NDB targets tapping 5% market share, open for mergers

NDB Bank CEO Rajendra Theagarajah (second from right) 

addressing the Investor Forum. Others from left are Group CFO Faizan Ozman, Chairman N.G Wickremeratne and NDB Capital CEO Vajira Kulatilaka – Pic by Shehan Gunasekera

By Shehana Dain

Marching forward, NDB Bank (NDB) is eyeing acquisitions and mergers, while hoping to boost its market share to over 5% by end this year from 4% at present.

Addressing the Bank’s Investor Forum in Colombo, NDB CEO Rajendra Theagarajah said: “By the end of this year, NDB’s market share in overall banking sector is likely to be over 5% from the present 4%. We are constantly looking at solid acquisitions to grab more and more market share in all banking segments.”

NDB already holds an 8.75% stake of Seylan Bank.

 “After the Government’s decision to abandon the DFCC-NDB merger, we are open to all mergers and acquisition opportunities,” Theagarajah added. However, he said that they could easily achieve the 5% market share with organic growth.

The bank is also planning to expand its credit card business as it has invested a hefty amount in digitisation. The CEO said NDB currently has a credit card customer base of over 16,500.

Asked about how he pictures NDB’s future in 2016 following the new Budget proposals, Thegarajah told the Daily FT: “As we see it, we have good times and not-so-good times. As the banking sector, the other thing that we see in Sri Lanka is a war free country. In terms of the 35% tax, when I was at HNB, the combined impact of VAT, FSVAT and Corporate Tax was in excess of 60%, so how can we complain? Despite some dips, the country is going in the right direction.”

Commenting on the digital revamp and the app the bank rolled out, the CEO highlighted: “The excitement of literally converting every one of our normal customers is immense. Through this except for cash withdrawals, everything else is in your hands. Now the focus will be serving rather than wasting time on processing. This is the only mobile solution in the country where the two million or so expatriate Sri Lankans can log in using an international mobile phone number from any corner of the world.”

“We are optimistic that we will play an even greater role this year. We are here to make money and good profits. Despite paying Rs. 854 million in Super Gains Tax and profits coming down by 14%, we still didn’t reduce the dividend payout,” he noted.

In 4Q2015 NDB increased its net profit by 46% to Rs. 1.3 billion while 2015 full year net profit was down 14% to Rs. 3.5 billion. The Earnings Per Share (EPS) rose to Rs.7.62 from Rs. 5.68 a year ago.

Elaborating on the bank’s financial stance, NDB Group CFO Faizan Ozman noted: “This 14% profit reduction was mainly due to margin squeeze and one off exceptional items, but core banking and volumes are on the growth path.”

Total assets grew 17.2 % to Rs. 315 billion compared to Rs. 269 billion in 2014. The deposit base grew 21.6% YoY to Rs. 184 billion, while CASA (Current and Savings Accounts) base stood at 25%.

Net interest income for 2015 was Rs. 7.8 billion down by 1% YoY due to the persistent low interest rates through 2015.

NDB managed to grow its loan book 19% YoY to Rs Rs. 215 billion, supported by significant growth in its term, leasing, and consumer loans portfolios.

Net Interest Margin (NIM) declined to 2.7% in 2015 vs. 3.3% in 2014, which contributed to the NII decline. Total impairment for 2015 increased 41% YoY to Rs. 746 million, despite a 61% YoY decline in collective impairment, as NDB adopted a more prudent provisioning method for its individual impairment calculations. The amount of non-performing loans over total loans (NPL) ratio however improved to 2.43% from 2.51% in 2014.

NDB recorded an expense growth of 16% YoY, driven by 15% YoY growth in personnel expenses and an 18% YoY growth of other expenses as the bank added 10 branches during the year, taking the total network to 93.