The National Savings Bank (NSB) has achieved strong all round growth in the first half aided by improved market conditions as well as management measures.
NSB has mobilised Rs. 23 billion deposits during the first half increasing the total base to Rs. 378 billion, up 6.4% over end 2010 figure. Savings deposits grew by 7% passing the Rs. 100 billion mark while term deposits rose by 6% to Rs. 275 billion.
Government securities portfolio of the bank recorded a growth of 8% to reach Rs. 296 billion while wholesale lending portfolio recorded a significant growth of 156% during the first half.
Net interest income of the bank reported an increase of Rs. 1.3 billion from Rs. 4.9 billion in the corresponding period of 2010.
Commenting on the performance, NSB General Manager/CEO Hennayake Bandara said: “The bank continued to pursue its efforts to achieve its strategic targets at all levels and improve its performance in all operational activities. As a result we were able to maintain our balance sheet growth.”
Total income decreased by 5% to Rs. 23 billion mainly due to low interest income earned on government securities which are re-priced at lower yields. Non-interest income declined to Rs. 584 million in 1H from Rs. 644 million in the corresponding period of last year, due to lower capital gains earned on trading securities.
Interest expense decreased by Rs. 2 billion from Rs. 17 billion same period last year, mainly due to re-pricing of term deposits at lower rates. Total operating income reported a marginal increase of 1% over 2010 1H, reaching Rs. 6 billion.
The lower growth in total operating income was mainly attributed to significant decline in interest income from government securities investments and other income. As a result net interest margin decreased to 4.0% from 4.4% at the end of 2010. Return on Asset (ROA) (before tax) ratio showed a marginal decrease to 2.5% from 2.6% at the end of last financial year.
Operating expenses increased by 6% to Rs. 3 billion in 2011 1H, which was mainly due to the expenses on branch expansion and refurbishments. Despite the increased expenditure the Bank was able to improve cost to income ratio to 43% compared to 51% a year earlier.
The bank’s effective tax rate decreased to 40% in 2011 1H compared to 57% a year earlier and this was mainly due to the decrease of VAT on financial services and corporate tax.
Retail lending increased to Rs. 88 billion recording a growth of 5% from Rs. 84 billion at the end of 2010. Housing loan portfolio of the bank has recorded a growth of 5% while pawning advances recorded an impressive growth of 23% during the first half of the year. Non Performing Loans (NPL) ratio increased to 3.8% from 2.5% at the end of 2010.
As of end June the Tier 1 and Tier 2 capital of the bank amounted to 20.5% and 17.6% compared with the regulatory minimum of 5% and 10% respectively.
The Group’s operating profit from ordinary activities before taxes increased to Rs 6.2 billion recording a growth of 1% over 2011 1H, while profit after tax for the period recorded an increase of 40% to Rs.3.7 billion.
The bank opened eight new branches during the period totalling branch network to 194 branches and installed eight new ATMs increasing total ATMs to 198.
“Recently NSB Annual Report 2010 was ranked world’s fourth best and bagged four other awards at the LACP vision awards. This is a remarkable achievement and we are happy that we have been able to bring international recognition to state sector as well as the country,” said Hennayake.
He also said NSB would continue to focus on retail banking and financing business whilst maintaining prudent credit policies and further improving cost efficiency.
“The bank expects to sustain its strong asset quality and will continue to leverage wide branch network as well as postal network to deliver balance sheet and revenue growth. The bank is steadfast in its commitment to uphold corporate governance and implement sound risk management policies to support long-term growth,” CEO Hennayake added.