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Citizens Development Business Finance PLC (CDB) reinforced its dominance as a disruptor in the financial intermediary business in Sri Lanka with its exceptional financial results for FY 2018/19, posting profit before taxes of Rs. 2.7 billion, an increase of 34% as per the interim group financial results released to the CSE.
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Chairman Herschel Gunawardena |
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MD/CEO Mahesh Nanayakkara |
Within its relatively short journey in Sri Lanka’s financial services industry, CDB has climbed the zenith to rank within the Top 5 largest Non-Bank Financial Institutions in the country, possessing an asset base of Rs. 91.9 billion, which at Company level is posted at Rs. 89.4 billion. Its strong balance sheet assets collates 93% of regular cash flow and income generating assets.
Being an ardent proponent of sustainability at the highest global compliance levels, CDB’s two dimensional business model positions the Company as a disruptor in the financial intermediary business and a socially and environmentally responsible corporate steward. Being listed on the mainboard of Colombo Bourse, this two pronged approach adds immense value to its bottom line, given the strong foundation of business sustainability and the constant stakeholder engagement upon which the business thrives on.
The Group’s revenue for this FY of Rs. 16.9 billion reflects a growth of 40%, while net interest income showcases an increase of 52%, at Rs. 5.5 billion. Profit before taxes recorded a figure of Rs. 2.7 billion reflecting a growth of 34%. Taxes amounting to Rs. 951 million reflecting an increase of 58% in comparison to the corresponding previous period includes VAT on financial services, debt repayment levy, Nation Building Tax, crop insurance levy and income tax. PAT stands thus at Rs. 1.8 billion, which too is a significant increase of 24%, achieved despite a threefold increase in impairment charge set aside for a higher impairment reserve. This is in line with regulatory requirements and accounting standards which CDB does not expect to translate into actual credit losses.
The Company recorded PAT of Rs. 1.7 billion, reflecting a growth of 22%, while Unison Capital Leasing Ltd. (UCL) contributed Rs. 98 million towards the Group’s PAT figure. UCL is CDB’s 90.3% owned specialised leasing subsidiary, and will merge with CDB as per regulatory requirements. A Stock Exchange announcement has already been made in this regard.
The gross NPL ratio recorded at 6.68%, and on net basis indicates at 3.84%. The net NPL ratio excluding revolving repossessed stock is reflected at 1.5%. Cost to income ratio declined to 49% during the period under review.
CDB’s loan book recorded a modest growth of 18%, detailed at Rs. 71.5 billion, from which 97% represents an asset backed portfolio. CDB raised $ 60 million in foreign funding from Belgian Investment Company for Developing Countries (BIO), Dutch Development Bank of the Netherlands (FMO) and Blue Orchard Microfinance Fund during the financial year in bid to add fillip to the country’s SMEs. The deposit base as at the yearend stood at Rs. 47.2 billion with a healthy deposits to debt funding combination of 60% to 40%. This composition also helped to record a healthy assets and liabilities maturity status.
Shareholders’ Funds recorded a figure of Rs. 8.8 billion, up by 22%, well above the regulatory threshold of Rs. 1.5 billion and the net book value per share stood at Rs. 162.50. Earnings per share (EPS) recorded a figure of Rs. 33.11 for the financial year. Tier I & II capital ratios stood at 7.78% and 11.05% respectively, computed under the revised direction issued by the Central Bank. CDB announced a rights issue of Rs. 1 billion recently, targeted on strengthening its capital base and in line with future growth aspirations.
CDB’s sustainability drivers are founded on the three key goals of social inclusivity, zero carbon growth and resource efficiency. Having been acknowledged and commended globally and locally for its sustainability fundamentals, CDB focuses on the diversity of its clientele to deliver on the results of its business model, which combines ‘Urban Funding with Rural Lending’. By becoming a net lender to the rural economy and touching the base of the pyramid markets that support a strong financial strength of economic value addition.
At present, CDB’s business strategy embeds conventional business aspects under its deliberate strategy and disruptive aspects under its emergent strategy. CDB’s new purpose statement, ‘Empowering Aspirations’ was recently rolled out to complement and further strengthen and reinforce its brand promise of being ‘Your Friend’.
Explaining the rationale of this new purpose statement, MD/CEO Mahesh Nanayakkara said, “When our tagline of Your Friend was launched 15 years ago, CDB was a relatively unknown entity and it best reflected our purpose at the time of being a true partner to the citizens of this country. However, having now become a financial services trailblazer and firmly etched our presence among the Top Five largest NBFIs in the country, the time is apt for us to take the concept of Your Friend to the next level, by empowering their aspirations. Empowering Aspirations therefore denotes our strong capacity to support our customers, team members and valued business partners.”
He added that this purpose statement also pushes the realms to make luxury accessible, “which we have further integrated into our entire ethos by gearing non-consumption disruption and being cognisant of elevating customer aspirations. Our firm belief is that the financial intermediary business will be subject to dramatic disruption within the next five years, where demarcated boundaries would be non-existent.”
CDB’s unrelenting commitment to ensure holistic sustainability through its business purpose infused into its business model has seen it being conferred with local and international accolades. This year it was included among the Top Ten Best Corporate Citizens and won in the category under the Rs. 15 billion revenue at the Best Corporate Citizen Sustainability Awards organised by the Ceylon Chamber of Commerce. It continued its winning streak for a third consecutive year with a Gold Award in Financial Services at the National Business Excellence Awards of the National Chamber of Commerce.
CDB is now ranked among the Top 50 Most Valuable Consumer Brands in Sri Lanka and recorded the highest percentage increase in brand value among the Top 50 Brands as per the latest rankings released by Brand Finance. CDB’s unwavering compliance to governance, ethics and business principles was reiterated with the Grand Award – Best of Sri Lanka at the ARC Awards USA for its 2017/18 Annual Report.
