The Bank’s Operating Profit Before Tax has decreased by 29 percent to Rs. 5.4 billion during the first nine months of 2012 compared to Rs. 7.6 billion in the corresponding period in 2011. Similarly, Profit After Tax declined by 31 percent to Rs. 3.7 billion during first three quarters from Rs.5.3 billion in the same period last year.
"The lower growth of income due to the time lag of repricing of T-bonds at higher rate and repricing of majority of the deposits within a short period, are the main reasons for decline in the profitability of the Bank and as a result the net interest margin of the Bank declined to 3.2 percent for the nine months ended 30th September 2012 compared to 3.9 percent for the year 2011. The Bank’s effective overall tax rate inclusive of VAT on financial services was 42 percent for the period," the bank said in a statement.
"The Bank has been able to manage the growth of non-interest expenses at 17 percent despite the notable increase in personnel costs and expenses on network expansion. Non-interest expenses stood at Rs.5.4 billion in September 2012 compared to Rs.4.6 billion in September 2011. During the 3rd quarter the Bank added 4 new branches to bring its total network to 214 branches. The Bank is fully committed to continue investing in its network and infrastructure to serve customers better and strengthen its reach in the country.
"The Bank’s total assets as of 30th September 2012 stood at Rs.481.9 billion, reflecting primarily, the increase in loans and advances and the aggregated customer deposits were Rs.422 billion as of 30 September 2012.
"Loans and advances grew by 17 percent to Rs.135.5 billion as of 30th September 2012 compared to the end of 2011. Housing loans, personal loans and pawning advances grew by 14 percent, 105 percent and 36 percent respectively and the Bank granted more than 17,449 housing and personal loans during the period. Even though non-performing loans (NPL) increased by 19 percent during the nine month period, asset quality remains strong with the NPL ratio of 2.8 percent as at 30 September 2012. The Bank was able to maintain the NPL ratio at the same level of end 2011 due to increase in total loans & advances and efforts on recovery."
Chairman of NSB Sunil Sirisena commented: "NSB results for the third quarter bear testimony to our commitment towards a sustainable business growth, increased efficiency and overall operational improvement despite the challenging circumstances prevailed in the first half of the year, which were not conducive for the growth of the business instead had an adverse impact on the overall performance."
Hennayake Bandara, CEO of NSB said, "Although the performance of the Bank in the first two quarters was below the expectation, it has improved notably during the third quarter. Total income of the Bank recorded a growth of 9 percent mainly due to the increase in interest income on loans and advances. The interest income on loans and advances grew by 44 percent which can be attributable to the portfolio diversification. The interest expenses on deposits increased by 19 percent due to stiff competition in the market for deposit mobilization. The increase in cost of funds was higher than the growth in income which resulted in a 12 percent decline in the net interest income to Rs. 8.4 billion during the period as against Rs.9.6 billion during the corresponding period last year.
Tier 1 and Tier 2 capital for the Bank were 19.4 percent and 18.0 percent compared to the regulatory minimum of 5 percent and10 percent respectively.