NDB achieves 164% growth

National Development Bank PLC (NDB) concluded another successful year, achieving Rs. 7.7 billion PAT, with a growth of 164% over the previous year. The sound performance of the Bank during the year amidst stiff competition, affirms the resilience and prudence of the Bank's strategy in driving its business efficiently.

The Bank recorded a Profit Before Tax (PBT) of Rs. 9.7 billion for 2013, a healthy growth of 110% compared to the previous year. The Bank's PAT was Rs. 7.7 billion, an increase of 164% over the previous year's Rs. 2.9 billion.

However, PAT for the Group was Rs. 2.7 billion as at the end of the year, a 70% decrease from the previous year.

This drop in Group PAT was due to the exceptional equity gain of Rs. 5.3 billion earned by the Group's subsidiary NDB Capital Holdings PLC (NCAP) through the strategic divestment of AVIVA NDB Insurance PLC to American International Assurance (AIA) Company Limited of Hong Kong in December 2012.

This gain was transferred to the Bank from the Group in March 2013 via a share buyback agreement with NCAP, thereby bringing down the Group PAT by the same amount compared to the previous year. The timing difference of realising this income within the Group and the Bank, also explains how the Bank's PAT has steeply risen compared to the previous year's corresponding figure.

On an overall note, the Group companies performed well during the year, providing much impetus to the enhanced performance of the Group.

The Operating Income of the Bank for 2013, comprising of Net Interest Income (NII), Fee and Commission Income and Net Trading Income achieved a growth of 80% up to Rs. 15.9 billion, compared to 2012. The growth in Net Operating Income was restricted to 68%, due to impairment losses totalling up to Rs. 1.2 billion.

This was a result of the increased stress levels within the industry for loan recoveries and the Bank's prudent adoption of fair valuing the impaired loans based on sound judgement and objective evidence on future recoveries.

With policy rates being reduced in two tranches as a part of the country's monetary policy, interest rates were on a continuous downward trend during the year. Withstanding such industry norms, the Bank achieved an NII of Rs. 6.8 billion, a 22% increase compared to 2012.

Interest Income grew by 21% with a corresponding growth in Interest Expenses also by the same percentage. The Bank maintained its Net Interest Margin at 3.74% for 2013 and 2012, resulting from efficient balance sheet management.

Fee and Commission Income of Rs. 1.6 billion increased by 33% over the previous year. The Bank derives large cross selling opportunities through its unique Group structure and has improved its Fee and Commission Income base via such opportunities.

Costs continued to be subject to strict vigilance, monitoring and control and the Bank reported a Cost to Income Ratio of 51% for 2013, excluding the one off equity gain earned during the year.

The Bank managed this Cost to Income Ratio level with nine new branches being added to the total branch network of the Bank during the year.

The Basic Earning per Share (EPS) of the Bank increased by 164% up to Rs. 46.96. The Group EPS however decreased by 70% to Rs. 16.48, again owing to the aforementioned timing difference of recognising the one off equity gain within the Group and the Bank. The Bank's EPS excluding the one off equity gain was Rs. 14.28.

The Bank's Return on Average Shareholders' Funds for 2013 was 44.69% which was a 111% increase compared to the previous year. The same metric for the Group, however, decreased by 75% to 10.70% due to the timing difference of recognising the capital gains by the Bank and Group on the strategic divestment of a Group company. The Bank's Return on Average Shareholders' Funds net of the one off equity gain was 13.61%.

The market price per share of NDB closed at Rs. 160.50 for the year, resulting in a Price Earning (PE) Ratio of 9.74 (times). The PE Ratio thus recorded a growth of 291%.

The Bank's Balance Sheet crossed the Rs. 200 billion mark. The asset base of the Bank increased by 23% compared to the previous year, up to Rs. 201.2 billion within which loans to customers increased by 18%. Customer deposits reached Rs. 130 billion, a 21% increase compared to 2012.

The Non-Performing Loan (NPL) Ratio increased to 2.4% from the previous year's 1.3% and was well below industry norm. Despite increased NPLs, the Bank's asset portfolio is backed by a strong provision cover of 51.24%.

A robust capital base continued to provide a solid foundation for the Bank's operating model. The Bank raised Rs. 10 billion via a rated unsecured debenture issue, which is the single largest quantum of funds raised through a listed corporate debenture issuance to date in the history of Sri Lanka. With this debenture issue the Bank's regulatory capital reached Rs. 27 billion.

Accordingly, capital adequacy levels were maintained well above the minimum regulatory requirement levels.