Financial Times - Like other banks, NTB too complains about high taxation rates

Like other banks, NTB too complains about high taxation rates

Nations Trust Bank has shown good first quarter results but like many of the other banks says increasing taxes are eating into the business and in turn affecting customers.

The first quarter ending March 31, 2006 pre tax profits of the NTB group was Rs 113.1 million, up 42% from the 2005 quarter, yet its post tax profits almost halved to Rs 58.1 million due to increased VAT of 20% and a higher income tax rate of 35%.

“Consequently, effective tax rates have increased and banks have to bear a greater burden of taxation, compared to other sectors of the economy. If this anomaly continues, it is likely that this additional burden could be passed on to customers, which would in the long run then be detrimental to accelerated economic growth,” the bank said in a statement.

On the basis of a comparison of the combined entity for the period ended March 2005:

* Income improved to Rs.589.1 million from Rs 429.6 million. Net interest income grew 36%, while fees and other income grew by 40% reflecting improved volumes in trade, retail and the credit card business. Foreign exchange income too showed a gratifying growth.

* Operating costs increased to Rs 396. 1 million, an increase of 31%, mainly due to a larger branch network, a bigger workforce and much higher volumes. Provisions were also higher, primarily due to an increase in general provision, reflecting the expansion in customer assets.

* Customer deposits grew to Rs 16.1 billion an increase of 12% in the quarter, while customer assets grew to Rs 22.5 billion, showing an increase of 16%. The aggressive sales drive continues to pay good dividends.

The merger with MLL resulted in capital and reserves increasing to Rs 2.2 billion, which will enable the bank to meet the Central Bank requirement to increase capital to Rs 2.5 billion by the end of 2007, the statement said.

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