NTB December profit supported by higher loans but margins under pressure
Nations Trust Bank PLC (NTB) yesterday reported earnings of Rs.831.2 million or Rs.3.60 a share for its October – December quarter, increasing 23 percent from a year ago, the interim results filed with the Colombo Stock Exchange showed.
The John Keells group commercial banking unit managed to record this performance despite its margins coming under intense pressure as its relatively strong loan book growth buttressed some of these negative implications.
The net interest income (NII) rose by a modest 11 percent year-on-year (YOY) to Rs.2.6 billion amid a steep rise in interest cost, virtually double the rate at which its corresponding income grew.
The net interest margin (NIM) fell to 4.90 percent from 5.46 percent a year ago.
NTB commands the highest NIMS in the industry until the interest rates rose sharply during 2016 hitting its leasing book, which cannot be repriced.
The bank’s leasing portfolio accounts for 21 percent of the total book.
Meanwhile, for the year ended December 31, 2016, the bank reported earnings of Rs.12.44 a share or Rs.2.9 billion, up 10 percent.
NTB expanded its loans and advances by 19.3 percent or Rs.28.7 billion in 2016 to Rs.149 billion. The bank said it rebalanced its loan book towards corporate and small and medium enterprise categories.
Corporates fetch lower margins while the SMES fetch relatively higher margins.
The bank now has an asset base of Rs.211 billion, an increase of 20 percent.
The asset quality also improved as the gross nonperforming loan ratio came down to 2.42 percent from 2.77 percent a year ago.
Provisions made for possible bad loans also declined to Rs.690.3 million from Rs.985.5 million recorded last year, mainly supported by sharp decline in specific provisions.
The deposits grew by 17.3 percent or Rs.22.4 billion to Rs.151.6 billion but the low-cost deposits took a beating when the interest rates rose as the current and savings account ratio dropped to 28 percent from 32.4 percent a year earlier.
“Other operating income increased by 85 percent due to profits generated on the disposal of shares held in Mastercard,” the bank said in an earnings release. “Net trading losses for the year amounted to Rs.241 million, which is reflective of the swap costs arising from an increased forex swap portfolio and unfavorable movements in forward premiums. However, the bank benefited from the relatively lower funding costs of the forex swaps compared to high-cost rupee deposits,” the statement further said.
Meanwhile, the net fee and commission income rose by 12 percent to Rs.3.6 billion.
NTB is well capitalized with both Tier I and Tier II capital adequacy ratios remaining at 10.57 percent and 15.04 percent, respectively, well above the minimum requirements of 5 percent and 10 percent.
The bank in November 2016 raised Rs.5.0 billion in subordinated debt.
As of December 31, 2016, the John Keells group effectively controlled a 29.9 percent stake in the bank.
The Sri Lankan rupee ended firmer yesterday aided by late exporter dollar sales, but concerns over possible further depreciation in the absence of Central Bank guidance weighed on the sentiment, dealers said.
Rupee forwards were active with two-week forwards ending at 152.00/30 per dollar, compared with Thursday’s close of 152.50/70. They hit a low of 153.05 early in the trade yesterday. The markets were closed on Friday for a religious holiday. “There was some selling from a state bank in the latter part of the day. Later, some other banks too sold,” said a currency dealer asking not to be named. The currency is under pressure due to dollar demand from importers ahead of the traditional Sinhala-tamil New Year in midapril while foreign investors continue to sell government securities, dealers said. Foreign investors sold a net Rs.15.37bn in the week ended February 22, extending the outflow from government securities to Rs.64.5bn in the eight weeks.