ECONOMYNEXT – Sri Lanka’s Nations Trust Bank (NTB) said net profit for the September 2017 quarter rose 33% to just over Rs1 billion from a year ago with a sharp hike in tax costs and a rise in trading losses while impairment charges fell.
Interest income rose 42% to Rs8.1 billion while interest expenses rose 57% to Rs4.9 billion with net interest income up 24% to Rs3.2 billion, according to interim accounts filed with the stock exchange.
NTB reduced impairment charges for the September quarter by 35% to Rs139 million although for the nine months to September 2017 they rose 38% to Rs745 million.
Earnings per share for the quarter were Rs.4.39. The share last traded at Rs79.90.
EPS for the nine months to September 2017 were Rs10.58 with net profit up 20% to Rs2.4 billion despite the 31% rise in pre-tax profit to Rs5,063 million.
“Post-tax profits increased at a lower rate of 20% as a result of the increase in the effective tax rate stemming from the increase in the financial services VAT rate as well as the additional tax provided for the inter-company dividend payments which impacted the group bottom line growth,” NTB said in a statement.
The dividend income received from the subsidiaries resulted in a higher other operating income for the bank, it said.
The nine-month net interest income increase of 21% was mainly driven by the volume growth which offset the unfavorable impact arising from declining bet interest margins (NIMs), NTB said.
“The faster increase in deposits rates which mirrored market trends due to tight liquidity resulted in interest expenses increasing by 65% whilst the corresponding increase in interest income was lower at 44%,” it said.
“However, NIMs are expected to improve in the forthcoming quarter with the stability of market rates and improved liquidity evidenced during 3Q.”
Net fees and commission based income grew 31% in the nine months primarily driven by cards and trade related products with other operating income also showing good growth due to non-trade related foreign exchange income, the bank said.
However, net trading losses for the year amounted to Rs.492 million.
This was “partly reflective of the swap cost arising from an increase in the funding FX SWAP book of 21% and increase in SWAP premiums by 112bps,” NTB said.
“However, the bank continued to benefit from the relatively lower funding costs of the forex swaps compared to high cost rupee deposits. Realized capital gains on fixed income securities portfolio amounted to Rs131 million for the period under review compared to Rs21 million in the corresponding year.”
Impairment charges for the nine months grew 38% increase mainly due to the increase in individual impairment under the small and medium enterprise (SME) portfolio.
“Collective impairment charges which saw an increase in the previous quarters due to a fall back in recovery targets on consumer portfolios has been fully arrested in the 3Q as seen by the lower collective impairment provisions for the quarter,” the bank said.
Total asset growth for the nine months of 21% was driven by the loan book growth of 18% primarily driven by SME lending, it said.
Deposits grew 21% while current account and savings accounts (CASA) grew by 13% with the CASA mix maintained at 26%.
Commenting on the results and achievements, Renuka Fernando, CEO/Executive Director said:
“It is indeed pleasing to see our core businesses reaching scale and delivering enhanced earnings year on year and our first nine months results are reflective of the collaboration efforts across the enterprise.”
Interest income rose 42% to Rs8.1 billion while interest expenses rose 57% to Rs4.9 billion with net interest income up 24% to Rs3.2 billion, according to interim accounts filed with the stock exchange.
NTB reduced impairment charges for the September quarter by 35% to Rs139 million although for the nine months to September 2017 they rose 38% to Rs745 million.
Earnings per share for the quarter were Rs.4.39. The share last traded at Rs79.90.
EPS for the nine months to September 2017 were Rs10.58 with net profit up 20% to Rs2.4 billion despite the 31% rise in pre-tax profit to Rs5,063 million.
“Post-tax profits increased at a lower rate of 20% as a result of the increase in the effective tax rate stemming from the increase in the financial services VAT rate as well as the additional tax provided for the inter-company dividend payments which impacted the group bottom line growth,” NTB said in a statement.
The dividend income received from the subsidiaries resulted in a higher other operating income for the bank, it said.
The nine-month net interest income increase of 21% was mainly driven by the volume growth which offset the unfavorable impact arising from declining bet interest margins (NIMs), NTB said.
“The faster increase in deposits rates which mirrored market trends due to tight liquidity resulted in interest expenses increasing by 65% whilst the corresponding increase in interest income was lower at 44%,” it said.
“However, NIMs are expected to improve in the forthcoming quarter with the stability of market rates and improved liquidity evidenced during 3Q.”
Net fees and commission based income grew 31% in the nine months primarily driven by cards and trade related products with other operating income also showing good growth due to non-trade related foreign exchange income, the bank said.
However, net trading losses for the year amounted to Rs.492 million.
This was “partly reflective of the swap cost arising from an increase in the funding FX SWAP book of 21% and increase in SWAP premiums by 112bps,” NTB said.
“However, the bank continued to benefit from the relatively lower funding costs of the forex swaps compared to high cost rupee deposits. Realized capital gains on fixed income securities portfolio amounted to Rs131 million for the period under review compared to Rs21 million in the corresponding year.”
Impairment charges for the nine months grew 38% increase mainly due to the increase in individual impairment under the small and medium enterprise (SME) portfolio.
“Collective impairment charges which saw an increase in the previous quarters due to a fall back in recovery targets on consumer portfolios has been fully arrested in the 3Q as seen by the lower collective impairment provisions for the quarter,” the bank said.
Total asset growth for the nine months of 21% was driven by the loan book growth of 18% primarily driven by SME lending, it said.
Deposits grew 21% while current account and savings accounts (CASA) grew by 13% with the CASA mix maintained at 26%.
Commenting on the results and achievements, Renuka Fernando, CEO/Executive Director said:
“It is indeed pleasing to see our core businesses reaching scale and delivering enhanced earnings year on year and our first nine months results are reflective of the collaboration efforts across the enterprise.”
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