Nations Trust Bank PLC (NTB), the banking arm of John Keells group, increased its net profit by 12 percent to Rs. 759.8 million or Rs.3.29 a share from a year ago, as the bank was able to contain the squeezing margins while growing its loan book, the interim results filed with the stock exchange showed.
NTB share ended 10 cents or 0.12 percent down at Rs.81 on Friday.
The bank, on a standalone basis, extended loans as much as Rs.15.1 billion to end the nine months with a Rs.135.4 billion loan and receivables book. This translates in to a 12.6 percent growth in loans.
NTB’s loan book has a 33 percent or Rs.45 billion exposure in to fixed rates leasing and credit cards which is slightly down from little under 36 percent in December 2015.
During the nine months the bank grew its leasing book by Rs.1.3 billion and credit cards by Rs.800 million. However with the new lower loan-to-value (LTV) ratios on vehicle financing coming into play from early January 2017 and the higher taxes on smaller cars could further limit the leasing growth in the banking sector.
The rise in loans pressured the capital adequacy levels of the bank, particularly in Tier II as the ratio fell to 10.83 percent from 14.67 percent at the start of the year. However the bank on November 1 raised Rs.5.0 billion thorough subordinated debentures to support its capital base.
The Tier I ratio also fell to 9.48 percent from 12.26 percent in December 2015 but stays above the 5.0 percent regulatory minimum.
By the end of September 30, the bank exceeded the Rs.200 billion assets milestone recording an increase of 14 percent in nine months.
Meanwhile, the deposits demonstrated a satisfactory growth of 14.5 percent or Rs.18.7 billion during the nine months amid stiff competition and the liquidity constrains in money markets during most part of the period.
However the low cost, current and savings account ratio fell below 30 percent to end the nine months at 28 percent from 32.4 percent at the start of the financial year.
The bank meanwhile managed to slightly increase its net interest margin (NIM) up to 5.03 percent from 4.95 percent at the end of June 30, however this is still below the 5.46 percent at the start of the year.
The net interest income (NII) during the quarter rose by 16 percent Year-on-Year (YoY) to Rs.2.58 billion despite the faster rise in interest expenses over interest income.
“The impact of narrowing NIMs is gradually tapering off as seen by the performance in the current quarter which posted a higher NII growth of 16 percent over the corresponding period,” a statement from the bank said.
Further the net fee and commission income also grew by 18 percent yoy to Rs.984.4 million supported by, “transactional fees related to volumes processed and card related income”.
Meanwhile, during the quarter, the bank’s trading book narrowed the losses by 43 percent to Rs.45.2 million but during the nine months such losses widened by 25 percent yoy to Rs.128.2 million.
“Net trading income recorded a drop of 25 percent owning to higher cost on foreign exchange funding SWAPs due to the increase in the SWAP book and related premiums. The impact arising from the FIS portfolio on net trading positions was minimal for the period under review,” the bank said.
The bank also made general provisions of Rs.225.3 million against possible bad loans during the quarter which is 206 percent more than a year ago. The figure increased to Rs.452.2 million for the nine months, an increase of 28 percent on year.
The gross non-performing loan ratio slightly increased to 2.85 percent from 2.77 percent in December 2015.
Meanwhile for the nine months ended September 30 the bank increased its net profits by 5.0 percent to Rs.2.04 billion or Rs.8.84 a share from a year ago. The NII rose by 6.0 percent yoy to Rs.7.19 billion.
As of September 30 John Keells Holdings held 20 percent stake in the bank followed by 15 percent by HWIC Asia Fund.