NSB earnings surge on lower impairments, stronger margins

Dr. Harsha Cabral – Chairman	Rohana Bandara Weerakoon - Actg. GM CEO

The National Savings Bank (NSB) Group delivered a sharp acceleration in earnings for the year ended December 31, 2025, with profit growth underpinned by widening margins, a steep decline in impairment charges and steady expansion in non-funded income streams, reflecting improving asset quality and disciplined balance sheet management amid a recovering economic environment.

Group operating profit before taxes rose 55 percent to Rs. 59 billion, while profit after tax increased 61 percent to Rs. 28.2 billion. At the bank level, which accounts for the bulk of operations, profit after tax surged 69 percent, driven by sustained net interest income growth, cost discipline and a significant reduction in credit impairment charges.

The earnings expansion was anchored by a 17 percent increase in net interest income to Rs. 84.8 billion, supported primarily by a sharp 14 percent decline in interest expenses, even as interest income fell 3 percent. This reflects effective asset-liability management and deposit repricing, which helped lift the net interest margin to 4.74 percent from 4.22 percent a year earlier. The stronger margin translated into improved profitability metrics, with return on equity rising to 25.08 percent from 17.89 percent and return on assets to 2.48 percent from 1.53 percent, signalling more efficient capital deployment.

Non-interest income provided an additional boost to earnings, with net fee and commission income rising 46 percent to Rs. 2.56 billion, driven by higher loan disbursements, increased card usage and improved trade and remittance-related activity. Net other operating income also rose 72 percent to Rs. 786 million, indicating growing income diversification.

A key driver of the bottom-line expansion was the sharp 86 percent reduction in impairment charges to Rs. 1.64 billion, pointing to improved borrower creditworthiness and stabilising macroeconomic conditions. This was reflected in asset quality indicators, with the Stage 3 ratio improving to 2.53 percent from 5.18 percent, while provision coverage strengthened to 58.56 percent from 44.50 percent, suggesting a more resilient loan portfolio.

Cost management remained contained despite ongoing investments, with operating expenses increasing marginally to Rs. 30.4 billion, while personnel costs declined 2 percent. As a result, the cost-to-income ratio improved to 34.30 percent from 38.35 percent, allowing stronger revenue growth to flow through to earnings. 

Balance sheet expansion was moderate, with total assets growing 4 percent to Rs. 1,831 billion, supported by a 3 percent increase in loans and advances to Rs. 550.8 billion and a 5 percent rise in financial assets at amortised cost to Rs. 1,093 billion, reflecting continued allocation towards government securities. Customer deposits rose 3 percent to Rs. 1,608 billion, accounting for around 94 percent of total liabilities, reinforcing funding stability. 

Capital and liquidity buffers remained significantly above regulatory thresholds, with the Tier 1 capital ratio at 24.90 percent and total capital ratio at 26.83 percent, while liquidity coverage ratios and the net stable funding ratio also remained well above minimum requirements. Total equity increased 20 percent to Rs. 119.1 billion, supported by profit retention and fair value gains.

NSB’s contribution to government finances rose sharply, with total payments including taxes, levies and dividends increasing 77 percent to Rs. 38 billion.

Management attributed the performance to strong core operations, disciplined execution and improving fundamentals, while indicating continued focus on capital preservation, digital transformation and targeted credit expansion in key sectors such as housing and green financing as the bank positions for growth in 2026.