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Nations Trust Bank records strong performance in 2021 amidst volatile conditions

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The Group achieved a record Profit Before Tax of LKR 10.4 billion, for the twelve months ended 31st December 2021 – a growth of 38% compared to the previous year, despite the challenging operating environment experienced during the period.  The Group recorded a Profit after tax growth of 65% supported by the decrease in the corporate tax rate.

Business Growth

The loan book recorded an 18% growth during the year against the private sector credit growth of 13.5%.

Nations Trust Bank adopted a selective expansion strategy, pursuing growth opportunities in sectors such as exports and local manufacturing which are aligned to the national development agenda while recording growth in the renewable energy and agriculture sectors. The Bank continued to focus on supporting customers through the crisis, proactively engaging and offering customised financing solutions to ensure commercial viability. The Bank also strengthened one-to-one engagement with customers, offering individual plans for repayment and providing guidance on effectively managing cashflows.

The Bank extended its fullest support in the implementation of the Government’s initiatives to minimise the impact of COVID-19 on businesses and the community and to stabilise the economy by partaking in the ‘Saubhagya’ loan scheme. Over LKR 20 billion new credit facilities were disbursed by the Bank under its own revival fund “Nations Diriya” scheme, which is dedicated to extending financial support to key industries, enabling such businesses to recommence and rebuild their business operations.

The Consumer Banking Division adopted a lifecycle approach to lending, moving away from a product push and offering customer-centric, relevant solutions based on specific needs. The Bank strengthened its digital offering to its customers, launching the Nations Direct integrated cash management system for corporate and commercial customers. This included tailormade offerings and host-to-host solutions, among others.

Nations Trust Bank raised USD 65 million from overseas Development Finance Institutions during the year to support the Small and Medium Enterprise (SME) sector, demonstrating the strength and track record of the Bank despite the volatile environment. The Bank also raised LKR 4 billion, Fitch ‘A’ rated, Senior, Unsecured, Unlisted, Redeemable Debentures, in July 2021, further strengthening the medium-term funding profile of the Bank.

Revenue growth

Supporting the loan growth and economic recovery efforts, average yields on loans reduced by 260 bps during the year. A net reduction in yields in the FIS portfolio also contributed to the decline in net interest income. The absence of a one-off interest reversal on moratorium loans similar to what was recognised in the previous year helped negate the decline in interest income. The improvement in the CASA ratio to 40% as at end of the year, from 32% recorded in the previous year, helped partially offset the decline in interest margins during the period.

Momentum could be seen in Trade Finance related income with the increase in certain Trade Finance related activities. Growth in cards income was contained on account of a decrease in card spend due to changes in customer behavior patterns owing to the restrictions in mobility and overseas travel during certain parts of the year. Suspension or refund of certain charges by the Bank, considering the current difficulties faced by customers due to the COVID-19 pandemic, negatively impacted the Bank’s fee-based income. While pandemic-led disruptions impacted credit card spending in certain months, the segment’s overall performance was upheld by the release of pent-up demand in other periods.

With the yield curve remaining flat for most part of the year, opportunities for generating capital gains through trading were limited. The Bank made conscious efforts to reduce the duration of the portfolio, repositioning it to capture future opportunities.

The Bank continued to adopt the strategy of utilising its FX SWAP book to fund rupee loan growth with focus placed on broad-basing counterparties to diversify risks. Gains on foreign exchange increased primarily from FX funding swaps due to the discounts which prevailed in the market. Nations Trust Bank successfully pursued low-cost funding options through the SWAP market, affording the Bank a strong platform to drive growth in 2022.

Credit cost management

Strategic focus on preserving portfolio quality through strong monitoring, risk profiling and ongoing customer engagement enabled the Bank to achieve an improvement in portfolio quality. Positive flows in the past due buckets together with lower exposures in most risk buckets, reflects a 228bps reduction in the non-performing loan ratio, thereby reducing impairment charges on loans by 13% during the period. The Bank continued to assess the uncertainties in the operating environment and to maintain a management overlay in the impairment provisions on exposures to identified risk elevated industries.

