John Keells Holdings PLC banking sector arm, Nations Trust Bank PLC (NTB), posted a post-tax profit of Rs.675.3 million for the quarter ended December 31, 2015 (4Q15) increasing 21 percent from the same quarter last year, the interim results showed.

The earnings per share for the quarter rose to Rs.2.93 from Rs.2.41. The NTB share closed at Rs.75.90, 10 cents or 0.13 percent lower at last week’s close.

The return on equity of the bank on a standalone basis came down to 18.07 percent from 20.18 percent a year ago. The performance was possible due to lower provisions made for possible bad loans against the same quarter last year. The net interest income edged down by one percent year-onyear (YoY) to Rs.2.33 billion as the pressure on margins built up. The bank saw the “declining yields in several business lines amidst rising cost of funds,” which put pressure on net interim margin (NIM). The NIM narrowed to 5.46 percent from 5.81 percent a year ago.

The provisions made for the individual borrowers saw a reversal of Rs.159.3 million against Rs.237.1 million reversal in the same quarter last year. The collective provisions were Rs.283.8 million, 53 percent less from a year ago. Overall the asset quality improved as the gross non-performing loan ratio dropped to 2.77 percent from 4.20 percent a year ago.

The non-fund based incomes rose by a strong 32.7 percent YoY to Rs.981.8 million, led by fee and commission incomes. The bank saw its net profit contracting by 18 percent to Rs.680.9 million for the quarter ended September 30, 2015 (3Q15) from a year ago as the bank made mark-to-market losses on its investments made in the government securities due to rise in treasury yields.

The bank’s cost-to-income ratio – the key efficiency measuring ratio – weakened to 55 percent from 52 percent a year, “largely owing to lower growth in revenue arising from narrowing NIMs,” the bank said in a statement. The return on assets was 2.24 percent, less than 2.39 percent a year ago. Meanwhile, for the year ended December 31, 2015, the banking group posted a post-tax profit of Rs.2.61 billion, up 3 percent amid the aforementioned mark-to-market losses and the one-off provisions booked for specific facilities in the 1Q15. During the quarter ended March 31, 2015, the bank provided a one-off impairment of Rs.365 million against lending to some customers at two of the branches, which had been made against securities fraudulently provided. The net interest income rose by just 2 percent to Rs.9.1 billion.

The non-fund-based incomes rose by a modest 7.5 percent to Rs.3.42 billion as the growth in such incomes slowed down due to losses made on government security investments. The bank expanded its gross loans and receivables by 23.8 percent or Rs.23.1 billion to Rs.120.3 billion. NTB, having the highest exposure to leasing of 23.6 percent (or Rs.29 billion) of the total loans and receivables, trimmed from 25.8 percent a year ago, is likely to feel the brunt from the leasing restrictions and interest rate risk as such leases cannot be re-priced in line with the market rates.

The deposits grew by a slower 16 percent or Rs.18.2 billion to Rs.129.2 billion. “The bank aggressively pursued strategies to grow current and savings accounts (CASA) to keep cost of funds low. Low-cost deposits recorded a 13 percent growth with the CASA mix improving to 32 percent of deposits,” the bank said. The industry average for CASA hovers around 40 percent. The bank on a standalone basis has an asset base of Rs.175.9 billion. As of end-December 31, the John Keells group collectively held 30 percent of the issued shares of the bank.