Nations Trust Bank 1H Pre Tax Profits Up By 27%

The Bank closed the first half ending 30th June 2017 with a pre tax profit of Rs. 2,977Mn up by 27% over the corresponding period in the previous year. Post tax profits increased at a lower rate of 12% as a result of the increase in the effective tax rate stemming from higher financial services VAT as well as the additional tax provision of Rs. 90Mn for the inter company dividend transfer which impacted the Group bottom line growth. However the dividend income received from the subsidiaries resulted in a higher profit growth for the Bank and further strengthened the capital base of the Bank.

Performance was driven by the momentum achieved in the Bank’s core activities which posted a revenue growth of 21% while the operating expenses increase was kept at 11%. The resulting improvement to operating margins were somewhat subdued by higher impairment charges for the period under review.

Net interest income increased by 19% as the volume growth outperformed the impact arising from the narrowing of NIMs. Interest income increased by 45% whilst interest expense increased at a faster rate of 70% as deposit rates in the market continued to increase due to tight liquidity.

Net fees and commission based income recorded a growth of 32% primarily driven by cards and trade related products. Other operating income also recorded good growth due to non trade related FX income. Net trading losses for the year amounted to Rs. 267Mn which is reflective of the swap cost arising from an increase in the funding FX SWAP book and unfavorable 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.

Expenses recorded a growth of 11% with personnel and other operating expenses contributing towards the increase. Growth in expenses were impacted by the higher taxes applicable for the current period on account of the increase in the VAT rate and the impact of regulatory allowances. Continued focus on efficiencies and digitalization of processes of fast growing transactional and servicing volumes have yielded productivity improvements across the Bank. Higher revenue growth and well managed expenses growth resulted in the cost income ratio declining from 57.5% to 52.7%.

Impairment charges recorded a 86% increase partly due to the increase in collective impairment charges related to the growth in the loan book and partly due to a fallback of stringent recovery targets in some portfolios in the second quarter. The bank has taken immediate action to review and further strengthen its collections capacity and processes in order to achieve its collection targets.

Growth in the loan portfolio was primarily driven by SME and Corporate whilst moderate growth was recorded in leasing and credit cards. CASA grew by 9% with new products launched during the early part of the year boosting growth in SA. The Bank successfully concluded a $50Mn funding line from IFC adding more diversity to the medium term funding structure of the bank.

Commenting on the results and achievements, Renuka Fernando, CEO/Executive Director stated “The first half results for our Bank demonstrates commendable performance across all our businesses as seen by the growth numbers across all key portfolios. We will continue to drive our growth while ensuring that we do not compromise on our strong risk management platform. We also saw a number of our projects on the digital front come to fruition this year and have launched unparalleled, state of the art experiences to our customers with our Nations mobile banking app as well as our new payment and digital banking platform, FriMi. Internally we continue to drive our efficiencies through innovative technology such as robotics and AI and will continue our focus towards leveraging these efficiencies. We are confident that these technological capabilities will enable us to steer Nations Trust Bank through its next phase of growth in a fast changing environment.