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Advances grow by Rs. 13 b to Rs. 315 b
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Deposits grow by Rs. 2 b to Rs. 312 b
The Group recorded a PBT of Rs. 2,036 million and PAT of Rs. 1,583 million for the quarter ended 31 March 2021, compared to Rs. 1,408 million and Rs. 1,014 million, respectively, in the comparative period of 2020. All the member entities of the Group made positive contributions to this performance.
The basic earnings per ordinary share (EPS) of the bank improved to Rs. 4.80 for the quarter ended 31 March 2021 from Rs. 3.04 for the comparative period in 2020, recording an increase of 58%. The bank’s Return on Equity (ROE) improved to 6% during the quarter ended 31 March 2021, from 4.93% recorded for the year ended 31 December 2020. The bank’s Return on Assets (ROA) before tax also improved to 0.91% during the quarter ended 31 March 2021, compared to 0.78% recorded for the year ended 31 December 2020.
The bank recorded a Rs. 2,679 million in net interest income (NII), which is a 10% decline year on year primarily due to the drop in AWPLR of more than 370 bps over the past 12 months, and due to the business implications that arose with the pandemic situation. In line with this trend and due to the time taken to re-price the existing deposits to reflect market trends, the interest margin also decreased from 2.53% in December 2020 to 2.35% in March 2021.
Economic activities were operating uninterrupted to a large extent during the current period compared with the comparative period which involved a stringent lockdown situation. The bank was able to use the opportunities created in the market with a concentrated effort to increase non-funded business and the effort was rewarded with an increase of fee and commission income to Rs. 651 million for the quarter ended 31 March 2021, from Rs. 548 million in the comparative period.
Other operating income increased mainly due to the increase in dividend income and gain on sale of fixed income securities during the period ended 31 March 2021.
Impairment provision decreased to Rs. 356 million for the quarter ended 31 March 2021, from Rs. 637 million in the comparable period. While maintaining the same provision level for loans and advances to customers, impairment charge over other financial assets was reduced due to the reduction in loss ratio related to the government securities denominated in foreign currencies, as per a guideline issued by the Central Bank of Sri Lanka.
In order to address the potential future impacts of Covid-19 on the lending portfolio, the bank has made adequate impairment provision as at 31 December 2020 by introducing changes to internal models to cover unseen risk factors in the highly uncertain and volatile environment, including additional provisions made for the exposures to risk elevated sectors. The same methods and the processes were followed during the quarter ended 31 March 2021, as there is no material change to the operating environment. The bank reported the NPL ratio of 5.53% in March 2021 compared to 5.56% in December 2020. As the impacts of the Covid-19 pandemic will continue to be felt for some time, the bank continues to closely monitor its loan portfolio and provisioning levels.
During the quarter ended 31 March 2021, operating expenses increased from Rs. 1,751 million to Rs. 2,031 million, compared to the corresponding period in the previous year. Staff related provisions for 2019 that were not utilised were reversed during the period ended 31 March 2020, and if not for such reversal, the increase in total operating expenses would have been only 6% during the quarter ended 31 March 2021, compared with the comparative period of 2020.