerated growth in 2Q with the loan portfolio indicating a steep volumes pickup. For 2011 first half (1H), gross loans and advances recorded a 11% (Rs. 5.3 bn.) growth. On a YOY basis, the uplift by June 30, 2011 was over 26%. The deposit base increased by Rs.5.4 bn. (11%) to Rs.54 bn. over December 31, 2010.
The capital position also strengthened to Rs.7.8 bn. with the conversion of the 2nd tranche of warrants leading to a comfortable 13.59% Group Total Capital Adequacy Ratio which augurs well for further loan book expansion. During the Q, the Bank opened two branches-in Kalmunai and Anuradhapura, thereby extending its branch network to 43. The Bank is planning to accelerate its footprint growth and delivery network during the rest of the year in order to enhance the Bank’s reach to customers and deposits, while being a credit growth channel especially for the SME sector.
The Bank also received recognition and accolades in various spheres in the six months under review. NTB brand rating improved from the 17th position in 2010 to 14th position in 2011 in the “Most Valuable Brands” category in brand ranking in Sri Lanka by Brand Finance Plc, the world’s leading independent brand valuation and ratings firm. NTB was also the recipient of the Award for the Most Innovative Bank in Sri Lanka presented by World Finance. NTB’s 2010 Annual Report won the Silver Award in the Banks (Asia Pacific) category for the second consecutive year at the US based LACP Vision Awards. In addition the 2010 Annual Report was listed within their top 50 annual reports in the Asia Pacific Region. Commenting on the results and achievements, director/CEO Saliya Rajakaruna, said, “We have performed creditably during the first six months of 2011 and recorded a noteworthy financial performance. More importantly, the results reflect continuing growth and sustainable returns. Rest of the year’s outlook remains positive with private sector credit growth continuing, driven by an environment conducive for business. Our focus is to move swiftly to the economy’s emerging areas and new geographies and also benefit from building scale in our current business. For the foreseeable future, the current business pipeline is strong and likely to boost the Bank’s performance. We look forward to a rewarding second half”. NTB has grown rapidly over the last 10 years through a strategy of organic growth and acquisitions. These included the tie up with American Express cards and the merger with Mercantile Leasing Ltd. In keeping with the Bank’s vision of “Making life simple by being the benchmark of convenience”, NTB provides customer convenience through pioneering concepts such as “365 day banking”, mini branches, personal banking centres, “bank at your doorstep” and extended banking hours which have helped to win over and maintain a strong and growing customer base.