Financial Times

Nations Trust among 20 best-performing Sri Lankan brands
NTB warns of too-high bank tax rates
The Nations Trust Bank (NTB), part of the giant John Keells Holdings (JKH) group, last week warned that high taxation on banks could obstruct efforts to attract capital investment.

NTB Chairman Ajit Gunewardene said, in the bank’s annual report for 2005, that continuing high rates would be impediment in attracting capital investment, if these rates continue to persist.

Despite this, the Bank —a fully-owned subsidiary of Waldock Mackenzie Ltd — had another successful year in 2005, nearly tripling earnings per share during the year under review. The group recorded a post-tax profit of Rs. 124.7 million for the year; up 174 percent from 2004 earnings of Rs. 45.5 million. The group’s operating pre-tax profits was Rs 265.2 million, up 72 percent from Rs 154.3 million in the earlier period under review.

The effective tax rate was at a high 53 percent, reflecting the higher tax rates that the banking industry has been burdened with. Tax paid, inclusive of financial services and VAT amounted to Rs. 140.5 million, up by 60 percent after adjusting for retrospective tax in 2004.

The increase in Net Interest Income which reflects the growth in Advances (including Corporate Debt Securities), grew by 33 percent to Rs 15.6 billion and Deposits (including Repurchase Agreements against Corporate Debt Securties), which grew by 28 percent to 15.9 billion.

While Corporate, Wholesale banking and Treasury activities contributed significantly in the year, Credit Cards and Retail Banking enhanced their share of contribution in keeping with the plan to expand the consumer side of the business, the bank said in a statement.

Provisioning increased from Rs 113.9 million to Rs 169.3 million mainly on account of a maturing Credit Cards portfolio. This provision also includes a General Provision of 1 percent on the portfolio increase and a continuation of the more stringent policy on specific provisioning laid down by the Central Bank.

“2005 was a year of consolidation and of reaping the benefits of the organization and focus changes effected in 2004. Branches grew from 26 to 28. ATMs grew for 30 to 33. The year also saw the raising of the Bank’s profile in the market, a much greater sales effort and the improvement of service quality across the Bank. Recognition of the impact made in the Business sector in Sri Lanka, was evident when a study done by Brand Finance PLC and Sting Consultants, ranked NTB among the 20 best-performing Sri Lankan brands. The Nations Trust brand was valued at Rs. 165 million in 2005, an increase in value of some 60% over 2004,” the statement said.

Zulfiqar Zavahir, NTB CEO, in his report said: “Our commitment to planned and structured growth continues into 2006 and beyond. Our enhanced brand image, relatively clean portfolio, proven winning strategy and an enthusiastic staff, who believe that they can achieve anything that they set their mind to, will continue to improve the bank’s stability and strength and deliver superior shareholder value.”

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