NDB records Rs. 6.8 b Q1 profit before tax

National Development Bank PLC (NDB) said yesterday it continued its strong growth momentum by posting impressive results for Q1 2013 in the backdrop of intense competition which placed severe pressure on interest margins and posed many challenges.

Despite these challenges, NDB recorded a strong performance for the first quarter of 2013, posting a commendable Profit After Tax (PAT) of Rs. 6.2 b to its shareholders, which is an increase of 387% compared to the corresponding period of last year.

The bank’s Profit Before Tax (PBT) rose to Rs. 6.8 b during the said period, reflecting an increase of Rs. 5.1 b (294%) over the PBT of Rs. 1.7 b for the quarter ended March 2012.

The reported earnings of the bank are mainly due to the significant growth in net interest income of 21% and equity income of Rs. 5.3 b. The bank’s PBT excluding the exceptional equity income of Rs 5.3 b and the one-off reversals of loan loss provisions made in the prior period, have recorded a growth of 4% over the prior period.

In addition to this, costs saving strategic initiatives implemented by the bank to eliminate non-value adding activities and streamline its internal processes have contributed positively towards improving the core banking profits and setting the stage for a strong 2013.

NDB...

The bank continued to benefit from the group synergies and provides unique value proposition to its shareholders. The strategic disposal within the Group by selling the investment in AVIVA NDB Insurance PLC to American International Assurance Company Limited (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 that was entered into, NCAP bought back its shares in March 2013 posting a Rs. 5.3 b capital gain to the bank’s equity income.

The Group share of profits increased tremendously by 224% compared to March 2012 as a result of improved performance by NCAP. The NDB Investment Bank and NDB Stock Brokers recorded modest profits due to the prevailing slow moving and inactive capital market conditions in the first quarter.

The bank’s Earning Per Share (EPS) of Rs. 43.52 indicates a significant increase of 145% over December 2012.  The Bank’s Return on Average Assets (ROA) and Equity (ROE) for the first quarter stood at 4.05% and 42.42% respectively due to the exceptional equity income of Rs. 5.3 b.

The deposit base of the bank grew by Rs. 20 b compared to the corresponding period under review posting a 22% growth to reach Rs. 110 b as at 31 March 2013. The bank’s newly-introduced ‘NDB Real Saver’ account which offers a true savings proposition to its customers has been able to attract over Rs. 500 m in deposits while inculcating the saving habit amongst all Sri Lankans.

The growth in loans and advances of the banking sector was at its lowest since end 2010 and thus comparative interest income earned dropped at a higher rate. Average Weighted Prime Lending Rate (AWPLR) has remained high and volatile in 2013, increasing the cost of borrowings to customers.

Despite these challenges, the bank’s loans and advances portfolio increased to Rs. 119 b as at 31 March 2013, an increase of Rs. 13 b, or 13% compared to March 2012. The NPLs to gross lending portfolio was 1.56% with a provision cover of 54% as at 31 March 2013. The NPL ratio of the bank continues to remain healthy due to the prudent risk management practices adopted by the bank and is well below the industry average. The liquidity position of the bank is managed exceptionally well and the ratio of 24.69% (DBU) is well above the required statutory limit of 20%.

The regulatory Tier I and II Capital Adequacy Ratio (CAR) improved to 15.86% from 12.41% as at December 2012 due to the realised capital gains from the share buyback transaction effected during this period. Accordingly, the bank’s capital base increased by Rs. 4.3 b. The bank’s very strong Tier I capital base and the cushioning capacity to absorb any vulnerability or uncertainty in the market supports the future growth potential through profitable avenues to grow its balance sheet aggressively in the coming months.

During the first quarter of 2013, the bank continued to expand its distribution network to provide greater accessibility and convenience for its valuable customers by expanding the bank’s footprint in the Southern Province with the opening of a branch in Akuressa. With this addition, the bank’s total number of branches increased to 70.

In recognition of NDB’s human resource practices, the bank received two awards for ‘Recruiting and Staffing Best in Class Award’ and ‘Global HR Excellence Award’ at the prestigious World HRD Congress held in February 2013 in Mumbai, India.

Commenting on the Q1 2013 performance, CEO of NDB Russell De Mel said: “The impressive performance during the period results from our continued focus on achieving a number of main objectives, including re-focusing on our core business and pursuing a growth agenda. Key initiatives aimed at developing our SME and retail segments and improving asset quality remain on track. We have expanded our distribution network and are continuing to work on a number of IT initiatives which will enable us to offer service enhancements for our customers and bring sustainable improvements in our operational efficiency.”

Chairman Hemaka Amarasuriya stated: “Our solid foundation, cemented by our strong capital base has undoubtedly expanded our horizons. We strongly believe in our ability to achieve higher returns through improved performance, intensified cost reduction drives and disciplined approach to capital and funding costs.”

“The bank will continue to grow through aggressive channel expansion, introducing innovative and personalised product propositions and service offerings to fulfil the financial needs of a diverse clientele supplemented by streamlined business processes during the rest of the year.”