NTB to launch a new business line

Nations Trust Bank (NTB) is gearing to launch its new line of business targeting top-end clients next month and is open about new opportunities to merge or amalgamate with another entity if the need arises. Here Zulfiqar Zavahir, Director/CEO, NTB speaks to The Sunday Times FT about the direction of the bank.

Our quality is still good. When you look at the non performing loan (NPL) ratio, it is still below five percent. So it is nothing to get too worried about, but in terms of the management of the NPL portfolio, we have put in same extra efforts. We have got a company from India to help us to understand a little bit more about the portfolio and improving the collection process, etc. But I think that in times like this there is always bound to be a bit of a delay in the payments.

What do you mean in times like this?

The interest rates are high. The rate of inflation is continuing to remain high. So in times like this the discretionary income that is available for repayment of loans comes down somewhat. That is where the issue is.

The economic conditions are deteriorating. Will it not affect your loan portfolio?

If you look at our portfolio, we are skewed in two ways-towards the corporate and towards the consumer. The consumer is generally skewed to a profile which is not 'down market' as such, because we lend to certain employees of certain selected companies. We do not open it out. On that basis we are not seriously concerned that it will impact us. If you look at our results in the first quarter, we have done pretty well. We are not totally dependant on the loan portfolio to bring us the revenue. We have other lines of revenue, which will offset the losses in the loan portfolio.

The lending portfolio did not see significant growth?

This is so, as we are particular whom we lend to. It is all about management of risk.

What about the gross NPLs?

It has increased from 4.07 percent to 4.9 percent. Your collection policies and risk management are pretty stringent.

Why has it gone up like this?

The consumer portfolio is diversified and the pricing on this portfolio takes into account the potential loss.

The interest margins are under pressure, but what we are trying very much to do is not to put volumes for the sake of putting volumes. Unless the margins are there we will not do business.

What are your expectations in terms of inflation this year?

We are hoping that during the course of the year as the government and the Central Bank say, they will bring the inflation under control and that they will bring down the interest rates to some extent. We do not expect anything to happen during the next quarter, but hopefully towards the end of the year there will be some improvement. We do believe that the economy is under pressure, but we need to understand that during times like this managing our risk is important. Also, you tend to reap dividends in the risk management that you put in place early. And the portfolios are stable enough to withstand the pressures that we get now.

What is your main source of business?

It is a mix. In the consumer side we have the credit cards, the loans and the deposits. On the corporate side we have some fairly good names. We have foreign exchange of which the income this quarter has been good. The trade income also has been good.

Are you happy with the deposit growth?

Eight to nine percent of deposit growth in a quarter is not bad.

What are your plans to boost this growth?

We have certain strategies which we have in place over the past few years and new strategies we are trying to implement, come June-in terms of re-launching our mass affluent value preposition relating to our top end clients.
There is a strategy for this year which we are still in the process of implementing and which in June we will launch.

What comprises the majority of your loan book?

It is a mix. The consumer side is about 35 percent.

The banking landscape is very saturated. How can you differentiate in such a situation?

We are not everything to everybody. We are fairly focussed in whom we want to service and the way we want to service.
This we have adopted from the start and that is something we continue to do.
We differentiate ourselves in terms of the products, the services, etc.

Was the purchase of your Colombo 2 property a substantial investment?

It was about Rs.1.4 billion and we paid it in full. We save on future rent and gain in the appreciation of the value of the property.

What about (a merger with) Union Assurance Ltd (UAL)?

The law says that institutions cannot do insurance. We do sell bancassurance on behalf of UAL. To merge, I do not see a benefit in terms of the synergies. When a leasing portfolio Mercantile Leasing was merging with NTB, there was a lot of synergies as we did not do leasing and that became a new pillar of service to us.

What kind of strategy are you following in terms of attracting customers? Is it a niche strategy?

As a start up organisation, we are comparatively smaller to the others and in terms of getting economies of scale we need to focus on where we want to go to. Once you get size you can expand your market segment.In terms of consolidation or amalgamation does size not matter? Are you looking to merging or amalgamating with any other entity?

Size does matter. If there is somebody who makes it worth the while we may. If something is available, if the price is right we will take the opportunity.