The Bank has also assessed the impact of macroeconomic variables that could elevate the credit risk of the loan portfolio and considered the potential impact of these variables in the calculation of provision for impairment.

The Bank further increased the impairment provisions against other financial instruments to reflect current market trends and other applicable macroeconomic conditions.

Operational excellence

Nations Trust Bank invested LKR 334 million on digital capabilities during the year while automating over 40 internal processes which supported growth in omni-channel users and Digital transactions which reached 87%. The cost management culture entrenched across the organisation by continuation of some of the cost saving strategies and initiatives executed last year along with productivity, efficiency drives and focus on some large cost pools were the main reasons for the 2% reductions in expenses. Cost to income ratio improved to 39% compared to 46% in the previous year, demonstrating the Bank’s ability to considerably enhance efficiency and productivity through digitalisation and new ways of working.

Taxation

The impact stemming from the tax rate differential in income tax and deferred tax relating to the previous financial year was reversed in the year ended 31st December 2021 using the applicable new tax rate of 24%. This resulted in a profit after tax growth of 65% over last year.

In the Budget Proposals 2022, the Government has proposed to impose a surcharge tax at the rate of 25%, on individuals or companies with a taxable income over Rs 2,000 million for the year of assessment 2020/2021. However, this proposal was not substantively enacted as at the date of the financial statements. As such, the Bank and the Group did not recognise any provision in 2021 financial statements in lieu of the proposed surcharge tax.

Profitability

The Return on Equity stands at 18% with a 69% EPS growth for the period under review.

Strong Financial position

The financial position of the Group remained strong as its Tier I Capital and Total Capital Adequacy ratios as at 31st December 2021 were well above the regulatory levels at 14.77% and 17.46%, respectively. The Statutory Liquid Asset Ratio (SLAR) for the Domestic Banking Unit was at 33% as at the reporting date.

Operations

Essential banking services were provided continuously despite some parts of the country being isolated with prolonged travel restrictions over a few months being imposed as a result of a third wave of COVID-19 during the year.

In true spirit of supporting the national effort, Nations Trust Bank’s employees came together to contribute essential medical equipment for the National COVID-19 Response, by donating a half a day’s salary to the Bio Medical Engineering Unit at the Ministry of Health. Nations Trust Bank also donated a portable ventilator to the Colombo South Teaching Hospital, Kalubowila in early 2021.

Way forward

Commenting on the results and achievements, Priyantha Talwatte, CEO/Director of Nations Trust Bank stated, “We are committed to pursue growth opportunities across selected industry sectors by offering holistic value propositions, which include advisory and capacity building across product verticals with ongoing focus on strengthening employee capabilities. We remain focused on delivering our strategic agenda set for the year and enhancing digital capabilities with the ultimate intention of achieving customer convenience, cost and process efficiencies, pioneering innovation and thereby, challenging the norm to deliver an unparalleled banking experience to our customers in a new reality. With the nation-wide vaccination program successfully being rolled out, there is an expectancy of a rapid return to economic normalcy, and Nations Trust Bank is fully geared to steer ahead more responsively to the external environment by prioritizing customer requirements supported by an extremely focused and involved Nations team who has demonstrated their agility to deliver sustainable value, given the challenging environment.”



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HNB Assurance Group surpasses 20% growth mark for third consecutive year

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HNB Assurance Group recorded yet another year of exceptional performance, marking the third consecutive year of achieving a growth rate exceeding 20% in terms of GWP (Gross Written Premium). The year 2023 witnessed the Group achieving remarkable financial milestones and an array of local and international awards, solidifying its position as a frontrunner in the insurance industry.

HNB Assurance Group recorded a substantial GWP of LKR 18.7 Bn, showcasing a remarkable growth of 20% compared to the previous year. Reflecting on this achievement, Rose Cooray, Chairperson of HNBA and HNBGI, expressed her delight, stating, “To me personally, the remarkable growth trajectory of the HNB Assurance Group stands as a testament to our commitment to delivering value to our stakeholders.

