Following the restructuring of International Sovereign Bonds and the voluntary restructuring of Treasury Bonds the small to the mid-tier banking sector is expected to take action to increase their proportionate share of the lending and deposit market. Nations Trust Bank (NTB) in their recent Annual General Meeting signalled the need to raise Tier 2 Capital and their better-than-average performance concerning the potential restructuring exercise.
Nations Trust Bank sold all its Sri Lanka Developments in January 2023. The company has also been actively seeking foreign strategic investors. The leading shareholders, John Keells Holdings and Central Finance have been regulatorily mandated to bring their holdings in line with regulatory requirements.
Chairman NTB Gihan Cooray said, “We will follow the regulatory guidelines when it comes to provisioning. No one yet knows exactly what the restructuring exercise will bring about.” Cooray reiterated that the Accounts as represented on 31 December did not require serious restatement given the recent announcements.
In line with the recent Asia Securities Report Titled ‘Sampath and NTB to remain strong amid near term challenges’, Cooray insinuated that the firm is only in need of Tier 2 Capital and that is to maintain its growth trajectory.
Norfund has already signalled interest in Sri Lanka’s banking sector and has also eyed NTB for potential investment.
In response to queries that the company’s Scrip Dividend policy had caused a tax burden to fall upon the shareholders, Cooray defended the move as it allowed the bank to expand its balance sheet.
Cooray said, “Even if we had paid it out as cash dividends the shareholders would have incurred a tax liability.”
Cooray added, “With the scrip dividend the shareholders can decide on how they want to take their earnings.”
Cooray said, “In Sri Lanka, the economy is expected to contract but pick up pace in the second half of 2023 with improved dollar liquidity supported by confidence through the IMF assistance, a pick-up in tourism and easing of supply-side factors, both globally and locally.”
In January of 2023, the share price of NTB was at Rs 46.70, given the improvements in the economy the share price has since risen to Rs 64. The bank with its digitized ethos is likely to be the first major player to roll out automated credit approval under the Credit Scoring Framework currently operational under the Credit Information Bureau.
Given such moves, the bank can maintain a much lower administrative cost than peer entities while growing its balance sheet exponentially. The bank is already operating at a scale wherein it is profitable and has the confidence of the general public. The bank has a diversified and reputable board with few of the legacy issues that plague the competitors. The bank boasts that 92% of transactions are completed digitally, it has 22 main process automation, a 30% cost-to-income ratio, and 96% of its clientele are digitally engaged customers.
The company maintains a 100% digital onboarding ratio for Savings Accounts, Current Accounts, and Credit Cards. For Term Deposits, the company maintains a 79% digital onboarding ratio.
The company also is inclusive in terms of gender with the majority of new hires being females. The bank has over 700,000 individuals, SMEs, and Corporates within its network. (TP)