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However, PAT for the Group was Rs. 2.7 b as at the end of the year, a 70% decrease from the previous year. This drop in the Group PAT was due to the exceptional equity gain of Rs. 5.3 b earned by the Group’s subsidiary NDB Capital Holdings PLC (NCAP) through the strategic divestment of AVIVA NDB Insurance PLC to American International Assurance (AIA) Company Ltd. of Hong Kong in December 2012.
This gain was transferred to the bank from the Group in March 2013 via a share buyback agreement with NCAP, thereby bringing down the Group PAT by the same amount compared to the previous year. The timing difference of realising this income within the Group and the bank also explains how the bank’s PAT has steeply risen compared to the previous year’s comparative figure.
On an overall note, the Group companies performed well during the year, providing much impetus to the enhanced performance of the Group as a whole.
The Total Operating Income of the bank for 2013, comprising of Net Interest Income (NII), Fee and Commission Income and Net Trading Income achieved an impressive growth of 80% up to Rs. 15.9 b, compared to 2012.
The growth in Net Operating Income was restricted to 68%, due to impairment losses totalling up to Rs. 1.2 b during the year. This was a result of the increased stress levels within the industry for loan recoveries and the bank’s prudent adoption of fair valuing the impaired loans based on sound judgment and objective evidence on future recoveries.
With policy rates being reduced in two tranches as a part of the country’s monetary policy, interest rates were on a continuous downward trend during the year. Withstanding such industry norms, the bank was able to achieve an NII of Rs. 6.8 b, a 22% increase compared to 2012. Interest income grew by 21% with a corresponding growth in the interest expenses also by the same percentage. The bank was able to maintain its Net Interest Margin at 3.74% for both 2013 and 2012, resulting from efficient balance sheet management.
Fee and Commission Income of Rs. 1.6 b increased by 33% over the previous year. The bank derives large cross selling opportunities through its unique Group structure and has improved its Fee and Commission Income base via such opportunities.
Costs continued to be subject to strict vigilance, monitoring and control during the year and the bank reported a Cost to Income Ratio of 51% for 2013, excluding the one off equity gain earned during the year. The bank managed this Cost to Income Ratio level with nine new branches being added to the total branch network of the Bank during the year.
The basic Earnings per Share (EPS) of the bank increased by 164% up to Rs. 46.96. The Group EPS however decreased by 70% to Rs. 16.48, again owing to the aforementioned timing difference of recognising the one-off equity gain within the Group and the bank. The bank’s EPS excluding the one-off equity gain was Rs. 14.28.
The bank’s Return on Average Shareholders’ Funds for 2013 was 44.69% which was a 111% increase compared to the previous year. The same metric for the Group however decreased by 75% to 10.70% due to the timing difference of recognising the capital gains by the bank and Group on the strategic divestment of a Group company as mentioned above. The bank’s Return on Average Shareholders’ Funds net of the one off equity gain was 13.61%.
The market price per share of NDB closed at Rs. 160.50 for the year, resulting in a Price Earning (PE) Ratio of 9.74 (times). The PE Ratio thus recorded an impressive growth of 291%.
The bank’s Balance Sheet achieved a notable growth in 2013, crossing the Rs. 200 b mark. This achievement speaks volumes of the bank’s commitment to strategically grow and continually increase the value generated to its stakeholders. The total asset base of the bank increased by 23% compared to the previous year, up to Rs. 201.2 b within which loans to customers increased by 18%. Customer deposits reached Rs. 130 b, a 21% increase compared to 2012. The Non-Performing Loan (NPL) Ratio increased to 2.4% from the previous year’s 1.3% and was well below the industry norm. Despite increased NPLs, the bank’s asset portfolio is backed by a strong provision cover of 51.24%.
A robust capital base continued to provide a solid foundation for the bank’s operating model. During the year, the bank was able to raise Rs. 10 b via a rated unsecured debenture issue, which is the single largest quantum of funds raised through a listed corporate debenture issuance to date in the history of Sri Lanka.
With this debenture issue the bank’s regulatory capital reached Rs. 27 b. This enhanced capital base provides the bank with the essential edge to aptly realize its ambitious growth expectations and maximise its profitability while being able to weather any potential losses arising from the business.
Accordingly capital adequacy levels were maintained well above the minimum regulatory requirement levels, the Tier I Ratio at 12.05% and the Tier I and II Ratio at 17.87%.
Chairman of NDB Sunil Wijesinha reflecting on the year expressed his gratitude to the bank’s shareholders and other investors for the utmost support rendered by them in defining a year brimming with success. The Chairman also expressed his gratitude to all staff and other stakeholders of the bank for their respective contributions in moulding the Bank to be the respected institution it is today.
CEO Rajendra Theagarajah noted that the bank was on a well concerted growth trajectory with a skilfully-articulated five-year strategy. He also reiterated the bank’s strong commitment to be a significant part of the economic resurgence of the country. Having concluded one successful year, the bank is aptly geared for another exciting year, where it will embrace positive changes, redefine success and add notable value to all its stakeholders.
The bank continued to reach out to its clientele through timely and multi modal expansions. Its branch network stood at 78 in total as of the year end. In addition to the conventional brick and mortar set up, the bank actively engaged in improving its virtual and mobile presence in order to improve its presence in the minds of the customers and bringing in absolute customer convenience.