Both teams at HNBA and HNBGI performed an outstanding job, leaving no stone unturned, meticulously analyzing every challenge, and capitalizing on every opportunity. Our Group assets grew by LKR 10 Bn during the year, well exceeding a remarkable total of LKR 51.2 Bn. Further, investment income for the Group surged to LKR 7.2 Bn, representing an outstanding growth of 49% from LKR 4.8 Bn in the preceding year. In terms of the Group’s profits, we recorded a commendable LKR 1.76 Bn in PAT.”

“Consistency has been our main focus and certainly the cornerstone of our success”, said Lasitha Wimalaratne, CEO of HNB Assurance PLC. At HNB Assurance, our track record speaks for itself. Year after year, we’ve demonstrated and honoured our commitment to our stakeholders and most importantly to our policyholders.

“I am delighted to highlight that as a team we have effectively translated our promises into action. Our Profit After Tax (PAT) reached LKR 1.61 Bn, marking a commendable 9% increase from the previous year. Moreover, we surpassed the significant milestone of LKR 10 Bn in GWP, representing a growth of 23%, which is almost twice the industry growth rate,” he said.

Sithumina Jayasundara, CEO of HNB General Insurance said: “Despite economic uncertainties and high inflation rates, the team showcased remarkable proficiency in risk assessment and customer management. Moreover, we made LKR 4.3 Bn in claims, marking a 12% increase from the previous year, reaffirming our commitment to honouring the trust instilled in us by our valued customers.”

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CEAT fortifies brand presence in Sri Lanka with three new premium Shop-In-Shop outlets

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The opening of the SIS outlet at U&H Wheel Service (Above) and at Paramount Tyre Traders

The CEAT brand’s retail presence in Sri Lanka has been further strengthened with the opening of three more premium outlets in the country – two in Colombo city and one in Hanwella, the company announced last week.

The three new CEAT Shop-In-Shop (SIS) outlets are designed to drive brand identity and enhance customer experience at leading dealer outlets. They are located at U&H Wheel Service and Paramount Tyre Traders, both at Prince of Wales Avenue, Colombo 14; and at Sakura Tyre Centre, Hanwella, a news release said.

“Part of a three-year distribution channel expansion strategy by the country’s highest-selling tyre brand, the CEAT Shop-in-Shop concept entails demarcating a dedicated area for CEAT branded tyres within existing multi-brand dealer premises. CEAT furnishes the interior, customer lobby and reception areas of this private space to augment customer comfort.

“Additionally, CEAT Kelani Holdings invests in interior branding, signage, and innovative product display racks to emphasise the tyre offerings available with the channel partner. Besides enhancing the visibility and positioning of the brand, this model is also known to increase the channel partners’ revenue,” the company said.

Elaborating on the company’s commitment to investing in premium retail concepts even in challenging times, CEAT Kelani Chief Operating Officer Mr Shamal Gunawardene said: “When the going gets tough, it is even more important to look for wins for all stakeholders. These SIS outlets add value for our customers, boost sales for our dealers and raise the brand’s presence in the market, benefiting the Company and all its stakeholders. They also ensure that the quality of the retail operation keeps pace with, and does justice to, the brand’s growth and the continuous improvement of the products.”

He said these premium retail outlets are also designed to bring special focus on providing all tyre-related services for passenger cars and SUVs, for which CEAT Kelani manufacturers a range of high-performance radial tyres in Sri Lanka.

Among the services common to CEAT SIS outlets are an extensive range of CEAT tyres at attractive discounts, specialized tyre care and technical expertise, computerized wheel alignment, nitrogen and air pumps for tyre inflation, dedicated customer lounge facilities and easy payment plans for credit card purchases. Some of the outlets also offer a wide range of alloy wheels and car batteries.

The manufacturer of nearly half of Sri Lanka’s pneumatic tyre requirements, CEAT Sri Lanka is considered one of the most successful India – Sri Lanka joint ventures. The joint venture’s cumulative investment in Sri Lanka to date exceeds Rs 8 billion. The company’s manufacturing operations in Sri Lanka encompass tyres in the radial (passenger cars, vans and SUVs), commercial (nylon and radial), motorcycle, three-wheeler and agricultural vehicle segments.

