NTB accelerates new loans in 3Q to record higher profits

Nations Trust Bank PLC (NTB) reported higher profits in the three months to September as the bank gained its momentum in new loans defying the economic challenges came about from the virus related lockdowns, which lasted for nearly half of the quarter, but the decline in yields and the relief offered to the pandemic affected borrowers weighed on the interest incomes. 
The bank reported earnings of Rs.1.71 billion or Rs.6.01 a share for its fiscal third quarter ended September 30, 2021, up 26 percent from Rs.1.36 billion or Rs.4.78 a share in the comparable period last year. 

The bank reported net interest income of Rs.3.47 billion, down 16 percent from a year ago as interest income fell while interest expenses rose due to the drop in the yields of loans and other financial investments, according to the bank. However, the absence of a one off interest reversal on account of the moratoria in the incumbent period similar to the same period last year and the improvement in the low cost funds measured through the current and savings accounts balances to 37 percent from 31 percent a year ago helped the bank blunt the full scale impact on the interest margin and the net interest income.  The bank reported a net interest margin of 3.76 percent by the end of September compared to 4.07 percent at the beginning of the year as the loan yields of the bank has fallen by 350 basis points.

Interest rate ceiling on some loans products such as credit cards in which the bank has a sizeable portfolio also confined the bank’s ability to stretch its margins as well as the top-line.   Reflecting the resiliency seen in the growth in private sector credit during the period through September, the bank gave nearly Rs.12 billion in loans and advances during the quarter, extending the first nine months growth in private sector credit to Rs.39 billion, logging a robust 17.6 percent growth.  Despite accelerated pace in the loans in the quarter, the bank managed to continuously bring down its gross non-performing loans to 5.25 percent by the end of September from 7.18 percent at the start of the year.  The bank set aside Rs.767.5 million for possible loan defaults in the quarter, down 37 percent from a year ago but raised the loss provisions against the investments in foreign currency denominated bonds to reflect the current macro-economic conditions. Meanwhile the falling yields and rupee depreciation helped the bank to make wider trading gains during the period as the bank realised sizeable trading profits on its fixed income securities while the foreign exchange funding swaps helped FX related trading gains.  Such trading gains in the quarter amounted to Rs.522.9 million, up 37 percent from the same period last year and for the nine months to September such gains rose by 159 percent to Rs.2.18 billion.  Meanwhile, NTB also saw increase in trade finance related activities, which helped the bank to record a 10 percent growth in its fee incomes. The bank reported Rs.1.62 billion in fee incomes for the quarter but the card related incomes which otherwise form a sizeable share remained lacklustre as card spending fell during the period due to changes in consumer behaviour due to restrictions on mobility and overseas travel.  Under its loan portfolio, trade finance loans portfolio recorded the highest growth in the nine months with over Rs.27 billion in new facilities out of Rs.39 billion in total loans and advances.  John Keells Holdings PLC directly owns 19.72 percent stake in NTB.