Recording its highest ever profit for a period of six months with a Profit Before Tax (PBT) of Rs. 13. 9 Bn and a Profit After Tax (PAT) of Rs.11Bn, National Savings Bank (NSB) shows strength and financial resilience in performance amidst the heightened uncertainty due to Covid 19 pandemic which has triggered a wide range of shocks on the Banking Sector and the Economy as a whole.
Against the backdrop of COVID-19 impact on the economic activities, the PBT for the first six months of 2021 was Rs. 13.9Bn, which marks an increase of 492.1% from Rs. 2.3Bn recorded in the same period last year, while the PAT was Rs. 11 Bn, with an increase of 942.7% from Rs. 1.1Bn in 2020.
Gross Income of the Bank grew by 9.3% to Rs. 65.8 Bn during the first six months of the year from Rs. 60.2Bn recorded in the corresponding period, last year. During the period under review, the interest income has increased by 8.5% to reach Rs. 64.1Bn, while the interest expense has decreased by 18.8% to Rs. 37.9 Bn 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 first half of the year.
The increase in interest income together with the considerable reduction in interest expenses supported Net Interest Income (NII) to surge by 111.7% to Rs. 26.2Bn against Rs. 12.4Bn stood during the same period last year. Consequently, Net Interest Margin (NIM) clocked in 3.70% at the end of first six months of 2021, higher against the 2.08% as at the same period last year.
Net Fee and commission income grew by 175.4% to Rs. 1.3Bn from Rs. 467Mn 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 107.4% to Rs. 27.8Bn during the first six months of the year.
Operating expenses during the period of first six months of 2021, rose by 22.7% to Rs. 9.5Bn 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 34.3% at the end of 1H 2021 compared to 57.8% reported in the 1H 2020.
Even though the NPL increased during the first half of 2021, its rise during the period was relatively lower compared to 1H 2020.
This led to the Impairment charges during the period under review to decrease to Rs. 1.4 Bn by 38.0% compared to the same period in the last year. However, the gross NPL ratio increased to 3.16% mainly owing to the reclassification of some loans and advances under debt and other instruments.
The Bank generated a Return on Equity (RoE) of 37.6% and Return on Assets (RoA) of 1.96% at the end of June 2021. The total asset base of the Bank grew at 9.2% to reach Rs. 1.49 Tn against the Rs.1.36 Tn reported as at the end of December 2020 mainly contributed by the growth in customers’ deposits, which increased by 9.3% to Rs. 1.35 Tn 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 first six months of the year, the Bank has mobilized Rs.118.1Bn worth of deposits which recorded an increase of 23.8% compared to the same period last year. The Bank continued the momentum of mobilizing low-cost funds during the period under review by mobilizing Rs. 30.4 Bn.
Loans and advances witnessed a decline of 2.5% to Rs. 504.1Bn over the last year December figure of Rs. 516.8Bn underpinned by the conversion of Rs.59.4 Bn loans and advances under the “Debt Instruments”.
The Tier 1 Capital and Total Capital ratios stood at 12.28% and 14.80% respectively at the end of June 2021 well above the statutory requirements of 8.00% and 12.00% respectively. The leverage ratio of 5.85% too was well above the minimum requirement of 3.0%.
To foster a saving culture among all Sri Lankans that comes from all segments of the society, and work towards financial and digital inclusion, we focus on strengthening our digital as well as physical footprint.
The ICRA Lanka Limited has assigned the Bank with the issuer rating of [SL] AAA with Stable Outlook. NSB contributes immensely to the wellbeing of the citizens of the country and the development of the economy as one of the biggest lenders in the Banking sector.
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