Nations Trust Bank reports subdued performance for Dec. quarter
Nations Trust Bank PLC (NTB) reported subdued performance for the three months to December 2020 (4Q20), as the bank was seen scrambling to find growth in fresh loans while the pressure on margins and asset quality mounted.
The bank reported a net interest income of Rs.2.86 billion in the October-december quarter, compared to Rs.4.22 billion in the corresponding period in 2019, logging a 32 percent decline.
The bank’s loan book continued to shrink and in the final three months, it contracted by Rs.5.2 billion, taking the cumulative contraction to Rs.15.7 billion through the entire year, to end with a Rs.219.5 billion loan portfolio.
Besides, the bank’s net interest margin thinned to 4.07 percent, from 4.86 percent at the start of the year “due to the combined impact of the lower interest regime, interest rates ceilings imposed and the concessionary interest rates granted on debt moratorium”, the bank said in an earnings release.
“The sluggish credit demand from the private sector and the selective lending approach adopted by the bank amidst the elevated credit risk prevalent in the market throughout the year led to a contraction in the loan book by 7 percent, adding pressure on the interest income growth. Low yield on the excess liquid assets further impacted the overall margins,” the statement added.
In general, the licensed commercial banking sector recorded an expansion in their outstanding loans into the private sector since July, albeit the pace at which it happened slowed in the final three months, due to fresh restrictions on economic activities caused by the pandemic fears.
The bank reported a nonperforming loan ratio of 7.18 percent, compared to 6.17 percent at the beginning of the year, in a slight deterioration in the asset quality, which is not exceptional in the banking sector.
However, the bank provided Rs.1.18 billion for possible loan defaults and other impairments in the final three months, compared to Rs.805 million in the same period in 2019. For the full year, such provisions rose by Rs.546 million to Rs.3.85 billion.
The bank with assets of Rs.337.6 billion reported earnings of Rs.3.33 a share or Rs.946.6 million in the October-december quarter, compared to Rs.4.13 a share or Rs.1.17 billion in the corresponding period in 2019.
For the full year ended on December 31, 2020, the bank reported earnings of Rs.14.29 a share on total earnings of Rs.4.05 billion, compared to Rs.13.08 a share or Rs.3.71 billion in 2019.
NTB share is currently trading around Rs.57.00 a piece and significantly underperformed the market since the market reopened in May 2020, as it missed the recent rally for financials stocks.
The earnings received a larger boost from massive trading gains “on its fixed income securities portfolio with the drop in market rates, resulting in an overall growth in non-fund-based income”.
Further, the depreciation of the rupee also resulted in the bank booking gains on trading foreign exchange on the foreign exchange funding swaps.
The bank saw its deposits rising by Rs.13.7 billion for the year to end with Rs.240.6 billion.
As at December 31, 2020, the John Keells group had a 29.48 percent stake in NTB. Sri Lanka Insurance Corporation Limited’s Life Fund and General Fund, which had 3.91 percent and 2.33 percent stakes, respectively, being the bank’s eighth and ninth shareholders, were seen adding NTB shares into their portfolio during the final quarter.