NTB per­for­mance hit mod­er­a­tion in loans, taxes

Daily Mirror (Sri Lanka) - - BUSINESS -

The mod­er­a­tion in the growth in new loans, pressure on mar­gins amid higher fund­ing cost, weak as­set qual­ity and Debt Re­pay­ment Levy were among the key rea­sons be­hind the weak top and bottom line per­for­mance of Na­tions Trust Bank PLC (NTB), the bank’s first quar­ter in­terim re­sults showed.

The bank with as­sets of lit­tle un­der Rs.345 bil­lion was scram­bling to find growth in its loans and de­posits book as it re­ported earn­ings of Rs.2.72 a share or Rs.772.9 mil­lion for the Jan­uary-march quar­ter (1Q19), com­pared to Rs.3.31 a share or Rs.939.1 mil­lion prof­its re­ported for the same pe­riod, last year.

While the bottom line record­ing an 18 per­cent de­cline, the top line too came un­der pressure by the same rea­sons cited above, as the bank’s new loans came in at Rs.13.6 bil­lion or 6.0 per­cent for the three months.

The growth in the net in­ter­est in­come – the gap be­tween what the bank earned from the loans and other as­sets and what it paid for de­posits and other li­a­bil­i­ties – lan­guished at 8.0 per­cent year-on-year (YOY) to

Rs.3.8 bil­lion.

The pressure on the bank’s net in­ter­est mar­gin per­sisted as it nar­rowed to 4.89 per­cent, from 5.03 per­cent in De­cem­ber 2018.

NTB in an earn­ings re­lease said it had to of­fer higher rates to lure medium-term funds to di­ver­sify the fund­ing mix.

The bank raised only Rs.4.3 bil­lion in de­posits with a growth less than 2.0 per­cent.

NTB used to stand out from other li­censed banks for its higher mar­gins well an­chored by its credit cards and leas­ing port­fo­lios, which typ­i­cally carry higher yields.

But the growth in the card port­fo­lio barely grew and the leas­ing growth mod­er­ated dur­ing the three months as the Sri Lankan econ­omy lan­guished.

Mean­while, the fee in­come growth fell to 6.0 per­cent YOY due to the “slug­gish rate of growth wit­nessed in fee gen­er­at­ing trans­ac­tional vol­umes across prod­uct lines”, the bank stated.

Sri Lanka’s bank­ing industry is go­ing through a rough patch, mainly due to the lack of business and con­sumer con­fi­dence in the econ­omy, although rel­a­tively higher rates were also partly blamed for the lack­lus­tre per­for­mance.

While NTB re­ported only one per­cent YOY drop in the prof­its be­fore all taxes, which was Rs.1.9 bil­lion, the Rs.208.9 mil­lion, the Debt Re­pay­ment Levy had a huge bear­ing on the bank’s bottom line.

The bank’s as­set qual­ity weak­ened as the gross non-per­form­ing loans ra­tio rose to 4.88 per­cent, from 4.58 per­cent in De­cem­ber 31, 2018.

The John Keells group has a 29.63 per­cent stake in NTB.

Di­rec­tor/ceo Renuka Fer­nando

Chair­man Gi­han Cooray

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