Friday, February 15, 2013

NDB Bank Performance

The NDB Group reported a net profit growth of 45 percent to Rs. 3 billion for the financial year ended December 31, 2012 with its asset base increasing 17 percent year-on-year. Profits before tax grew 37 percent to Rs. 4.6 billion. However, a capital gain of Rs. 6 billion gave shareholders a profit of Rs. 8.8 billion.

"These growth levels resulted in a PBT of Rs. 4.6 billion and PAT of Rs. 3 billion. However, it is noteworthy to mention that the share of profits available for shareholders at a group level increased significantly by 227 percent to Rs 8.8 billion due to the capital gains of Rs. 6 billion generated as a result of the divestment of the investment in Aviva NDB Insurance PLC to American International Assurance (AIA) Company Limited of Hong Kong during the fourth quarter of 2012," the group said in a statement yesterday (14).

The Net Interest Income of the Bank increased by 26% over the last year with other income from fees, commission and forex income increasing by 22% to Rs. 2.3 billion. On the operating expenses side, gross administrative expenses increased with a controlled growth of 16% over last year. Provisions for loan losses for the period were reported at Rs. 94 million for the year compared to the reversal of Rs 326 million in 2011, due to provision recoveries/releases of Rs 426 mn in 2011.

The asset base of the Bank grew to Rs. 162 billion as at December 31, 2012 from Rs. 138 billion as at year end 2011 indicating continued acceleration of development financing activities by the Bank. Advances (gross) of the Bank was Rs. 119.2 billion with an increase of 18% over 2011, mainly on account of growth in the SMEs, agriculture and the service sectors. The deposit base of the Bank increased by 31%, with a 10% and 60% increase reported in current and saving deposits respectively, improving the CASA percentage substantially.

The Bank also achieved a 21% return on equity and reported improved Earnings Per Share (EPS) from Rs 12.25 in 2011 to Rs 17.74. However, the Group EPS for 2012 is significantly higher at Rs 53.82 due to the capital gain of Rs 6 billion earned by the NDB Group from divesting NDB Group’s holding in AVIVA NDB Insurance PLC to AIA.

The balance sheet growth of the NDB group of 21% from the previous financial year points to a sound financial position and the shareholders’ equity base increasing by Rs 8 billion to Rs 25 billion. This significant surplus in shareholder funds within the NDB group will result in the Bank having ample opportunities in moving forward to benefit from development opportunities in the country and in the region.

During 2012 the Bank expanded its distribution network by opening nine branches. NDB continued to remain focused on driving the SME business segment and opened four more dedicated SME Centres in Kandy, Anuradhapura Matara and Kalutara. NDB’s SME Centres aim to provide a one-stop-shop for the diverse needs of entrepreneurs. They are equipped to provide 360 degree solutions ranging from financial expertise on SME Banking services, industry expertise for those who intend to start up new business ventures to investment and capital management advice along with a gamut of customized credit facilities. The Bank also conducted SME workshops in several regions including Minuwangoda, Homagama, Hambantota, Wennappuwa, Anuradhapura, Rajagiriya, Kiribathgoda and Matara in a bid to educate, empower and enrich the business knowledge of entrepreneurs in these areas.

To further establish its nationwide savings drive, NDB introduced a novel savings concept named the ‘Real Saver’ in the 3rd quarter of 2012. ‘NDB Real Saver’ is a rewarding savings account that doubles the interest rate applicable on the account balance, if a committed monthly deposit is maintained with minimum withdrawals, thereby encouraging account holders to save continuously. The launch of Real Saver account reiterates NDB’s commitment to inculcate a savings habit in people, which was first initiated through the nationwide ‘Ithiri karana Maga’ savings drive in 2011.

Meanwhile, NDB Capital Holdings PLC the investment arm of NDB Group marked a landmark in the history in debt markets in the country, with the launch of a family of fixed income indices for the Sri Lankan market, which would measure the performance of government securities of selected maturities. The pioneering initiative by NDB Capital Holdings PLC together with CRISIL Limited India is expected to provide more clarity to the debt capital market participants and propagate government securities as an attractive investment opportunity.

Following a strategic rearrangement of investments within the Group, NDB entered into a Share Sale and Purchase Agreement with AIA Group Limited (AIA), headquartered in Hong Kong, whereby NDB Group agreed to sell its shareholding in the AVIVA NDB Holdings Lanka (Private) Limited (AVIVA NDB Holdings or ANI) to AIA. Through the transaction which reached finality in December 2012, NDB group earned a net receipt of US$59 million. With the aim of continuing to provide all financial services under one roof, NDB also entered into an exclusive Bancassurance agreement with AIA for a period of 20 years. Pursuant to this transaction, NDB entered into a second transaction to purchase the balance of the shareholding of NDB AVIVA Wealth Management PLC from AIA. NDB Capital Holdings PLC which now owns 100% of the Wealth Management arm of the group will be able to harness the strengths of its portfolio, thus consolidating its position as the market leader in Wealth Management in Sri Lanka. Concurrently, a fund management agreement is also in place to manage AIA’s insurance funds exclusively for a period of 20 years.

Commenting on the Bank’s performance, Russell De Mel, CEO of NDB said: "Fortified by a capital base which is way above the ordinary, guided by an inclusive long term business strategy and driven by the intergrated expertise of the group companies, NDB stands poised for exceptional growth. We will focus on delivering optimum financial solutions to our diverse clientele with intent care and profound customer service. NDB will continue with the unique positioning to be the one-stop-shop for all financial

and advisory requirements of our customers. We thank our customers for their continued support and our staff for their commitment and contribution to the Bank’s success."

Following the release of the Bank results, Chairman, Hemaka Amarasuriya said, "The excellent financial performance in 2012 has erased any doubts about the efficacy and value of our transformation programme and our investments in infrastructure, systems and marketing. We delivered on our commitment to shareholders by achieving higher profits and strengthening our capital position, whilst making great strides in our journey towards realising our aspiration as the bank of choice in Sri Lanka. With our strong capital base and improved asset quality, we are assured of sustained growth in years ahead and will be entering an exciting growth period in the Bank’s history".

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