NSB posts exceptional results amid woes

• PBT increased by 81.4% to Rs. 28.4 b from Rs. 15.6 b in 2020
• Total Assets grew by 15.8%
• Second highest deposit mobilisation of Rs. 192.6 b
• NPL ratio (Gross) 2.97% below the industry average of 4.47%
• Cost to income ratio improved by 599 bps to 33.29% from 39.28% in 2020

Generating a record-breaking profit for the year, NSB has recorded sensational performance beating all the odds during a pandemic which has had a wide-ranging impact on the bank, employees, customers, and economy. The bank’s continued focus on financial resilience enables us to remain strong and achieve a solid performance
The performance of the bank over the year was characterised by strength and resilience.

The bank recorded its highest ever profit for the year with a Profit Before Tax (PBT) of Rs. 28.4 billion which marks an increase of 81.4 percent from Rs. 15.6 billion recorded in the same period last year, while the PAT was Rs. 22.1 billion, with an increase of 118.8 percent from Rs. 10.1 billion in 2020.

The Gross Income of the bank grew by 5.8 percent to Rs. 134.9 billion during the year from Rs. 127.5 billion recorded in the corresponding period, last year. 

During the period under review, the interest income has increased by 7.3 percent to reach Rs. 131.4 billion, while the interest expense has decreased by 12.3 percent to Rs. 76.8 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 period considered.

The increase in interest income together with the considerable reduction in interest expenses supported Net Interest Income (NII) to surge by 56.6 percent to Rs. 54.6 billion against Rs. 34.9 billion stood during the same period last year. Consequently, Net Interest Margin (NIM) clocked in at 3.71 percent at the end of 2021 recording the highest during the 10 years period and higher against the 2.77 percent reported as at the same period last year.

Net Fee and commission income grew by 11.2 percent to Rs. 2.8 billion from Rs. 2.6 billion 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 45.6 percent to Rs. 57.9 billion at the end of the year 2021. Operating expenses during the period of 2021, rose by 23.3 percent to Rs. 19.1 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 33.29 percent at the end of the year 2021 compared to 39.28 percent reported in the year 2020.

Impairment charges during the period under review decreased to Rs. 4.3 billion by 11.7 percent compared to the same period 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 2.97 percent compared to 2.79 percent reported in the same period last year mainly owing to the reclassification of some loans and advances under debt and other instruments.

The bank generated a Return on Equity (RoE) of 33.92 percent and a Return on Assets (RoA) of 1.93 percent at the end of 2021. The total asset base of the bank grew by 15.8 percent to reach Rs. 1.58 trillion against the Rs. 1.36 trillion reported as of the end of December 2020 mainly contributed by the growth in customer deposits, which increased by 15.5 percent to Rs. 1.43 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 period under review, the Bank has mobilised Rs. 192.6 billion and continued the momentum of mobilising low-cost funds during the period under review by mobilising Rs. 46.7 billion. 

Loans and advances witnessed only an increase of 4.3 percent to Rs. 538.9 billion over the last year’s December figure of Rs. 516.8 billion underpinned by the conversion of Rs. 59.4 billion loans and advances under the ‘Debt Instruments’.  However, without taking the converted loans into consideration, the total loans and advances demonstrated a growth of 17.8%, triggered by personal loans as well as loans to State-Owned Enterprises (SOEs). 

Complying with the direction of the Central Bank of Sri Lanka (CBSL), the capital position of the bank remained strong and stood well above the revised minimum statutory requirements imposed by the regulator consequent of the COVID-19 pandemic. 

The Tier 1 Capital and Total Capital ratios stood at 18.60 percent and 20.83 percent respectively at the end of 2021 well above the statutory requirements of 8.00 percent and 12.00 percent respectively. The leverage ratio of 8.92 percent too was well above the minimum requirement of 3.0 percent.