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Nations Trust Bank makes good progress; upgraded to A(lka) by Fitch

COMPANY RESULT: Nations Trust Bank made progress in the first six months, having achieved a Group Operating Profit before Tax of Rs. 279.7 Mn for the half year ended June 30, 2006.

On a combined entity basis (with the merger of Mercantile Leasing Limited (MLL) on January 1, 2006, Group Operating Profit before Tax showed an increase of 73%.

These results were seen on the back of an all round improvement with strong growth in Deposits and Advances, an increase in Fees and Commissions and while maintaining good control of Non-Performing loans. Provisions and Operating costs.

Group profit after tax was Rs. 132.9 Mn, with the effective tax rate increasing from 41% to 52.5% due to the increased Financial Services VAT of 20% and a higher Income Tax rate of 35% in 2006.

The combination of the good performance and the increase in Capital (resulting from the merger with MLL) has led to the upgrading of the Banks rating to A(lka) from A-(lka), by Fitch Ratings Sri Lanka. A(lka) National ratings denote a strong credit risk relative to other issuers or issues in the same country.

On the basis of a comparison of the combined entity for the six months ended June 2006, income improved to Rs. 1.2 Bn from Rs. 0.9 Bn. Foreign Exchange income too, showed a strong growth.

Operating costs increased to Rs. 80.9 Mn, an increase of 31%, mainly due to a larger branch network, a bigger workforce and much higher volumes.

Provisions only increased by 15% reflecting a much tighter control on non-performing advances. Customer deposits grew to Rs. 18.5 Bn an increase of 29% in the half year, while customer assets grew to Rs. 25.4 Bn, showing an increase of 26%. The aggressive sales drive continues to pay good dividends.

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