NDB posts strong 1H performance

NDB delivered solid June half year results, with continued growth in business and a stronger balance sheet. NDB continued to deliver strong performance despite the low level of credit growth during the first half of the year.

The Net Interest Income of the Bank grew by 29% over the past year. The Bank's Interest Income grew by 34% compared to the corresponding period of 2012 supported by a 14% expansion in its loan book over the corresponding period. Interest Expenses increased by 37% year-on-year (YoY) with a 24% growth in customer deposits compared to the corresponding period in a relatively higher interest rate environment.

The Bank's Net Fee and Commission Income also increased by 20% YoY due to effective cross selling mechanisms implemented among group companies. The revaluation gain made during the corresponding period of 2012 due to the significant depreciation of the Sri Lankan Rupee against the US Dollar was Rs. 418 million, compared to the gain of Rs. 47 million during the period under review.

However, Other Operating Income grew significantly by 465% over the corresponding period and included a one off equity capital gain of Rs. 5.3 billion.

The strategic disposal within the Group of 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, NCAP bought back its shares in March 2013 posting a Rs. 5.3 billion capital gain for NDB, which supports the core equity of the Bank.

The Bank's effective cost saving and monitoring strategies curtailed growth in its overheads to 18% and thereby maintain the same levels of Cost to Income Ratio as compared to the corresponding period.

The Bank's Operating Profit Before Value Added Tax (OPBVAT) of Rs. 8.1 billion for the six months ended June, 2013 recorded an impressive growth of 201% YoY.

OPBVAT excluding the capital gain was a modest increase of 3% over the corresponding period. The Profit After Tax (PAT) for the said period was Rs. 6.9 billion.

Group companies have contributed positively towards the performance of the NDB Group despite the sluggish capital market conditions in the economy. However, group profits attributable to shareholders declined by 2% YoY due to the set-off of the capital gain of Rs. 5.3 billion and inter-company dividends received during the period. With the diverse portfolio of service offerings comprising investment banking, wealth management and stock brokering the Bank will continue to benefit from group synergies.

The Bank's asset growth slowed down in 2013, due to low credit appetite. The banking industry experienced low growth levels in customer advances from the beginning of 2013.

As at end of May, industry credit growth was only 3% YTD compared with a 5% growth at NDB. The decline in pawning advances due to drastic drop in gold prices during the second quarter also contributed negatively towards the drop in loans and advances during the period.

The NPL ratio stood at 1.85% at the end of June 2013. The robust and prudential risk management practices with rigorous recovery processes adopted by the Bank assisted in maintaining the NPL ratio below the industry average throughout the period. The total deposit base increased to Rs. 118 billion with a YTD growth of 9%. Due to the relatively high interest rate scenario that prevailed during the second quarter of 2013, conversion of low cost savings to high cost term deposits was witnessed and this resulted in the CASA ratio declining from 25% in December 2012 to 21% by June 2013.

The Capital Adequacy position of the Bank further strengthened during the first half of 2013 with the Tier I ratio improving from 11.16% in December 2012 to 13.89% in June 2013 mainly through the capital gain earned on the share buyback transaction within the NDB group during the first quarter of 2013, while Tier I and II ratio improved from 12.41% to 15.09%. The Bank's strong capital base will provide a firm foundation for aggressive growth in the core banking business by seizing opportunities in the economy.

NDB continues to create value to its shareholders with an increased Earning per Share (EPS) of Rs. 49.18 from Rs. 17.81 in 2012 and a significantly increased ROE of 47.02% from 21.17% in 2012. The Bank's Return on Assets (ROA) stood at 4.70% as at June 30, 2013.