NTB September profit up 33% on strong loan growth

Nations Trust Bank PLC (NTB) reported Rs. 1.01 billion in net profits for the quarter ended this September, which was a 33 percent increase compared the corresponding quarter last year, with growth being driven by new loans. Earnings per share increased to Rs.4.39 during the quarter under review up from Rs.3.29 year-on-year (YoY). 

Yet, the bank’s shares traded thinly, Rs. 2 lower at Rs. 79.90 on the day the financial results were released last week.

The total interest income grew by 42 percent YoY to Rs.8.1 billion while the net interest income grew by 24 percent YoY to Rs.3.2 billion as the corresponding increase in interest expense was 57 percent due to faster increase in deposit rates.         

The bank’s balance sheet expanded 21 percent to Rs. 255.53 billion during the 9 months between the start of the financial year and the end of the last quarter, with the increased asset base being led by Rs. 27 billion in new loans, which expanded the loan book 18 percent to Rs. 176.49 billion.

The new loans were mainly on the small and medium enterprise segment, NTB said in a statement.
Meanwhile on the liabilities end, deposits increased 21 percent to Rs. 183.72 billion, of which 26.4 percent were in current and savings accounts, down from 28.0 percent at the beginning of 2017. 
The bank managed to maintain its net interest margin at 4.83 percent, slightly down from 4.90 percent at the beginning of the year. 

For the 9-month period from January to end-September, net profits for NTB increased 20 percent YoY to Rs. 2.44 billion,with earnings per share increasing to Rs. 10.58 from Rs. 8.84 YoY.

Interest income increased 44 percent YoY to Rs. 22.02 billion, and higher interest expenses resulted in net interest income increasing by 21 percent YoY to Rs. 8.69 billion.

Meanwhile, the bank last week announced the issue of non-voting right in the proportion of 4 new shares for every 23 held convertible into voting to raise Rs.3.2 billion in new capital. 

NTB said that the new capital will enable it to extend its lending while maintaining its capital adequacy above BASEL III standards, which came into effect on July 1, 2017.   

Meanwhile, the Central Bank informed NTB last month that its largest shareholder, John Keells Holdings PLC (JKH), could retain its existing stake until December 31, 2020 upon which time the latter has to reduce it to 15 percent. 

Currently JKH directly holds 20 percent of the shares in NTB while a subsidiary owns a further 9.9 percent of shares. 

The Monetary Board of the Central Bank has also required NTB to limit the voting rights of the John Keells Group to 10 per cent with effect from March 31, 2018. 

NTB said that it is uncertain if the Monetary Board’s letter refers to this total stake or only the 20 percent stake held by JKH alone.  

However, the current shareholding structure at NTB is such that none of the top three shareholders can increase their voting shares post rights issue. 

This could result in JKH potentially taking up any undersubscribed rights. 

Except for JKH, Central Finance Company PLC, HWIC Asia Fund (Fairfax Financial Holdings) and Janashakthi Insurance currently hold 20.0 percent, 15.0 percent and 9.8 percent stakes respectively in NTB.