National Savings Bank posts steady results for 2020 amid virus woes

• Reports highest ever pre-tax and post-tax profits
• PBT increased to Rs.15.6bn, from Rs.10.5bn in 2019
• Highest ever deposit mobilisation of Rs.222bn to reach deposit base of Rs.1.2tn
• Gross NPL ration at 2.79%, below industry average of 4.93%
• Cost-to-income ratio improved to 39.12%, from 49.35% in 2019

State-owned National Savings Bank (NSB) yesterday announced its financial performance for the year 2020, which was characterised by strength and resilience, despite the heightened uncertainty due to the impact of the COVID-19 pandemic.

The bank’s total asset base grew by 17.8 percent to Rs.1.4 trillion as at December 31, 2020, from Rs.1.2 trillion as at December 31, 2019. NSB reported its highest ever pre-tax and post-tax profits in 2020, aided by the government’s stimulus initiatives introduced in 
late 2019.

Against the backdrop of the COVID-19 impact on the economic activities, the bank’s profit before tax was Rs.15.6 billion, a 49.5 percent increase from Rs.10.5 billion in 2019 and the post-tax profit stood at Rs.10.1 billion, a 58.4 percent increased from Rs.6.4 billion in 2019.

A dividend of Rs.1.0 billion was paid for the financial year under review.

The bank reported a gross income of Rs.127.5 billion for 2020, achieving a growth of 4.6 percent, mainly driven by the 3.2 percent rise in interest income, to Rs.122.5 billion as well as fee and commission income, which increased by 114.9 percent to Rs.2.7 billion compared to last year. 

The increase in interest income along with the decrease in interest expenses resulted in a 21 percent surge in net interest income, rising to Rs.34.9 billion in 2020 over 2019. Consequently, the net interest margin improved to 2.77 percent during the year, from 2.63 percent reported a year ago.

The bank’s profitability was further enhanced by the removal of the Nation Building Tax (NBT) and Debt Repayment Levy (DRL) on financial services and favourable changes to the deposit mix with the savings deposits to total deposits ratio increasing to 22.6 percent in 2020, from 21.5 percent in 2019, providing the bank with a source of low-cost funding. 

The bank successfully improved its cost to income ratio (without taxes) to 39.1 percent in 2020 from the year 2019 through various cost savings strategies and initiatives. Nevertheless, the highest ever profit was achieved after making an impairment provision of Rs.4.9 billion, a 761.8 percent increase over 2019 reflected the elevated risk in the loan and advances portfolio and tenuous state of asset quality in the banking sector. During the year under review, the bank disbursed Rs.31.4 billion in loans for infrastructure projects to state-owned enterprises and the bank also positioned itself to finance further long-term projects in future through diversifying the bank’s sources of funding. 

The bank raised Rs.5.0 billion through the issuance of a perpetual debenture. By enhancing the bank’s additional Tier I capital. The bank is well positioned to increase its lending capacities for both government and retail lending. 

 The bank’s retail lending portfolio increased significantly by end-December 2020, as the credit demand picked up during the fourth quarter, following the government’s COVID-19 Renaissance Facilities and policy interest rate cuts by the Central Bank of Sri Lanka (CBSL). 

Total loans and advances increased by 13.7 percent to Rs. 516.8 billion as of December 2020, against the Rs.454.4 billion recorded as at December 31, 2019. The bank’s gross NPL ratio increased considerably by 122 bps to 2.79 percent, from 1.57 percent at end-2019, caused by the adverse impact of the COVID-19 outbreak on the repayment capacity of the customers amidst the economic stimulus package introduced by the government. 

Nevertheless, the credit quality of the bank was maintained in a stable manner, having one of the lowest NPL ratios in the industry, in comparison to the industry average of 4.93 percent as at end-2020.

Meanwhile, the bank recorded its highest ever mobilisation of deposits by mobilising Rs.221.9 billion during the year. The bank’s deposit base increased by 21.7 percent to record Rs.1.2 trillion as of end-December 2020, compared to Rs.1.0 trillion reported as at  December 31, 2019. 

Despite the low interest rate regime that prevailed during the year, both savings deposit and fixed deposit bases recorded significant growths of 28.1 percent and 19.9 percent, respectively, to reach Rs.280.0 billion and Rs. 957.1 billion, respectively, as at end-December 2020, on the back of the increased household savings triggered by the pandemic. 

The capital position of the bank remained strong and stood well above the revised minimum statutory requirements imposed by the regulator consequent to the COVID-19 pandemic. The Tier I Capital and Total Capital ratios stood at 13.65 percent and 16.45 percent, respectively, at end-December 2020, well above the statutory requirements of 8 percent and 12 percent, respectively. The leverage ratio of 6.64 percent too was well above the minimum requirement of 3.0 percent.