NTB 4Q boosted by lower provisions on possible bad loans

Slower growth in loans, pressure on margins and weak asset quality hurt Nations Trust Bank PLC (NTB), but the quarter ended December 31, 2019 (4Q19) showed better performance partly supported by lower provisions on possible bad loans.

The mid-sized lender with assets of Rs.325 billion was cautious in loaning money in 2019, a period beset by multitude of challenges from a weak economy and political and policy uncertainty, which was exacerbated by  Easter attacks. 

“Due to the prevailing challenges in the economy, the bank followed a cautious approach in expanding its advances portfolio, which contributed to a slowdown in the loan book to a 2 percent growth leading to a moderated net interest income (NII) growth of 6 percent (full year),” the bank stated in an earnings release.  NTB gave Rs.7.2 billion in new loans, out of which Rs.3.3 billion came from its strong card portfolio as the lender has strong presence in the card market. The issuer and the acquirer for Amex cards in Sri Lanka recently tied up with Mastercard to offer its existing Amex base with Mastercard credit cards further penetrating to its existing market and was aggressive with promotions and discounts to lure users to increase their card spend.  During the three months under review, the bank generated Rs.4.2 billion in net interest income, up 2 percent as the increase in the interest expenses increased while interest income declined.

The net interest margin slipped to 4.86 percent from 5.03 percent at the beginning of the year. 

“Lending rates ceiling imposed during the year also added to the slowdown in the NII growth while the reduction in Statutory Reserve Ratio from 7.5 percent in 2018 to 5 percent in March 2019 contributed towards defending the pressure on the NII growth,” the statement added.  The bank provided Rs.767.3 million as possible bad loans for the three months, down from Rs.911.9 million in the year earlier period. 

For the full year (FY19), such provisions were little changed from 2018 at Rs.3.3 billion. 

The bank reported earnings of Rs. 4.13 a share or Rs. 1.2 billion for 4Q19 compared to Rs.2.76 a share or Rs.783.3 million in the year earlier period.  The full year earnings were Rs.13.08 a share or Rs.3.7 billion, unchanged from 2018. The full year profits were impacted by the debt repayment levy (DRL) which came into effect in October 2018. 

A DRL of Rs.869 million was reported for 2019 as opposed to Rs. 178.5 million a year ago. 

The bank saw its gross non-performing loans ratio increasing to 6.17 percent from 4.58 percent at the start of the year. 

According to the order from the Monetary Board in 2017, John Keells Holdings and Central Finance Company PLC are mandated to shed their stakes in the lender down to 15 percent each by December 2020.

 
John Keells Group currently holds 29.51 percent stake in the bank while Central Finance PLC holds 19.74 percent.