NTB 1Q net up over lower impairments; core banking narrows

John Keells Holding’s banking sector arm, Nations Trust Bank PLC (NTB), upped its March quarter net profit by 20 percent year-on-year (YoY) to Rs.592.2 million but the core banking operations and other incomes contracted amid lack of growth in the loan book and squeezing margins, the interim 
results showed. 

The earnings per share rose to Rs.2.57 from Rs.2.14. The NTB share closed 50 cents or 0.59 percent up at Rs.85.80 at last week’s close. The group’s net interest income narrowed by 3 percent YoY to Rs.2.2 billion on the back of compressed margins and extremely lower growth in the loan book. 
The net interest margin fell to 4.83 percent from 5.46 percent three months ago. The gross loans and advances of the bank on a standalone basis grew by a meager 1.2 percent or Rs.1.5 billion during the period. The bank had a loan book of Rs.121.8 billion. 

The bank, which was once thriving on leasing and cards, now sees those portfolios in virtual static mode as the leasing book grew only by Rs.400 million, while the card portfolio remained unchanged at Rs.13.9 billion.

The bank had a total leasing portfolio of Rs.29.3 billion as of March 31, 2016 – an exposure level of 23.6 percent. 

The bank had a total asset base of Rs.180.9 billion, up 3 percent. 
Meanwhile, the deposits grew by 4.7 percent or Rs.6.1 billion to Rs.135.3 billion but the low-cost – current and savings accounts (CASA) – deposit ratio edged down to 29.5 percent from 32.4 percent just three months ago. 

The net fee and commission income had a zero growth to Rs.781.6 million.  
But the bank managed to make a net gain of Rs.58.5 million on its trading portfolio, recovering from a loss of Rs.76 million a year ago. 

The bank’s net losses on its available-for-sale portfolio was a staggering Rs.478.4 million, up from Rs.44.6 million a year ago and this is adjusted against the bank’s equity. 
Meanwhile, the bank’s provisions made against the possible bad loans during the quarter was Rs.200.6 million, much lower than the Rs.535.3 million made a year ago. 

Pre-impairment adjusted profit – total operating income – of the bank was only up by 2 percent YoY to Rs.3.1 billion. 

The asset quality improved as the gross non-performing loan ratio dropped to 2.74 percent from 2.77 percent in December 2015. The total expenses of the bank were up by 15 percent YoY to Rs.1.8 billion for the quarter. 

The bank’s capital adequacy levels still remain well above the minimum regulatory requirements and the capital could be forthcoming from the its parent, John Keells Holding PLC which has a 20 percent stake when needed.