Annual Report 2011 BEYON D GROWING BEYOND For some years now, our annual reports have presented the story of our organization and it’s successful, profitable growth. Since our establishment 12 years ago, we have evolved into a leading feature of Sri Lanka’s financial landscape. All through those years we stuck to our values, elaborating and perfecting our reputation as a dynamic, up-to-the-minute financial-services provider for worldly-wise customers who are used to and demand the best. None of that is changing. But now, we’re going beyond the classic paradigm, moving to secure a bigger piece of the banking action country-wide. We’ve started reaching out to customers beyond the relatively affluent urban base that hitherto provided us with the bulk of our business, thereby supporting the nation’s inclusive economic and industrial development. Watch this space, as the newspapers say. There will be exciting times ahead. NTB is implementing plans to reach out across the island, to make our presence felt in the remotest regions of the country. This report will reveal how we’re doing this, so that wherever people are, at whatever time or location they need us, we will become the bank they prefer to choose. Contents Financial Highlights 4 Chairman’s Message 6 Chief Executive Officer’s Message 10 Management Discussion and Analysis 20 Sustainability Report 52 Ten Year Summary 70 Risk Management 74 Governance Report 90 Board of Directors 116 Corporate Management 120 Senior Management 123 Service Network 126 Report of the Board Supervisory Committee 128 Report of the Board Audit Review Committee 129 Human Resources and Remuneration Committee Report 131 Board Nomination Committee Report 132 Board Integrated Risk Management Committee Report 133 Board Credit Committee Report 134 Annual Report of the Board of Directors on the Affairs of the Bank 135 Directors’ Statement on Internal Control 140 Independent Auditors’ Report on Internal Control 142 Directors’ Interests in Contracts with the Bank 143 Directors’ Responsibility for Financial Reporting 152 Independent Auditors’ Report 153 Balance Sheet 154 Income Statement 155 Statement of Changes in Equity 156 Cash Flow Statement 157 Notes to the Financial Statements 158 Glossary 190 Corporate Information 191 Notice of Meeting 192 Form of Proxy Enclosed Vision Making life simple by being the benchmark of convenience. Mission Be innovative in continuously developing customer centric solutions. Unleash the talent of our team to be the best in the industry. Consistently grow market share and be the most profitable and respected Sri Lankan bank by 2015. Values • Inspirational leadership • Integrity in all our dealings • Open communication • Learning focused • Meritocracy • Prudent risk management • Contents Respect for all • Innovation and continuous improvement • Nurture relationships • Socially and environmentally responsible Financial Highlights DEPOSITS 66.43Bn Up 38% NET PROFIT Rs.1,534Mn Up 41% LOANS & ADVANCES Rs.62.02Bn Rs. Mn Up 39% 15,000 12,000 9,000 ASSETS 6,000 Rs.102Bn 3,000 0 08 09 10 11 Up 23% Gross Income Group Group 2011 2010 Change Rs. Mn. Rs. Mn. % Results for the year Gross Income 12,337 12,215 1 Net Profit before Tax 2,210 2,029 9 Provision for Taxation 676 944 (28) Net Profit after Taxation 1,534 1,084 41 At the year end Shareholders’ Funds 8,611 6,804 27 Deposits from Customers 66,439 48,315 38 Loans and Advances (Net) 62,026 44,571 39 Total Assets 102,006 83,248 23 Information on Ordinary Share Earnings Per Share (Rs.) 6.73 5.04 33 Net Assets Value per share (Rs.) 37.34 32.46 15 Market Value at the year end 57.00 83.40 (32) Ratios Return on Average Assets (%) 1.66 1.41 18 Return on Avarage Shareholders’ Funds (%) 19.90 18.72 6 Capital Adequacy Ratios Tier I (%) 13.42 13.43 - Tier II (%) 17.44 15.74 11 Rs. Mn Rs. Mn Rs. Mn 65,000 70,000 9,000 52,000 56,000 6,750 39,000 42,000 4,500 26,000 28,000 2,250 13,000 14,000 0 0 0 08 09 10 11 08 09 10 11 08 09 10 11 Loans & Advances Deposits Equity page 5 NATIONS TRUST BANK PLC ANNUAL REPORT 2011 Heading 02:35 pm Colombo ‘s Message “The Sri Lanka Banking Industry is well placed to benefit from the expected growth in the local economy and emergence of Asia as an economic bloc which is second to none. Major investments in infrastructure development, both ongoing and planned, bring unprecedented growth opportunities for the country as a whole. “ 2011. The fourth quarter of 2011, and the early part of 2012, have however seen significant volatility in both the exchange rate and interest rates as monetary and fiscal policies came into play in addressing the widening