The Bank closed the first nine months of the year ending 30th September 2017 with a pre-tax profit of Rs. 5,063Mn, up by 31% over the corresponding period in the previous year. Post-tax profits increased at a lower rate of 20% as a result of the increase in the effective tax rate stemming from the increase in the financial services VAT rate as well as the additional tax provided for the inter-company dividend payments which impacted the Group bottom line growth. The dividend income received from the subsidiaries resulted in a higher other operating income for the Bank.
Net interest income increase of 21% was mainly driven by the volume growth which offset the unfavorable impact arising from declining NIMs. The faster increase in deposits rates which mirrored market trends due to tight liquidity resulted in interest expenses increasing by 65% whilst the corresponding increase in interest income was lower at 44%. However, NIMs are expected to improve in the forthcoming quarter with the stability of market rates and improved liquidity evidenced during 3Q.
Net fees and commission based income recorded a growth of 31% primarily driven by cards and trade related products. Other operating income also recorded good growth due to non trade related FX income. Net trading losses for the year amounted to Rs.492Mn which is partly reflective of the swap cost arising from an increase in the funding FX SWAP book of 21% and increase in SWAP premiums by 112bps. However, the Bank continued to benefit from the relatively lower funding costs of the forex swaps compared to high cost rupee deposits. Realized capital gains on fixed income securities portfolio amounted to Rs. 131Mn for the period under review compared to Rs. 21Mn in the corresponding year.
Expenses recorded a growth of 12% with personnel and other operating expenses contributing towards the increase. Overheads expense growth of 14% is owing to the increase in business volumes, regulatory charges and due to increased branding and business promotion activities. The Bank also witnessed productivity and efficiency improvements in processing areas during the year thereby enhancing the customer experience quite apart from cost optimization. Higher revenue growth and well managed expenses growth resulted in the cost income ratio declining from 55.5% to 51.4%.
Impairment charges recorded a 38% increase mainly due to the increase in individual impairment under the SME portfolio. Collective impairment charges which saw an increase in the previous quarters due to a fall back in recovery targets on consumer portfolios has been fully arrested in the 3Q as seen by the lower collective impairment provisions for the quarter.
Total asset growth for the 9 months is 21%, driven by the loan book growth of 18% primarily driven by SME lending. Deposits recorded a growth of 21% while CASA grew by 13%. CASA mix was maintained at 26%.
Commenting on the results and achievements, Renuka Fernando, CEO/Executive Director stated “It is indeed pleasing to see our core businesses reaching scale and delivering enhanced earnings year on year and our first 9 months results are reflective of the collaboration efforts across the enterprise. We are also relentlessly pursuing our digital journey in providing state of the art experiences to our customers whilst leveraging technology which will enable Nations Trust to be future ready and steer ahead in the next phase of growth”.
↧