Nations Trust Bank PLC (NTB) contracted its net profit by 18 percent to Rs. 680.9 million for the quarter ended September 30, 2015 (3Q15) from a year ago as the bank made mark-to-market losses on its investments made in the government securities, the interim results released to the Colombo Stock Exchange showed.
The earnings per share (EPS) dropped to Rs.2.95 from Rs.3.60 a year ago. The NTB share fell 20 cents or 0.21 percent to close at Rs.95 at yesterday’s close.
Sri Lanka’s one treasury yield rose just below 100 basis points from June through end-September to 7.18 percent (from 6.18 percent) resulting in losses on investments made by the banks on the government securities.
NTB made a loss of Rs.233 million on its fixed income securities against the Rs.169 million gain made during the corresponding period last year.
Seylan Bank PLC, though making steady progress in its financial performance and asset quality, saw it having to book a loss as much as Rs.900 million during its September quarter.
Meanwhile, the bank saw its core banking operations declining by 6 percent year-on-year (YoY) to Rs.2.2 billion on the back of a 15 percent (Rs.15 billion) growth in its gross loans and advances to Rs.114.7 billion of which the leasing and credit card portfolio consists of 36 percent.
The leasing portfolio during the nine months to September 30, 2015 grew by Rs.2.7 billion to Rs.28.4 billion while the credit card portfolio grew by Rs.800 million to Rs.12.9 billion.
Further, the bank saw its net interest margin narrowing to 5.55 percent from 5.81 percent in December 2014 as the bank booked incremental new businesses at relatively lower margins, the bank said.
“Portfolios such as corporate and leasing in particular, felt the pinch of declining yields and heavy competition,” the bank further said.
The bank’s higher exposure to leasing could also become a challenge if the interest rates go up as the bank cannot re-price its leasing book unlike other advances.
The bank has a low-cost deposit base (current and savings account base) of 33 percent, up 6 percent by the end of 3Q15 but remained below the industry average hovering around 40 percent.
The net fee and commission income grew by 18 percent YoY to Rs.830.8 million, “primarily driven by credit card fee-based income and transactional fees” out of which the trade-related fee income grew by 16 percent YoY due to concerted efforts put in to penetrate trade hubs, the bank said.
Total operating expenses rose by 7 percent YoY to Rs.1.75 billion during the quarter but depreciation and amortization cost rose 80 percent YoY due to the core-banking upgrade, which was implemented during 3Q14.
The bank has a cost-to-income ratio of 54 percent, up from 53 percent in December 2014.
Meanwhile, the banking group made a net profit of Rs.1.94 billion, down 2 percent YoY for the nine months ended September 30, 2015. The EPS was Rs.8.41.
The total impairments for the period was Rs.809 million, up from Rs.789 million during the corresponding period last year due to a Rs.365 million one-off provision made against an alleged fraudulent activity in two of its branches.
Meanwhile, the return on equity fell to 18.31 percent from 20.18 percent in December 2014.
The bank’s capital adequacy levels, though declined to 11.43 percent and 14.29 percent for Tier I and Tier II, respectively from 13.25 percent and 17.44 percent in December 2014, remained well above the regulatory minimums of 5 percent and 10 percent, respectively.
The bank operates with an asset base of Rs.168.7 billion, up 6 percent during the nine months. The bank has 2,608 staff, 92 branches and 39 off-site ATMs.
The banking group was hit by the Super Gains Tax, which was estimated at Rs.820.5 million, of which the first instalment was made on October 30, 2015, and the balance to be made in two equal instalments in November and December end.
As of end-September, John Keells Holdings PLC had a 20 percent stake in the bank followed by a 15 percent stake by Hwic Asia Fund.