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Tuesday, 12 August 2014 00:35 - - {{hitsCtrl.values.hits}}
By Shabiya Ali Ahlam
NDB yesterday expressed confidence in the institution’s current approach to fulfilling targets towards better performance.
The Bank's optimism was following it having recorded a solid progress for the second quarter where the bottom-line profits crossed the Rs. 2 billion mark.
“The excitement in the management and the board is to continue the journey to demonstrate to our stakeholder there is meticulous executing strategy to go ahead with a consistent approach. It is a clear step in our quest to become one of the systemic important banking institution in the country as soon as possible. And this is a clear commitment from all of us,” said NDB Bank CEO Rajendra Theagarajah pleased with the fact that the institution has fared better than the industry in certain areas, the bank attributed its commendable performance to its practice of maintaining consistency.
He made the comments at the investor forum held last evening to share the company’s second quarter financial performance.
The Group profit before income tax recorded a 42% year-on-year growth to reach Rs. 2.9 b for the first half of 2014, whilst the Group profit after tax recorded a commendable increase of 57% to reach Rs. 2.1 b.
Highlighting the institution’s performance to an audience that comprised of investors, investment managers, financial analysts, and journalists, the upbeat CEO attempted to give clarity as to how the bank has managed to achieve its reported growth rates. With NDB having captured a market share of 3.8%, a 0.5% increase from its previous share of 3.5%, Theagarajah shared the growth has been with the bank tapping into new customers while also successfully converting clients of other financial institutions to its own.
“It has been a combination of bringing in new customers and getting the market share from other financial institutions. In addition to that I would say that the banks performance is due to the committed sales force which works parallel to the network. That has given a sophisticated advantage for us. Furthermore, the industry is relatively slow and the bank has not been afraid to go up and attract customers,” he said at the forum which was graced by NDB Chairperson Sunil Wijesinha, NDB Investment Banking Cluster CEO Vajira Kulatilaka and NDB Bank Chief Financial Officer Faizan Ozman.
The Group’s total operating income of Rs. 6.3 b recorded a 17% growth on a year-on-year basis, with three constituents of operating income, namely, Net Interest Income (NII), net fee and commission income and net gains from trading recording a year-on-year increase of 16%, 15% and 38% respectively.
Commenting on the bank’s growth in advances, Theagarajah said its progress in this regard has been reasonably balanced across the spectrum. When focusing on the SME sector it is observed 48% of the advances come from outside the Western province, indicating its growth story is not Colombo specific. In the retail the growth has largely come from housing and lifestyle loan.
“This reinforces the definition of the bank, which is that development is not necessarily what happens at a large scale at the top level. Development starts from the individual which then spills over to communities, through which national development will be reinforced,” commented the chief. Loans and receivables recorded a 26% increase (of Rs. 33 b) over the last 12 months, primarily due to increase in infrastructure and working capital financing. It also recorded a 12% increase over December 2013, which is well above the industry loan growth rate. Asset quality was sustained with a non performing loans ratio of 2.69%, which is also well below the industry average.
With the bank observed to be a bold risk taker on the Non-Performing Loan (NPL) area where last year it stood at an average of 1.0-1.4% against the industry level of 4.5%, Theagarajah said: “We took a call as to does it make sense to be at those rates and grow at the rate we wanted to or take an intelligent call by perhaps increasing that. That is something we believe we can defend.” Defending its move towards having rates lower than the industry, he noted that the bank will continue to follow its current approach in this regard.
Commenting on the bank’s borrowing patterns; Theagarajah noted that NDB is an institution that naturally has a business thirst. “We have borrowed it at rates which have made meaningful sense to us. It could also be realised that we also try to raise money through international bond market, but we chose not to take that route alone since it did not make business sense to us. We were able to mobilise the same quantum of money at a much lower rate using likeminded confidence, with the willingness to achieve the same objective. Again it is the willingness to identify the right finding source,” he expressed implying the bank will not take up strategies simply because other financial institutions employ such.
NDB-DFCC merger efforts on tack as planned
NDB Chairman Sunil Wijesinha yesterday pointed out that despite there being matters that are to be sorted out, the NDB-DFCC merger was broadly on track as planned.
“The merger is a fairly complex exercise we have had talks with the other party (DFCC) and have started the proceedings. As announced we (NDB and DFCC) have sought the services of the Boston Consulting Group and they have initiated their work,” Wijesinha told an investor forum of NDB.
“It (merger) will take its normal course since such exercises cannot be rushed. There are things that have to be sorted out and at the moment I can say it is on the plan that has been laid out,” he shared at the NDB Investor Forum held last evening,” he added.
Noting that a merger is much more complex than an acquisition, NDB Bank CEO Rajendra Theagarajah added: “Because we know we don’t have the answers to all we have reached out to one of the best consultancies in the world to help us out.”
In line with the joint announcement made in January, work in progress to finalise the merger proposal were carried out in February.
In March the two banks entered into a Memorandum of Understanding to proceed with their merger process.