external trade deficit and its consequent impact on the balance of payments and foreign reserves. We believe that the recent hiccups experienced by Asia, as a whole, are temporary. A review of some basic economic Ronnie Peiris statistics, published by leading authorities, indicates a significant Chairman shift in world economic power over the next 10 years. It is estimated that by 2013, the EU, the USA and Asia will be contributing equally to global GDP at approximately 25% each and that by 2020, China, Japan and India will be among the top 5 economies of the world together with the USA and Germany. In this light, the 3 Asian countries are estimated to contribute 27% of the global GDP. As per reports, Asia is expected to consume Growth story continues... US Dollar 21 trillion of global produce by 2020, this being US Dollars 15 trillion more than what it consumes today and more In keeping with the country’s development plans, than 3 times what the USA is expected to add to its current your Bank, accelerated its own expansion plans consumption in the same period. with a view to satisfying the banking needs The Banking Industry in Sri Lanka … of its customers and the needs of all its other 2011 was a year of growth for the Sri Lanka Banking Industry. stakeholders. In the process, Nations Trust Bank Total assets grew by 20%, while deposits and advances recorded surpassed all its previous achievements to record a growth of 19% and 32% respectively. A steady rise in demand for credit took the total asset base in the Banking Sector to over post-tax profit of Rs 1,534 Mn in 2011 - the highest Rs. 4 trillion by the end of 2011. in our 12 year history, and our total assets ‘s The Sri Lanka Banking Industry is well placed to benefit from recorded a remarkable growth of 23% to cross the expected growth in the local economy and emergence of Asia the Rs 100 Bn mark. as an economic bloc which is second to none. Major investments in infrastructure development, both ongoing and planned, bring unprecedented growth opportunities for the country as a whole. The Agricultural Sector, Small and Medium Sized Enterprises It is against this back-drop that I take pleasure in presenting to and Tourism which contributed significantly to the growth in you the Annual Report of your Bank for 2011. 2011 are expected to contribute in a similar vein, or better, in 2012. Consumer demand which grew rapidly in 2011 will Global and Regional Developments – An Opportunity for continue at reasonable levels albeit not at the pace as was in Sri Lanka the past. There is no denying that the mood of business at the end of 2011 was extremely downbeat as the world experienced an economic Your Bank…. Rising to the Occasion crisis in Europe, social revolutions in the Arab and Middle As highlighted in the prelude to my message, your Bank had Eastern countries, continued uncertainty in the US economy and a great year. A detailed analysis of the Bank’s performance as a result of the foresaid, a slight slowdown in the emergence of is provided in the CEO’s Review, Management Discussion and a new Asian economy. Analysis and the Financial Statements of this Annual Report. It is therefore in that light, I am pleased to recommend for the Sri Lanka, thankfully, has so far, been not too severely affected approval of the Shareholders at the AGM, a First and Final by the above described global scene. The economy has grown Dividend of Rs. 2.10 per share. This will amount to a Dividend at over 8 % for two years running while inflation and interest Payout of Rs. 484.28 Mn, this being an increase of Rs. 23.06 rates have, in general, been kept under control during most of Mn over the previous year. page 7 NATIONS TRUST BANK PLC ANNUAL REPORT 2011 Chairman’s Message The Bank’s performance during 2011 would not have been Changing of the Guard possible if not for the unstinted support of all the Bank’s Mr. Ajit Gunewardene, the former Chairman and Employees, from the CEO, the Senior Management team Mr. Eranjith Wijenaike, the former Deputy Chairman, down to the lowest possible level. To them, on behalf of the stepped down from the Board with effect from 31st Board of NTB, I say a big “Thank You”. December 2011. On behalf of all the Stakeholders of the Bank, I take this opportunity to express my gratitude to both Your Bank... Today and Tomorrow of them for their invaluable services to the Bank. The current Strategic investments in key areas, innovations such as stature of the Bank and its above average growth in the past 365 day banking with extended banking hours, prudent years are a testimony of their vision and stewardship.