NTB March net up on new loans, higher margins, but asset quality weakens
The healthy growth in new loans, higher yields and lower cost of funds helped Nations Trust Bank PLC (NTB) to report strong performance for the quarter ended on March 31, 2018 (1Q18).
The private lender, with an asset base of Rs.290 billion, reported earnings of Rs.3.38 a share or Rs.939.1 million in total earnings for the January-march period, up 30 percent from a year ago.
The profits rose despite the bank’s provisions for possible bad loans and tax expense rising significantly.
The net interest income rose by 43 percent year-on-year (YOY) to Rs.3.5 billion as the “net interest margins (NIM) climbed up steadily due to a drop in cost of funds over the corresponding period coupled with improved portfolio yields,” the bank said in an earnings release.
NTB had a NIM of 5.46 percent, up from 5.00 percent in December 2017. NTB enjoys the highest NIM across licensed commercial banks as its credit cards and leasing portfolios fetch higher yields.
NTB also has a relatively high return on equity of 24.47 percent.
During the three months, the bank recorded a Rs.14 billion growth in new loans and Rs.17.2 billion growth in new deposits.
This translated into a growth of 7.5 percent and 8.9 percent, respectively.
Meanwhile, the bank saw its provisions made against possible bad loans under specific customers and general portfolio rising by as much as 169 percent YOY to Rs.479 million for the quarter.
The asset quality weakened slightly as the gross non-performing loan ratio rose to 2.62 percent from 2.29 percent in December 2017.
Meanwhile, the net fee and commission incomes rose by 15 percent YOY to Rs.1.3 billion largely supported by trade and transactional fees.
The net trading losses for the year amounted to Rs.203 million, which is reflective of the swap cost arising from an increased funding forex swap book, which was up by 30 percent coupled with an increase in forward premiums (up by 50bps) as compared with the comparative period.
“The bank continued to benefit from the relatively lower funding costs of the forex swaps compared to high cost rupee deposits. Marked to market losses on the FIS portfolio was minimal for the quarter under review,” the earnings release said.
The bank during the quarter raised Rs.3.21 billion via a rights issue of convertible non-voting shares to support the BASEL III capital requirements
Such shares are convertible into ordinary voting shares every quarter and the first conversion will commence on the last market day of the quarter ending June 30, 2018, the bank said in a disclosure.
On April 11, the bank raised another Rs.3.5 billion via a BASEL Iii-compliant convertible subordinated debenture issue to further support its capital ratios.
By end-march, the bank had a Tier I capital ratio of 12.25 percent and Tier II ratio of 14.95 percent against the regulatory minimum of 7.875 percent and 11.875 percent, respectively.
By March 31, 2018, the John Keells group held a 29.9 percent stake while related parties HWIC Asia Fund and Central Finance Company PLC held 15.0 percent and 9.98 percent stakes each.
Janashakthi General Insurance Limited also held a 8.06 percent stake being the fifth largest shareholder of NTB.