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ComBank stays on growth trajectory in 2023 with notable Q4 performance

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Commercial Bank Chairman Prof. Ananda Jayawardane (left) and Managing Director/CEO Mr Sanath Manatunge

Accelerated lending sees loan book grow by Rs 56.8 billion in three months

Deposits surge by Rs 109.4 billion in final quarter

12-month gross income up 21.82% to Rs 341.6 billion

The Commercial Bank of Ceylon Group lent Rs 56.816 billion in the fourth quarter of 2023 at a monthly average of Rs 18.939 billion to end the year with a loan book of Rs 1.296 trillion, continuing its trend of strong lending growth in support of economic revival.

Robust deposit growth of Rs 109.408 billion was also witnessed in the three months ending December 31, 2023 at a monthly average of Rs 36.469 billion, demonstrating the Group’s strong deposit franchise and focus on financial intermediation in volatile macroeconomic conditions. Deposits grew by 8.60% YoY to Rs 2.148 trillion at the end of the review period.

The Group, comprising of Sri Lanka’s biggest private sector bank, its subsidiaries and an associate, reported in a filing with the Colombo Stock Exchange (CSE) that total assets increased by Rs 156 billion or 6.24% YoY and by Rs 130 billion or 5.15% in the three months reviewed to reach Rs 2.656 trillion as at December 31, 2023.

Gross income improved by 21.82% YoY and by 33.44% in the final quarter to total Rs 341.566 billion for 2023, and interest income grew by 33.84% to Rs 297.646 billion, the Group said. With interest expenses increasing at a higher rate of 53.37% over the year to Rs 211.231 billion, net interest income grew by a marginal 2.07% to Rs 86.415 billion. This was however, a welcome reversal of the negative growth recorded at the end of the preceding quarter, and was made possible by net interest income of Rs 25.534 billion in the fourth quarter, an improvement of 16.85%.

“We have consistently reinforced our balance sheet strength throughout the year and reaffirmed our position as the leading private sector bank,” Commercial Bank Chairman Prof. Ananda Jayawardane commented. “Our solid performance stands as a testament to our resilience and enduring dedication to serving our customers and stakeholders with distinction. We look forward to building upon this foundation of success and charting new heights of prosperity in the future.”

Commercial Bank Managing Director/CEO Mr Sanath Manatunge noted that the Bank continued to demonstrate its unwavering strength and adaptability amidst a landscape of economic revival and reform. “As the country navigated through the aftermath of challenges flowing from the immediately preceding years, our focused strategy and commitment to stakeholder equity remained steadfast,” he said. “Embracing pivotal reforms and leveraging innovative approaches, we propelled forward, ensuring stability and sustainable value creation for all stakeholders. Our resilience and adaptability in the face of adversity is a testament to the dedication and resolve of the entire Commercial Bank team, whose unwavering commitment remains the cornerstone of our success.”

The Group posted an operating profit before taxes on financial services of Rs 38.885 billion for the full year, and Rs 10.193 billion for the fourth quarter, achieving improvements of 36.77% and 253.81% respectively, the latter due to the higher impairment provisions of the fourth quarter of the previous year.

The Group’s profit before income tax of Rs 33.927 billion for the 12 months recorded an improvement of 38.45%, in contrast to 13.56% at the end of the third quarter. With income tax for the 12 months increasing to Rs 12.027 billion, the Group reported a net profit of Rs 21.900 billion, a decline of 10.25% YoY.

Taken separately, Commercial Bank of Ceylon PLC reported a profit before tax of Rs 31.880 billion for the 12 months, an improvement of 41.07% while profit after tax for the year reduced by 10.92% to Rs 20.461 billion.

The largest private sector bank in Sri Lanka and the first Sri Lankan bank to be listed among the Top 1000 Banks of the World, Commercial Bank operates a strategically-located network of branches and over 950 automated machines island-wide, and is the largest lender to Sri Lanka’s SME sector. Commercial Bank has the widest international footprint among Sri Lankan Banks, with 20 outlets in Bangladesh, a Microfinance company in Nay Pyi Taw, Myanmar, and a fully-fledged Tier I Bank with a majority stake in the Maldives.

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