NSB continues growth in 2012
2012, was a challenging year for NSB. For instance, policy changes,
such as the credit ceiling on bank lending and rising interest rates on
deposits, had an impact on our top and bottom lines. However, we have
continued to sustain growth and extend our support to our customers and
the national economy as a whole. The network expansion was limited to 9
branches compared to 24 branches opened in 2011, changing the direction
from channel expansion to channel optimization by productivity
improvements said the Chairman of NSB, Sunil S Sirisena .
Sunil S Sirisena |
Hennayake Bandara |
The bank adopted new Accounting Standards (SLFRS/LKAS) from January
1, 2012. The Consolidated Financial Statements for the year ended
December 31, 2012 is the first financial statements prepared in
accordance with international accounting standards.
Commenting on the bank’s performance CEO of NSB Hennayake Bandara
said “the Interest Income of the bank included Rs 34,289 millions of
interest on government securities portfolio and Rs 18,834 million of
interest income on retail lending and other investment portfolio. During
the year, the policy rates were increased and the tight market
competition also put pressure on the interest rates offered to go up.
The interest income increased by Rs 5,577 million to 52,673 million from
Rs. 47,096 in 2011 while the interest cost echoed the increase in
interest rates by rise of Rs 9,846 millions in 2012. Market interest
rates continued to rise and the interest costs increased over and above
the increase in interest income As a result, net Interest Income has
dropped by Rs 4,269 million (24%) making the net interest margin 2.8%
compared to 3.9% in 2011.
He said the personnel costs increased in the year under review when
collective agreements with employee unions were revised.
The actuarial valuation was carried out for the pension fund
retirement benefits as at December 31, 2012 and the resulted adjustments
were recognized in the accounts. The increase in other expenses was by
inflationary effects and the cost to income ratio was maintained at
45.7% from 36.41% in 2011. The bank had maintained its long term
stability at the expense of the higher profits during a precarious year
in which our internal strengths were tested.
The market competition was intense for mobilization and putting
pressure on our interest margins. But we continued to build up skill
competencies of our staff and enrich the customer care.
Therefore, the Bank’s net profit of Rs 4,331 million which was 29%
less than the post tax profit of 2011 were encouraging in light of the
many challenges we went through the year.
The bank contributed Rs 5,900 million to the Treasury by way of taxes
and transfers, including a dividend payment of Rs. 2,823 million.
NSB mobilised Rs 31,126 million deposits compared to the Rs 55,648
million deposits in 2011 and recorded 7.6% growth over its deposit base
as at December 31, 2011 against 18% deposit growth of banking sector in
2012.
Deposit growth for the year was adversely impacted by rising
competition that saw attractive negotiable rates being offered in the
market for fixed deposits. The foreign currency deposit base increased
by 12.6% this year, contributing 1.2% to the Bank’s total deposit base.
The Bank’s assets grew by 9.4%, reaching Rs 509,694 million from Rs.
465,974 million in 2011 against the Banking sector asset growth of 18%
in 2012. The 61% (2011-64%) of the Bank’s assets are invested in
financial instruments held to maturity, 2.1% (2011-2.5%) was invested in
assets held for trading and 33% (2011-29%) was given as loans and
receivables.
With the adoption of SLFRS/LKAS the Bank’s investments which were
previously classified as investment portfolio and trading portfolio were
categorised as assets held for trading, assets held to maturity, loans
and receivables and assets available for sale. Government securities and
equity securities held for trading purposes are designated as Financial
Assets held for Trading.
Unquoted long term investments in equity capital and Strategic
investments in quoted equity capital, are reflected in Financial
Investments available for sale. Investment in Government securities
which are held till maturity, are reflected in Financial Investments
held to maturity.
The loan portfolio is reflected in Loans and receivables to Banks and
loans and receivables to other customers. During the year, retail
lending increased to Rs 114,226million as at 31st December 2012,
representing 82% of the Bank’s loan portfolio. In its role as a
wholesale lender, NSB had Rs. 11,349 million of loans to banks and
financial institutions as at 31 December 2012.
The Bank had also extended loans amounting to Rs. 1,226 million for
agricultural purposes and Rs. 10,386 million for housing.
The NPL ratio was improved from 3.03% to 2.71% with sound credit
evaluation process.
We provided 9,535 of loans for housing purposes which was a 19%
growth and the growth of development project loans was 15% over the
previous year.
The Bank’s Tier I and Tier I & II capital remained well above the
regulatory minimum of 5% and 10%, notched at 20% and 18.7% respectively,
as at 31st December 2012. The statutory liquid assets ratio stood at
69.5%, which too, is well above the regulatory requirement of 20%.
As at end December 2012, the Group profit before tax stood at Rs.
6,221 million from Rs.9,411million in 2011. Profit after tax decreased
by 28.9% to Rs 4,341 million from Rs. 6,104 million in 2011. “We, as a
national bank, cannot lose sight of the larger picture of overall
national development and growth.
Therefore, we cannot be hemmed in by a narrow profit focus. Instead,
our business operations have always had a wider developmental approach,
where we use our expertise to support the national development drive.
But, whether this is done by supporting the government finance large
development projects, or by supporting a small farmer in rural Sri Lanka
through a small loan, we have always maintained the integrity of our
operations by ensuring the financial viability of our involvement” added
the Chairman, Sirisena.
Our Strategic Business Plan 2011- 2013 is very aligned to the
external transformations both locally and globally in the economic
sphere.
This strategic plan sees our success, failures and deviations clearly
marked and analysed, which enables us to now start formulating the
blueprint for the Strategic Plan for 2014 to 2016. This new plan will
form a wider and more in depth scope in adding value to our
stakeholders, which will include a focused penetration to improving
customer service levels as well.
Strategic changes are planned in 2013 in channel management. A more
penetrative autonomous Regional Management System has already replaced
the previous Zonal Management System.
This will facilitate to reinforce our longstanding relationship and
the strong traditions, ethics and values of our past, that is
intertwined with postal banking, in our journey forward.
Another positive envisaged from this change in structure would be in
enabling the Bank to hone better inter-personal relationships with the
younger generation, which will help us strengthen our presence at
grassroot level. School banking units, Ithurum Ayojana Kawa and
expanding our loan portfolio through these IAKs will add to the focus.
POS mobilisation will form a primal driver in expanding our roots and
thus, our branch expansion plan will have the value addition of having
more devices in the field as well, to help us reach our stakeholders.
We intend to pursue investment opportunities in strategic corporate
entities. This will be further augmented through the facilitation of
more project loans in diversified industries which would in turn give
good rates of return. Another facet we intend working on is raising
foreign funds which would enable us to expand our business activities
concluded the CEO, Hennayake. |