Saturday, 14 February 2015 01:42
National Development Bank PLC and its Group companies recorded an exceptional financial performance for the year 2014.
The Groupâ€™s Profit Attributable to Shareholders (PAS) excluding any one-off gains crossed Rs. 4 billion, for the first time in its history, supported by a strong growth in the balance sheet assets to end at Rs. 269 billion as at 31 December 2014.
NDB Chief Executive Officer Rajendra Theagarajah, commenting on the yearâ€™s achievements, maintained that the NDB Group underwent structural remodelling during the year enabling concerted focus and precise execution of the Groupâ€™s business strategy, which was the key driver of sound financial performance.
The CEO also mentioned that the Group has consistently delivered improved shareholder value and created sustainable value to all other stakeholders whilst playing an integral role in the prospering national economy.
The NDB Group recorded a total operating income of Rs. 12.97 billion for the 12 months ended 31 December 2014 which was a 12% increase from the comparative yearâ€™s total operating income of Rs. 11.55 billion. Total operating income was fortified by the performance of Net Interest Income (NII), Fee and Investments Income.
NII increased by 13% up to Rs. 7.91 billion, from Rs. 7 billion of the comparative year. This is a notable achievement in comparison to the average industry NII growth rate. NII benefited from the strong growth in business volumes and prudent management of the balance sheet.
Impairment charges for loans and other losses were lower by 58% over the previous year, as a result of provisions made for one-off individual loan exposures during the year 2013. The impairment charges for loans and other losses for the year ended 31 December 2014 was Rs. 529 million and compares with Rs. 1.26 billion for 2013.
Accordingly, net operating income increased by 21% up to Rs. 12.44 billion.
The total operating expenses of the Group amounting to Rs. 5.91 billion, was well managed, and recorded an increase of only 6%, when compared with the prior year. Both the bank and the Group aggressively expanded their business operations during the year. Some of these activities were high cost initiatives such as the opening of NDBâ€™s first-ever digitised branch â€˜NDB Connectâ€™ at the Kandy City Centre.
Despite these significant business expansions, the Group demonstrated excellent operational efficiencies through effective procurement mechanisms. The Group is committed towards achieving additional sustainable savings by further streamlining its processes and procedures.
As a result, the cost to income ratio for the 12 months ended 31 December 2014 was 45.52%, which is well below the industry average, and is also one of the lowest in the industry.
Group operating profit after tax on financial services recorded a 44% increase, while profit after tax increased by 57% over the previous year. Group PAS demonstrated a strong growth in core banking performance which accounted for 77% of the Group PAS for the year.
The total balance sheet size of the Group grew by 30% to reach Rs. 269 billion. The Group has demonstrated energised growth since crossing the Rs. 200 billion mark in 2013. Loans and receivables to customers increased by 28% and was Rs. 175 billion as at 31 December 2014.
In 2014, the credit growth was confined to moderate levels in a very low interest rate regime. Against such a backdrop, the Group has performed commendably well in increasing its loan book across all product categories.
Asset quality, denoted by the non-performing loan ratio was 2.5% as at 31 December 2014, and is well below the industry average.
In the liability frontier, customer deposits increased by 17%, and was Rs. 152 billion as at 31 December 2014, with a CASA ratio of 24.3%. It is noteworthy to mention that the bank has preserved its CASA ratio and recorded only a marginal deterioration from the CASA mix of 25% in 2013, amidst a low appetite of the customers to invest their savings/funds in bank deposits, given the low interest rate environment that prevailed during the year.
The Return on Assets (ROA) of the Group closed at 1.74% as compared to 1.39% of 2013, demonstrating efficient management of assets, to maximize profitability.
Capitalising on the strong relationships maintained with international funding agencies, NDB raised a total of $ 200 million during the year via a syndication facilitated by the International Finance Corporation. The funds raised via this syndication facility were infused to the SME sector of the country and other eligible sectors that contribute towards national development.
NDB Groupâ€™s capital position was further strengthened during 2014. Tier I capital of the Group as at 31 December 2014 was Rs. 26.95 billion with a Capital Adequacy Ratio (CAR) of 12.92%. Tier I and II capital was Rs. 36.61 billion with a CAR of 17.55%.
NDB Groupâ€™s CAR has constantly remained at a strong level, which signifies the Groupâ€™s stability, capacity for expansion and ability to absorb risk. These constituents have served as key strengths which have enabled the Group to make significant strides in the banking and capital market businesses of Sri Lanka.
The newest addition to the NDB Group is NDB Zephyr Partners Ltd. Inaugurated in December 2014, NDB Zephyr is in the business of managing private equity funds and currently manages the Emerald Sri Lanka Fund I, the largest private equity fund dedicated to Sri Lanka.
The Fund will be investing on equity or equity related securities in growth-oriented organisations such as SMEs in Sri Lanka. Apart from providing much-needed capital for the organisations, the investment team of the fund manager will provide guidance to portfolio companies in areas of strategy, finance and management development in order to enhance the value of the companies.
The inauguration of the new company completed the missing link in the product portfolio of the NDB Group, which now features a dynamic set of full spectrum banking and capital market offerings.
All shareholder return indicators soared during the year, indicating absolute value generated for shareholders. The Group Earnings Per Share (EPS) for the year ended 31 December 2014 was Rs. 25.14 with a 53% increase over the previous year. Return on Shareholder Funds (ROE) was 15.78%, a growth of 47%.
The share price of the bank closed at Rs. 250 on 31 December 2014 with a market capitalisation of Rs. 41.3 billion. The bank was the 16th in the Colombo Stock Exchange in terms of market capitalisation ranking, and has moved up by four positions compared to its rank of 20 in December 2013.
The Total Shareholder Return (TSR) for the year ended 2014 was 62% and compares with a TSR of 31% as at 31 December 2013, which indicates the value created to investors over the years.
The resultant Price Earning (PE) Ratio was 9.9 (times).
Meanwhile, 2014 was a year filled with many awards and accolades conferred on NDB by various national and international institutions. The latest award of the year was being selected as the sole global awardee for financial inclusion awarded by the prestigious Banker Magazine of UK (in November 2014). All these awards bear testimony to the significant impact NDB has created through its existence in multiple layers of the countryâ€™s economy.
NDB Chairman Sunil Wijesinha sharing his sentiments mentioned that NDB is committed to helping the Nationâ€™s individuals to prosper, enable business growth and develop Sri Lankaâ€™s capital markets via its conglomerate structure. He also noted that the Group is relentless in its efforts to penetrate all of the segments of the country, from small scale cottage industries to large sale corporates to usher true national development.