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He also noted that the NDB Group is energised for an exciting year ahead, harnessing strengths from the Group’s rich repository of capital, the unique conglomerate structure and the pool of talent and expertise of its human capital.
Profitability
NDB Group’s PBT of Rs. 1.5 b recorded a 106% increase while the PAS of Rs. 1.2 b recorded a 135% increase over the comparative quarter of March 2013. These commendable Group profits accentuate the contribution made by the improved core banking operations and the performance of the Group companies through their individual expertise, proficiency and collective synergies.
The core banking operations of the Group recorded a sound growth, achieving a Net Operating Income of Rs. 3 b, a growth of 27% over the comparative quarter. But the Net Operating Income at the bank level recorded a decline against the comparative period, due to a one-off equity gain earned by the bank during the first quarter of 2013.
NDB Group’s subsidiary, NDB Capital Holdings PLC (NCAP) earned an exceptional equity gain of Rs. 5.3 b through the strategic divestment of AVIVA NDB Insurance PLC to American International Assurance (AIA) Company Ltd. of Hong Kong in December 2012, which was transferred to the bank 
from the Group in March 2013 via a share buyback agreement with NCAP. The Bank’s Net Operating Income for the first quarter of 2014, when compared with the comparative quarter adjusted for the aforementioned equity gain, recorded a 16% increase affirming the growth in its core banking operations.
Total Operating Income which includes Net Interest Income (NII), Net Fee and Commission Income and Net Gains from Trading Activities, recorded commendable growth levels over the comparative quarter at 14%, 35% and 289% respectively. These growth levels were on account of the skilful asset and liability management, effective contribution of cross selling opportunities within the conglomerate set up and active money market participation across the NDB Group.
Impairment charges for loans and advances increased from Rs. 23 m in the comparative quarter of 2013 to Rs. 126 m in the first quarter of 2014. This was due to significant impairment charges made for few customers based on the bank’s prudent adoption of fair valuing the impaired loans, based on sound judgment and objective evidence of future recoveries.
In April 2014, NDB Group divested its stake held in Maldives Finance Leasing Company Ltd. (MFLC), which was an Associate of the NDB Group, with a 35% shareholding. NDB was able to release Rs. 140 m out of the total original Investment of Rs. 165 m, which was written off in 2011 in the books of NDB due to MFLC making continuous losses. The provision release in the first quarter of 2014, with respect to the above divestment, was Rs. 97 m.
Operating cost management remains a prioritised strategic objective of the Group and the recorded increase of 8% in total operating costs for the first quarter in 2014 was well in line with the recorded business growth. The cost to income ratio of 44% is pleasingly below the budgeted levels for the Group, and also the corresponding figure for 2013.
Balance sheet growth and asset quality
NDB Group’s balance sheet maintained its strategic growth momentum throughout the quarter, reaching Rs. 213 b, a 3% increase over the balance sheet as at 31 December 2013. The key driver of this growth was loans and receivables, which grew by Rs. 8 b over December 2013. In terms of asset quality, the Non-Performing Loan Ratio (NPL) for the first quarter of 2014 was 2.69%, compared to the 2.48% in December 2013, which was well below the industry NPL levels.
"NDB Group’s PBT of Rs. 1.5 b recorded a 106% increase while the PAS of Rs. 1.2 b recorded a 135% increase over the comparative quarter of March 2013. These commendable Group profits accentuate the contribution made by the improved core banking operations and the performance of the Group companies through their individual expertise, proficiency and collective synergies."
Customer deposits were Rs. 135 b, a 4% increase over 31 December 2013.
In March 2014, the bank entered in to an agreement with the International Finance Corporation (IFC) for a syndicated loan of $ 125 m. The funds received via this agreement will be mainly routed to the SME sector of the country, the backbone of the nation’s bustling economy, and other eligible sectors that would contribute towards the nation building. The infusion of these loan proceeds will also boost the balance sheet of the bank.
Strength in capital
The bank’s rich repository of capital continued to energise and strengthen the bank’s growth prospects, while meeting regulatory requirements. The Tier I Capital Ratio was 11.70% while the Tier I and II Ratio was 17.36% as at 31 March 2014, and was well above the stipulated minimum regulatory requirements.
Shareholder rewards
Shareholder return indicators demonstrated a marked enhancement during the first quarter of 2014. The Group Earnings per Share (EPS) for the quarter was Rs. 29.66, an 80% increase over December 2013. Return on shareholders’ funds also recorded an 80% increase from 10.7% in December 2013 to 19.3% in March 2014.
The bank’s market capitalisation as at 31 March 2014 was Rs. 29,444 m with a share price of Rs. 178.60, which resulted in a Price Earning (PE) ratio of six (times).
The way forward
The national economy is experiencing rapid development and has ample opportunities for business growth. The banking sector has been specifically identified as an industry to be a predominant contributor in this growth momentum.
Commenting on NDB’s role in such a backdrop, Chairman of the bank Sunil Wijesinha expressed the bank’s agility and readiness in embracing the opportunities that unfold within the industry and its commitment to reshape and flex its structures in response to the emerging national needs. Wijesinha also emphasised that such changes would place valued shareholders, customers, employees and other stakeholders at the centre, ensuring that positive value is generated for their investments and that NDB as an institution is elevated from its present levels to a size that truly matters.
