Nations Trust Bank’s performance during the quarter ending March 31, 2019 reflected a continuation of the issues witnessed in the previous few quarters with increasing non-performing loans and moderation of credit growth.
The increased credit cost arising from both higher NPLs and policy changes relating to SLFRS 9 impairment provisioning added further pressure to the results of the quarter when compared with the corresponding period. Despite these unfavorable conditions, Group pre-tax profits remained relatively constant at previous year levels, recording Rs 1,938 million whilst post-tax profits were affected largely due to the Rs 209 million impact arising from the Debt Repayment Levy.
Therefore, Group post-tax profits for the quarter recorded Rs 773 million down by 18% over the corresponding period. Notably, Bank post-tax profits recorded a larger drop due to the inter-company dividend income of Rs 291 million received last year resulting in a higher operating income for the comparative quarter.
Net interest income growth was weak at 8% owing to the pressure of narrowing NIMs to 4.89% from 5.46% reported in the corresponding quarter. Interest income growth moderated at 18% mainly due to a cautious lending approach adopted for selective portfolios coupled with some impact stemming from changes in impairment policy rules. A higher increase of 26% is seen in interest expenses due to rising cost of funds and a higher mix of medium term funding raised for better diversification of the funding base.
Fees and commission income growth reduced to 6% reflecting the sluggish rate of growth witnessed in fee generating transactional volumes across product lines. Net trading losses arising from the movement in SWAP premiums is largely negated by the revaluation gains arising from balance sheet positions accounted under Net other operating income. The Bank continued to benefit from the relatively lower funding costs of the forex swaps compared to high cost rupee deposits.
Impairment charges recorded an increase of 10% mainly due to the continued cash flow stresses witnessed in selective portfolios as evidenced in the deterioration of the Group NPL ratio to 4.88% from 4.58% reported in December 2018. The Bank continued its efforts in improving asset quality with prudent risk management practices and better alignment of collection processes.
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