Nations Trust Bank (NTB) Group’s operating profit before all taxes declined by 7%, while Profit after Tax increased by 24% due to withdrawal of the Debt Repayment Levy and NBT on financial services, the Bank said in a media release.
Interest income declined by 8% due to the lack of growth in the loan book and interest ceiling imposed from April 2019. Average Weighted Prime Lending Rate reduced by 296 basis points as at end of 1Q 2020 Vs 1Q 2019. Average loan book declined by 2.64% in 1Q 2020 Vs 1Q 2019.
The cost of funds declined at a faster rate of 13% due to effective fund management strategies supported by the growth in current and savings account balances. As a result, reduction in Net Interest margins was contained to 30bps while Net Interest Income reduction was contained at 1%.
While lending, credit cards, trade and deposit related fees recorded a drop owing to lower business volumes, Net FX gains increased during the period increasing the total net revenue to 2%. Gains on trading FX increased arising from forward FX funding swaps due to the depreciation of the Sri Lankan Rupee during the period in contrast to the appreciation in the previous period which offsets to some extent by the revaluation losses arising from balance sheet positions for the same reason accounted under Net other operating income. The Bank continued to benefit from the relatively lower funding costs of the funding swaps compared to high cost rupee deposits.
The increase in operating expenses was kept to a minimum of 1% as a result of comprehensive cost containment strategies implemented throughout the period under review, especially in times of curtailed growth in business volumes. Cross functional teams heading various initiatives on cost management, productivity and efficiency improvements resulted in minimizing increases in some large cost pools contributing to the overall management of the Bank bottom line
When assessing the impairment provisions, the Bank considered the potential impact of the COVID-19 pandemic on customers as well as the relief package introduced in the form of a debt moratorium by the government. Additional impairment provisions were made for identified customer segments impacted due to COVID-19 related developments, by assessing potential delays to the cash flow expectations based on currently available information, leading to a 46% increase in the impairment charge.
The Group’s Tier I Capital and Total Capital Adequacy ratios as at March 31, 2020 stood at 12.44%, and 16.62%, both well above the corresponding minimum regulatory requirement of 8% and 12%, applicable as at the reporting date. CBSL reduced the Capital Conservation Buffer by 0.5% with effect from March 27, 2020. The Statutory Liquid Asset Ratio (SLAR) for the Domestic Banking Unit and the Off-Shore Banking Unit was at 24.91% and 26.74% as at the reporting date.