NDB Group crosses Rs. 300 b in total assets

National Development Bank PLC and its group of companies, has concluded the financial year 2015 with enhanced business performance as indicated in its balance sheet growth, exceeding Rs. 300 billion by the end of the year. 

Total assets at a Group level closed at Rs. 315 billion which translated to a 17% growth whilst the same at the bank level was Rs. 309 billion, an equivalent of 18% growth over the prior year, a convincing indicator of the gradual systematic importance that the bank is attaining in the Sri Lankan banking industry. 

The NDB Group’s gross income increased by 3% during the year up to Rs. 26,916 million, over the comparative year. Net Interest Income (NII) of Rs. 7,807 million recorded a marginal decline of 1% over the prior year, largely due to the less than favourable interest rates that prevailed in the market. Group’s net fee and commission income and net gains from trading recorded commendable growth of 23% and 20% respectively, over the prior year. This was a result of increased volumes of banking operations supported by a branch network of 93 and enhanced operations of the Group companies via their expert capital market offerings. 

These growth levels in non-interest income were results of the Group’s concerted focus on one of its strategic imperative to ‘grow the fee based income’ with a view to sustaining profitability even in difficult situations. 

Net gains from financial investments for the year ended 31 December 2015 was Rs. 494 million at the Group level and compares with a corresponding figure of Rs. 1,251 million for the prior year. The variation in the net gains from financial investments in 2015 was mainly due to the higher marked to market gains which were realised in 2014 as a result of the then prevailing market conditions. 

Group other operating income recorded a notable growth of 127%. This growth was primarily due to the higher exchange gains earned on the revaluation of the foreign currency book of the Bank over the prior year, which resulted from the adoption of a free float foreign exchange rate mechanism in September 2015 by the Central Bank of Sri Lanka.

Group impairment charges for loans and other losses were Rs. 746 million for the year ended 31 December 2015, an increase of 41% over the prior year. Within total impairment, individual impairment was Rs. 561 million and compares with Rs. 141 million in 2014, whilst collective impairment charge was Rs. 151 million as compared with Rs. 387 million for the corresponding year.

The increase in the individual impairment charge was primarily due to the bank’s prudent adoption in fair valuing the impaired loans based on sound judgment and objective evidence of future recoveries. The decrease in the collective impairment, which was based on a Board approved impairment provisioning model, was primarily due to the improvement in asset quality, despite the growth in loans and receivables over the prior year.

The total operating expenses of the Group increased by 16% up to Rs. 6,830 million by end 2015. Within total operating expenses, personnel expenses grew by 15% to reach Rs. 3,634 million and relates to an increase in the permanent work force and annual remuneration increments affected during the year. Office administration and establishment expenses increased during the year mainly due to the increase in the branch network (by 10 new branches and 8 off site ATMs) and general price increases. 

Group Profit Attributable to Shareholders (PAS) for the year was Rs. 3,542 million, down by 14% over 2014 and the contribution to PAS from the core banking operations and the Group share of profits for the year 2015 was 74% and 26% respectively.

In terms of returns to shareholders, the bank paid an interim dividend of Rs. 7 per share in December 2015. NDB remains as one of the few corporates which pays high dividends consistently to its shareholders and is committed to ensure high returns to the shareholders at all times.

Balance sheet performance

Total assets exceeded Rs. 300 billion in 2015, recording a 17% increase at the Group level. Within total assets, loans and receivables to customers grew by an impressive 20% (Rs. 34 billion), to reach Rs. 210 billion.  The growth was noted across the entire product portfolio, demonstrating the enhanced performance of all the business segments of the Bank during the year. Customer deposits grew by 22% over the prior year to reach Rs. 184 billion. 

When analysing the performance of the bank on a quarterly basis, it is evident that more growth was skewed towards the latter half of the year. The performance during the first six months of 2015 was relatively modest, partly due to macro-economic and political conditions that prevailed during this period. It is expected that, the benefits of the accelerated growth achieved in the second half of the year will reflect in the financial results in the year 2016.

Key performance ratios

Return on Equity (ROE) (Group) for the year ended 31 December 2015 was 12.59% and compares with an ROE of 15.78% in 2014. Cost to Income Ratio (CIR) was 49.55%. Despite the year-on-year increase in the CIR, predominantly attributable to network expansion costs, the CIR of the Bank was well managed within the industry norms.

The Non-Performing Loan (NPL) ratio reflecting asset quality improved to 2.43% compared to 2.51% at the end of 2014. The NPL ratio was also well below the industry average. The improvement in the ratio over the year is a clear reflection of the strong reviewing, monitoring and recovery processes which exist within the Bank over its credit portfolios. 

The Bank remained soundly capitalised, with the key capital adequacy ratios well above the regulatory minimum requirements. Tier I capital adequacy ratio (statutory minimum of 5%) was 8.51% at the bank level and 11.07% at the Group level. Total capital adequacy ratio (statutory minimum of 10%) was 12.59% for the bank whilst the same ratio for the Group was 15.25% as at end December 2015.

The share price of the bank closed trading at Rs. 194.10 on 31 December 2015.

The branch network stood at 93, with 10 new branches added during the year. The ATM network was 101 by the year end with 18 new ATMs added to the network, 8 of which were off site ATMs.

Awards and accolades 

2015 was a momentous year for NDB, where the bank was recognised by several leading awarding bodies for the sustainable growth the bank achieved. The most illustrious award was being selected as the Best Bank in Sri Lanka 2015 by the world renowned Global Finance Magazine of USA. The bank was also recognised by the Asian Banking and Finance Magazine of Singapore as the Best Retail Bank, Best SME Bank, Best Project Financing Bank and Best Cash Management Bank of Sri Lanka for 2015. Furthermore, a team of professionals from NDB which represented the Asia and Europe cluster at the seventh International Asset and Liability Management Competition emerged champions of the competition at the grand finale held on 2 July 2015.  The event was organised for the seventh consecutive year by a consortium of international agencies that promote financial development globally. This competition offered NDB a unique opportunity to showcase its ALM and Risk Management skills globally whilst affirming the high level of expertise and proficiency of the bank in the respective areas.

A new vision for the future

During 2015, NDB embarked on a new vision ‘to be the driving force for a financially empowered Sri Lanka’ and a new mission ‘to be the catalyst in the financial services industry by creating superior shareholder value and contributing to national development’. This transition also led to the adoption of a redefined set of corporate values of integrity, excellence, creativity, accountability and sincerity. 

The essence of all these are captured in the bank’s new corporate tag-line of ‘Our Commitment. Your Success’. 

NDB Director/CEO Rajendra Theagarajah reflecting on the year gone by stated, that 2015 was one in which, the Bank affirmed its ability in navigating its business sustainably amidst rough market conditions.  Envisaging the future, the CEO maintained that, as the bank’s new tag-line vows, NDB is ever more resolute in generating enhanced value to all our stakeholders for their success in 2016 and beyond.