NTB June profit growth slows over higher loan loss provisions, taxes
Nations Trust Bank PLC (NTB) reported earnings of Rs.3.05 a share or Rs.702.5 million net profit for the quarter ended June 30, 2017 (2Q17), an increase of just 2.0 percent year-on-year (YOY) amid higher loan loss provisions and taxes.
NTB share ended Rs.1.00 or 1.27 percent lower at Rs.78 at yesterday’s market close.
NTB, a unit of John Keells group, reported an interest income of Rs.7.39 billion for the quarter, up 46 percent YOY. But the interest expense rose by a faster 70 percent YOY to Rs.4.48 billion due to higher rates offered on deposits.
This weighed in on the net interest margin, which slipped from 4.90 percent to 4.68 percent during the six months to June.
As a result, the net interest income growth was 20 percent YOY to Rs.2.91 billion.
The net fee and commission incomes grew by 28 percent YOY to Rs.1.07 billion, “primarily driven by cards and trade related products”, the bank said in an earnings release.
The net trading loss widened to Rs.211.3 million compared to Rs.141.4 million a year earlier due to swap cost arising from an increase in the funding foreign currency swap book and unfavourable movements in forward premiums.
“However, the bank continued to benefit from the relatively lower funding costs of the forex swaps compared to high cost rupee deposits”, NTB said.
During the period NTB raised US $ 50 million foreign funds from the International Financial Corporation (IFC), the private sector investment arm of the World Bank.
The bank made total provisions of Rs.428.1 million against possible bad loans for the quarter compared to Rs.125.7 million a year earlier.
The value added tax and Nation Building Tax on financial services rose significantly by 70 percent YOY to Rs. 369.9 million while the income tax rose by 28 percent YOY to Rs.460.6 million denting the bottom line.
This included an additional tax provision of Rs.90 million on account of an inter-company dividend transfer.
Meanwhile for the six months ended June 30, 2017 (1H17), the bank increased its net profits by 12 percent YOY to Rs.1.43 billion or Rs.6.19 a share on a net interest income of Rs.5.48 billion, up 19 percent YOY.
NTB, which has an asset base of Rs.247 billion, grew its loans by Rs.19.6 billion during the 1H17, recording an increase of 13.1 percent while the deposits grew by a stronger Rs.29.9 billion or 19.7 percent.
The bank on a standalone basis has a loan book of Rs.168.6 billion and a deposit base of Rs.181.5 billion.
The bank managed to grow its leases by Rs.3.3 billion and credit cards by Rs.1.2 billion.
The low cost deposits measures by current and savings account (CASA) ratio slipped to 25.5 percent from 28 percent at the beginning of the year.
The asset quality weakened a little as the gross non-performing loan ratio rose by 10 basis points to 2.52 percent from 2.42 percent at the start of the year.
By the end of June 30, John Keells group held 29.9 percent stake in NTB while HWIC Asia Fund held 15 percent stake being the second largest shareholder.