The Bank closed the nine months ending 30th September 2018 with a post-tax profit of Rs.2, 918 million with standing multiple challenges as witnessed across the industry with increasing non-performing loans, tightening of liquidity and moderating credit growth which particularly hindered the performance for the quarter.
The Bank realigned its resources in a timely manner during the quarter with absolute focus on managing impairment provisions and bottom line growth whilst consolidating growth in selective portfolios.
Net interest income increased by 31% mainly attributable to growth in volumes (Up by 26%) as NIMs stabilized and remained on par with the previous period. Interest income recorded a faster growth of 24% resulting from the increased growth in loan volumes and effective pricing of the loan book. Interest expense growth was lower at 19% due to the higher drop in cost of funds in comparison to the previous period.
Non fund based income recorded a moderate growth of 16% with trade finance, syndication based facility fees and bancassurance fees contributing to a larger portion of the increase.
Net trading losses dropped significantly during the period under review as customer and trading FX reported a higher growth rate coupled with the drop in the SWAP book and the resultant forward premiums. Impairment charges for the current year increased as some portfolios of the loan book experienced cash flow stresses, which were also seen at an industry level. Bank NPL ratio stood at 3.71% from 2.29% reported in December 2017, mirroring industry trends.
Expenses recorded a growth of 19% which is partly due to investments made in technology, branding and people related skills development and employment engagement activities. Bank expenses pertaining directly to business volume growth were well managed at 10%. Notable increases are also seen in regulatory expenses.
On the digital front, the Bank has undertaken a number of initiatives to improve efficiencies. Renuka Fernando, CEO/Executive Director stated “Our continuous improvement in financial performance demonstrates our core capabilities in steering the Bank during testing times. Managing impairment has been a key area of focus for us during the past few months whereby we have reorganized our collection shops and hope to keep a close watch in the upcoming months and will continue to focus until the stress on selective portfolios stabilise.”
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