NSB records strong first half despite COVID-19 related challenges

• Records highest ever profit for a period of six months with PBT of Rs.13.9bn and PAT of Rs.11bn

Recording its highest ever profit for a period of six months with a Profit Before Tax (PBT) of Rs.13.9 billion and a Profit After Tax (PAT) of Rs.11 billion, National Savings Bank (NSB) shows strength and financial resilience in performance amid the heightened uncertainty due to Covid-19 pandemic which has triggered a wide range of shocks on the banking sector and the economy as a whole.

Against the backdrop of COVID-19 impact on the economic activities, the PBT for the first six months of 2021 was Rs. 13.9 billion, which marks an increase of 492.1 percent from Rs. 2.3 billion recorded in the same period last year, while the PAT was Rs. 11 billion, with an increase of 942.7 percent from Rs. 1.1 billion in 2020.

Gross Income of the bank grew by 9.3 percent to Rs. 65.8 billion during the first six months of the year from Rs. 60.2 billion recorded in the corresponding period, last year. 

During the period under review, the interest income has increased by 8.5 percent to reach Rs. 64.1 billion, while the interest expense has decreased by 18.8 percent to Rs. 37.9 billion due to the prevailing lower interest rate regime which leads to lower interest expenses for the deposits as well as borrowings despite the substantial growth in the deposit base during the first half of the year.

The increase in interest income together with the considerable reduction in interest expenses supported Net Interest Income (NII) to surge by 111.7 percent to Rs. 26.2 billion against Rs. 12.4 billion stood during the same period last year. Consequently, Net Interest Margin (NIM) clocked in 3.70 percentat the end of first six months of 2021, higher against the 2.08 percent as at the same period last year. 

Net Fee and commission income grew by 175.4 percent to Rs. 1.3 billion from Rs. 467 million mainly driven by the increase in fee and commission income due to conversion/renewal of the existing loans to reduced interest rates as well as increased foreign remittances and coupled with fees generated through digital platforms to where the customers shifted under social distancing and health guidelines. 

The increase both in NII and Non-Interest Income led the total Operating Income to record a rise of 107.4 percent to Rs. 27.8 billion during the first six months of the year. Operating expenses during the period of first six months of 2021, rose by 22.7 percent to Rs. 9.5 billion compared to the corresponding period of the previous year, which is mainly attributable to the increased personnel expenses owing to the provisions made for the Collective Agreement due in 2021. Meanwhile, the bank’s cost to income ratio decreased to 34.3 percent at the end of 1H21 compared to 57.8 percent reported in the 1H20.

Even though the NPL increased during the first half of 2021, its riseduring the period was relatively lower compared to 1H20.  This led to the Impairment charges during the period under review to decrease to Rs.1.4 billion by 38.0 percent compared to the same period in the last year. 

The bank has carried out a prudent approach when calculating the impairment charges, considering that the outbreak of Covid-19 has caused disruption in business and economic activities, along with the uncertainty and volatility prevailing in the global and local economy and other holistic factors.  However, the gross NPL ratio increased to 3.16 percent mainly owing to the reclassification of some loans and advances under debt and other instruments.

The bank generated a Return on Equity (RoE) of 37.6 percent and Return on Assets (RoA) of 1.96 percent at the end of June 2021.  The total asset base of the bank grew at 9.2 percent to reach Rs.1.49 trillion against the Rs.1.36 trillion reported as at the end of December 2020 mainly contributed by the growth in customers’ deposits, which increased by 9.3 percent to Rs. 1.35 trillion compared to the deposit base reported at the end of December 2020. 

There is an increase in the pattern of saving of the customers despite the impact of Covid-19 on the economy and lifestyle of the customers.  During the first six months of the year, the bank has mobilised Rs.118.1 billion worth of deposits which recorded an increase of 23.8 percent compared to the same period last year. 

The bank continued the momentum of mobilizing low-cost funds during the period under review by mobilizing Rs.30.4 billionsavings deposits which improved the deposit mix by 22bps compared to December 2020.