National Development Bank PLC (NDB) has recorded a Profit after Tax (PAT) of Rs. 1,159 million for the three months ended 31 March 2017, an impressive growth of 45% over the corresponding period of Q1 in 2016.
During the quarter, the total assets of the bank grew up to Rs. 347 billion (4% from December 2016). Loans and receivables to customers recorded a notable growth of Rs. 14 billion (6%) to reach Rs. 241 billion. Customer deposits also achieved an impressive growth of Rs. 24 billion (12%), thereby bringing the total customer deposits to Rs. 228 billion.
Commenting on this impressive first quarter performance, NDB Chief Executive Officer Dimantha Seneviratne stated that such results at the outset of the year are encouraging, and reflects the potential of the bank to record enhanced performance throughout the year.
He attributed the impressive results to the strong teamwork and the firm focus on generating enhanced value from all fronts to all its stakeholders. He also mentioned that the bank’s fresh strategy will place the group on the precise trajectory in becoming a major player within the industry, whilst committing and contributing to the success of its stakeholders and the nation at large.
Improved core banking operations contributed towards the growth in profitability of the bank. Net Interest Income (NII) grew by 18% in Q1 2017 up to Rs. 2,334 million compared to Rs. 1,979 million for Q1 2016, supported by the strong growth in several key asset products coupled with the enhanced net interest margin (NIM) of 2.78% compared to the NIM of 2.64% in 2016.
Net fee and commission income of Rs. 554 million for Q1 2017 grew moderately by 3%. The bank continuously strategises on improving non-fund based income, thereby maintaining an appropriate revenue mix to overcome any unforeseen challenges. Net gains from trading of Rs. 273 million, which comprises of income from foreign exchange, grew by 46% compared to the corresponding period, benefiting from the movement in the exchange rates.
Impairment charges for loans and other losses (Rs. 134 million) saw a reduction of 75% compared to Q1 2016. The higher impairment charge during Q1 2016 was due to one-off specific provisions made for few customers, based on sound judgement and objective evidence.
Operating expenses have been strategically managed. Expenses were up by 10% to Rs. 1,718 million over Rs. 1,568 million for Q1 2016. The increase in costs was mainly attributable to the increase in business volumes, network expansion, increase in Value Added Taxes and the increase in deposit insurance premium cost resulting from the increased customer deposits base of the bank. The bank strives to continuously improve this ratio amidst planned volume and network expansions.
The resultant operating profit before taxed on financial services was Rs. 1,912 million, a marked increase of 50% over Rs. 1,278 million in Q1 2016. Tax on financial services comprising of NBT and VAT increased by 67%. This was partly due to the increase in the VAT rate to 15% from 11% applied for the corresponding period.
Profit attributable to equity holders of the bank (Group PAS) was Rs. 738 million, an impressive 35% growth over Rs. 548 million for Q1 2016.
Total assets of the bank stood at Rs. 347 billion, whilst total assets of the Group stood at Rs. 354 billion as at the end of Q1 2017. Loans and receivables to customers grew by 6% over December 2016 and stood at Rs. 241 billion. This was an increment of Rs. 14 billion which was achieved across all of the business segments of Corporate, Retail and SME.
Customer deposits grew by a notable 12% or by Rs. 24 billion during Q1 2017 to Rs. 228 billion by end Q1 2017. Within deposits, term deposits recorded a relatively higher growth, reflecting the general preference of depositors to place their money in high interest yielding products. The bank is meticulous in adjusting its deposit mix to increase the CASA contribution within the total mix. CASA grew up to Rs. 49.6 billion from Rs. 46.3 billion over the three months period.
Gross Non-Performing Loan (NPL) ratio of the bank for Q1 2017 was 2.87%, whilst the net NPL ratio was 1.56%. The bank’s proactive risk management and recoveries processes ensure that the ratio is well managed.
The bank’s Tier I capital adequacy ratio for Q1 2017 was 9.24% whilst its total capital adequacy ratio was 12.76%. The same ratios for the Group were 11.24% and 14.84% respectively. The ratios are well above the statutory minimum requirements of 5% and 10% for Tier I and Total Capital Ratio respectively. The bank has carried out the necessary ground work to migrate to the BASEL III capital requirement which will come to effect in July 2017.
The bank’s annualised return on average shareholders’ funds (ROE) for Q1 2017 was 13.96% (2016: 13.36%) with an earnings per share (EPS) of Rs. 21.25 (2016: Rs. 19.19).
NDB added one branch to its network during the quarter with the opening of the Katana branch, bringing the total branch network to 105, whilst relocating Kiribathgoda and Wennappuwa branches to more spacious locations for greater customer convenience. The total ATM count was 117, with 12 off-site ATMs. NDB’s reach to the customers comprises of an equitable mix of physical and virtual channels. The bank’s mobile banking app saw a rapid increase in on-boarding during the quarter and is widely commended by the users.
The quarter saw the bank being recognised with five awards. The Global Banking & Finance Magazine of UK recognized NDB with three award titles, namely, the Best Mobile Banking App, the Best SME Bank and the Best Investor Relations Bank 2017 in Sri Lanka. The bank also won awards for Brand Excellence within the Banking & Finance sector and excellence in Social Media Marketing from the CMO Golden Globe Brand Excellence Awards held in Kuala Lumpur, Malaysia recently.
Furthermore, NDB Investment Bank Ltd., the investment banking subsidiary of NDB, was awarded two titles, namely, the Most Trusted Investment Banking Brand – Sri Lanka by the prestigious Global Brands Magazine Awards 2017 and the Best Corporate and Investment Bank – Sri Lanka by the Asiamoney Banking Awards 2017. All these awards are a firm affirmation of the stature that the bank and its Group companies have established in the Sri Lankan banking and capital markets sphere.