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The bank’s net fee and commission income also increased by 20% YoY as a result of effective cross-selling mechanisms implemented among group companies. The revaluation gain made during the corresponding period of 2012 due to the significant depreciation of the Sri Lankan rupee against the US dollar was Rs. 418 million, compared to the gain of Rs. 47 million made during the period under review. However, other operating income grew significantly by 465% over the prior period and included a one off equity capital gain of Rs. 5.3 billion. The strategic disposal within the group of the investment in AVIVA NDB Insurance PLC to American International Assurance Company Ltd. (AIA) of Hong Kong during the fourth quarter of 2012, earned impressive capital gains for NDB Capital Holdings PLC (NCAP) which is a subsidiary of the bank. Following the share buyback agreement, NCAP bought back its shares in March 2013 posting a Rs. 5.3 billion capital gain for NDB, which supports the core equity of the bank.
Despite the faster growth in the distribution network of the bank, the operating expenses have been managed well throughout the period. The bank’s effective cost saving and monitoring strategies enabled to curtail the growth in its overheads to 18% and thereby maintain the same levels of cost to income ratio as compared to the prior period.
The bank’s Operating Profit Before Value Added Tax (OPBVAT) of Rs. 8.1 billion for the six months ended 2013 recorded an impressive growth of 201% YoY. OPBVAT excluding the capital gain was a modest increase of 3% over the corresponding period. The Profit After Tax (PAT) for the said period was Rs. 6.9 billion.
Group companies have contributed positively towards the performance of the NDB Group despite the sluggish capital market conditions that prevailed in the economy. However, group profits attributable to shareholders declined by 2% YoY due to the set-off of the said capital gain of Rs. 5.3 billion and inter-company dividends received during the period. With the diverse portfolio of service offerings comprising investment banking, wealth management and stock brokering the bank will continue to benefit from group synergies.
The bank’s asset growth slowed down in 2013, as a result of low credit appetite. The banking industry as a whole experienced low growth levels in customer advances from the beginning of 2013. As at end of May, industry credit growth was only 3% YTD compared with a 5% growth at NDB. The decline in pawning advances due to drastic drop in gold prices during the second quarter has also contributed negatively towards the drop in loans and advances during the period.
The NPL ratio stood at 1.85% at the end of June 2013. The robust and prudential risk management practices together with rigorous recovery processes adopted by the bank have assisted in maintaining the NPL ratio well below the industry average throughout the period.
The total deposit base increased to Rs. 118 billion with a YTD growth of 9%. Due to the relatively high interest rate scenario that prevailed during the second quarter of 2013, conversion of low cost savings to high cost term deposits was witnessed and this resulted in the CASA ratio declining from 25% in December 2012 to 21% by June 2013.
The capital adequacy position of the bank further strengthened during the first half of 2013 with the Tier I ratio improving from 11.16% in December 2012 to 13.89% in June 2013 mainly through the capital gain earned on the share buyback transaction that took place within the NDB group during the first quarter of 2013, whilst Tier I and II ratio improved from 12.41% to 15.09%. The bank’s strong capital base will provide a firm foundation for aggressive growth in the core banking business by seizing opportunities in the economy.
NDB continues to create value to its shareholders with an increased Earning per Share (EPS) of Rs. 49.18 from Rs. 17.81 in 2012 and a significantly increased ROE of 47.02% from 21.17% in 2012. The bank’s Return on Assets (ROA) stood at 4.70% as at 30 June 2013.
The International Financial Magazine (IFM) of UK, recently recognized NDB as the “Best Commercial Bank” for the great strides the bank has made in emerging as a competitive commercial bank, while displaying worthy corporate citizenship through sustainable business practices. The Asian Banking and Finance Awards also recognized NDB as the “Domestic Retail Bank of the Year” and “SME Bank of the Year” for 2013. These accolades, whilst encouraging staff to strive towards greater excellence, also endorses that NDB has touched upon the many domains of the business and industry.
Commenting on the bank’s performance for the first half of 2013, Chairman, Hemaka Amarasuriya said: “Despite the challenges in the business environment that prevailed during the period, NDB has delivered higher profits and enhanced value to its shareholders. We will continue our focus on growing our core banking activities whilst contributing to the economic development of the country”.
CEO Russell de Mel said: “Our innovative and specialised financial solutions together with prudential risk management practices have helped us to achieve strong performance. NDB will continue with the unique positioning to be the one-stop-shop for all financial and advisory needs of our customers. Good governance has been embedded into every aspect of our business processes to ensure greater transparency and accountability. Our staff are committed to achieve excellent standards of customer care while providing superior value to our shareholders”.
