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NTB PBT recovers in first nine months 

12 Nov 2021

The Nations Trust Bank (NTB) Group recorded a profit before tax (PBT) of Rs. 7.46 billion, a growth of 27% for the nine months ended 30 September 2021 compared to the previous year, despite the challenging operating environment experienced during the period, the company noted, issuing its financial report yesterday (11).  Supporting the loan growth and economic recovery efforts, average yields on loans reduced by 350 bps. A net reduction in yields in the FIS portfolio also contributed to the decline in net interest income. The absence of a one-off interest reversal on moratorium loans similar to what was recognised in the previous year helped negate the decline in interest income. The improvement in CASA ratio to 37% as at end September 2021 from 31% as at the end of September 2020 helped partially offset the decline in interest margins during the period.  Momentum could be seen in trade finance-related income with the increase in certain trade finance-related activities. Growth in card income was contained on account of a decrease in card spend due to changes in customer behaviour patterns owing to the restrictions in mobility and overseas travel. Suspension or refund of certain charges by the bank, considering the current difficulties faced by customers due to the Covid-19 pandemic, negatively impacted the bank’s fee-based income.  The bank was able to realise sizable trading profits on its fixed income securities portfolio with the fall in market rates. Gains on foreign exchange trading also increased primarily from FX funding swaps due to a higher depreciation of the rupee during the current period in contrast to the depreciation during the same period last year. Impairment charges on loans declined by 18% during the period owing to the new underwriting standards and concentration on loan recoveries. Positive flows in the past due buckets together with lower exposures in most risk buckets, reflects a 193 bps reduction in the non-performing loan ratio. The bank continued to assess the uncertainties in the operating environment and to maintain a management overlay in the impairment provisions on exposures to identified risk-elevated industries. The Stage Three loan ratio (net of impairment) and the provision cover for Stage Three loans stood at 2.73% and 42.62%, respectively as at 30 September 2021. The bank increased the impairment provision on investments in foreign currency denominated bonds issued by the Government of Sri Lanka in line with market practice to reflect the current macroeconomic conditions.  The bank was successful in containing the increase in operating expenses to 2% despite the operating expenses in 2020 being 10% below the corresponding period of 2019. This reflects the cost management culture entrenched across the organisation. Continuation of some of the cost saving strategies and initiatives executed last year along with productivity, efficiency drives, and focus on some large cost pools were the main reasons for this favourable outcome. Cost-to-income ratio improved to 42.3%, compared to 45.7% in the same period last year, demonstrating the bank’s ability to considerably enhance efficiency and productivity through digitalisation and new ways of working.  The impact stemming from the rate differential in income tax and deferred tax relating to the financial year ended 31 December 2020 was reversed using the applicable new tax rate of 24%. This resulted in a profit after tax (PAT) of Rs. 5 billion for the nine months ended 30 September 2021 with a 61% growth over last year’s same period. 


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