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| Sunday, 13 June 2004 |
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NDB group gears for growth The NDB Group released its first quarter results for 2004 on the 18th. The recent acquisition by the National Development Bank (NDB) of nearly 80% of the issued share capital of NDB Bank Limited (NBL) is expected to transform the business model of the Group, in the medium term, with the commercial banking operations of NBL complementing the project and SME finance activities of NDB. These Quarter 1 figures do not reflect this acquisition, which occurred in April this year, or the mandatory offer to the remaining shareholders of NBL, at a price of Rs. 31/- per share, which is to be made shortly. The NDB's profit before tax (PBT) for the period increased from Rs. 273 million for the quarter of 2003 to Rs. 332 million in Q1 2004. Net interest income reduced, in line with the reduction in interest rates in the economy, as the Bank lowered its interest rates to its customers, especially in the SME sector, and operated on lower spreads. This reduction was compensated by lower provisions, as the Bank reaps the benefits of a disciplined credit process, and consistently stringent provisioning policies. Provisions as a percentage of non performing loans amounted to 52% as at 31.03.04. In addition to these provisions made according to the minimum rules mandated by the Central Bank, the Bank also has additional general and specific provisions on its performing loan portfolio amounting to Rs. 853 m. The profit after tax, however, remained virtually flat at Rs. 225.4 million in comparison with Rs. 225.9 million in Q1 of 2003, due to an increased tax charge, including the higher cost of VAT which was increased from 10% to 15%. Group profits before tax for this quarter are distorted in comparison with profits of a year earlier, largely because of the divestment of Mercantile Leasing Limited (MLL) and the acquisition of Eagle Insurance Company Limited (Eagle). MLL ceased to be a subsidiary in April 2003. Its results are therefore included in Q1 2003, but not in Q1 2004. The acquisition of Eagle occurred in July 2003 and the interest costs on the bridging loan which financed the acquisition until March 2004, when it was replaced by equity, is a charge against profits for Q1 2004, but not Q1 2003. The after tax profit of the group also declined from Rs. 306 million in Q1 2003 to Rs. 218 million for this quarter, due to the divestment of MLL, acquisition of Eagle and the higher tax charge of NDB, as described above. The recent changes in the Group's structure have positioned NDB Group to harness the opportunities that will arise in the future. This will include new infrastructure investments that are expected to flow into the economy soon, under the Government's development programme. |
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