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NDB and its Group companies reported a strong performance with its profit attributable to shareholders crossing the Rs. 2 b mark for the six months ended 30 June 2014, affirming the strong strategic focus maintained by the Group in generating and delivering meaningful long-term value to its shareholders.
Chief Executive Officer of the Bank Rajendra Theagarajah, expressing his views on the half-year performance of the Group, stated that it is ably guided by a unique strategy which will ensure that the Group will thrive in its performance in a highly challenging and fast changing industry climate that prevails. He further stated that these results are a testimony to an exciting year of enhanced performance, which the Group promised to its shareholders, with the release of its Q1 results in May 2014.
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. This strong growth was a result of enhanced performance across all products and services together with prudent and efficient cost management across the entire Group.
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. The increase in NII amidst a reducing interest rate environment affirms the structural robustness of the Group’s balance sheet in sourcing and utilising funds effectively.
The bank’s impairment charges for loans and other losses of Rs. 222 m increased by 49% over the prior period, and were primarily due to the increase in impairment provision on an individual basis; resulting from the bank’s prudent adoption of fair valuing of its impaired loans, based on sound judgment and objective evidence of future recoveries.
The bank’s operating expenses recorded a modest 9% increase over the prior period, and the cost to income ratio recorded a record low of 42.6%, well below the budgeted levels, affirming the bank’s sustained focus on strategic cost management.
The asset base of the Group increased by 16% compared to end December 2013 and stood at Rs. 239 b, maintaining its growth momentum ahead of the industry growth levels. The balance sheet growth was fuelled by a marked increase in loans and receivables and investments.
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.
Loans and receivables 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.
Customer deposits of Rs. 140 b posted an increase of Rs. 22 b (a 19% growth) over the past 12 months. This was a 7% growth over 31 December 2013. NDB’s balance sheet indicates a strong liquidity position supported by customer deposits and institutional borrowings, which provide leeway for the bank to mobilise more funds to economically important sectors such as SMEs.
Capitalising on the strong relationships maintained with international funding agencies, NDB raised a further $ 75 m in June 2014 via a syndication facilitated by the International Finance Corporation, thereby completing a total syndication of $ 200 m. The bank raised $ 125 m of this syndication in March 2014.
The funds raised via this syndication facility will be infused to the SME sector of the country and other eligible sectors that contribute towards national development.
The syndication saw several leading international banks and more than five international development financial institutions lending to the bank (some of them lending to Sri Lanka for the first time), which reflects the growing confidence the international financial fraternity has placed in the Bank as well as Sri Lanka at large.
The second phase of the syndication facility will also help further strengthen the Group’s balance sheet.
The NDB Group has long benefited from a strong bedrock of capital, which has provided much stimulus in achieving solid business growth and resilience in absorbing potential business losses.
The regulatory capital adequacy ratios of the bank stood well above minimum requirements, the Tier I capital ratio at 11.18 % (minimum requirement – 5%) and the Tier I and II ratio at 16.49% (minimum requirement – 10%).
The Group Earnings per Share (EPS) stood at Rs. 25.40 for the first half of 2014, marking a 54% increase over the comparative period.
Return on shareholder funds (ROE) moved along the same upward trajectory and recorded 16.24%, well above the comparative period and the budgeted levels, denoting positive value generated to its shareholders.
The share price of the bank closed at Rs. 204.10 on 30 June with a market capitalisation of Rs. 33.7 b. Accordingly the Group’s Price Earning (PE) ratio was 8.04 (times).
The first half of 2014 saw NDB receiving many coveted local and international accolades. The bank was recognised with a Bronze award for its sound investor relations at the CFA Sri Lanka Capital Market Awards 2014, conducted by the CFA Society of Sri Lanka.
The bank clinched three titles at the Asian Banking and Finance – Retail Banking Awards 2014 as the Domestic Retail Bank of the Year (Sri Lanka), SME Bank of the Year (Sri Lanka) and the Core Banking System Initiative of the Year (Sri Lanka).
NDB Chairman Sunil Wijesinha sharing his thoughts on these achievements mentioned that all these awards speak volumes of the commitment, efficiency and transparency with which the bank strives to accomplish its purpose.
He added: “We are humbled by such recognitions and are further energised to serve all our stakeholders with best in class standards.” He reiterated that the Group was geared for robust growth and assured that they will deliver meaningful value to all their stakeholders.
