NDB Group profit after tax up 4% to Rs. 1.7 b

The NDB Group reported a profit after tax of Rs 1.7 bn, an increase of 4% over 2007, whilst NDB Bank’s profit after tax was Rs 1.2 bn, an increase of 8% over the previous year.

The Bank maintains a steady return on equity of 12.44%, one of the lowest Cost Income Ratios at 47% and the lowest Non Performing Loans (NPL) ratio of 2.3% in an industry, which averages a NPL ratio near 7%.

In the year under review NDB Bank also strengthened its liquidity position helped by customer deposits increasing by 25% over 2007 and by obtaining additional credit lines from multi-lateral agencies. The Bank remains the most well capitalized bank among local banks with a Tier 1 Capital Adequacy Ratio of 14.42% and a Tier 1 and 2 ratio of 17.29%.

The products and services offered to the customers of the NDB Group include Insurance from Eagle Insurance Co PLC (Eagle), Stock Brokering from NDB Stockbrokers (Pvt) Ltd and Investment Banking from NDB Investment Bank Ltd, among others. The NDB Bank also owns 99.6% of Capital Development and Investment Company PLC (CDIC) which is an effective vehicle for NDB’s plans for local and regional growth.

NDB Bank obtained approvals from regulatory authorities in Sri Lanka and Bangladesh to make an investment in Capital Market Services Limited, Bangladesh. Accordingly NDB Bank invested in Capital Market Services Limited, Bangladesh and acquired a controlling interest in the investee company in January 2009.

NDB Bank’s Fitch Credit rating of AA (lka), amongst the best in the industry, reflects NDB Bank’s strong financial profile in terms of its capital base, profitability and asset quality. The NDB Group continues to focus on its business strategy, which is to grow in the Commercial Banking (Corporate and Retail Banking), Emerging Corporates (SME), Project Finance, Specialized Commercial Markets, Investment Banking, Stock Brokering and Insurance areas.

The core banking revenue (net interest income, forex and commissions) of NDB Bank grew by 12% over the previous year. The Profit Before Tax and the Profit After Tax of the Bank, excluding the exceptional equity capital gains earned by the Bank during 2007 increased by 13% and 32% over 2007.

The Bank’s loans and advances grew by 9%, while the deposit portfolio grew by 25% over the previous year. The growth in both the lending and deposit portfolios of the Bank is commendable despite the prevailing global and local economic environment in which the Bank operates.

The Bank has adopted stringent policies to maintain the quality of the loan book throughout the year and as a result the ratio of NPLs to the gross lending portfolio remained at 2.3% both at the beginning and at the end of the year. This compares very favourably with the ratio in the local banking industry. The NPLs as at December 31, 2008 amounted to Rs 1,275 mn as compared with Rs 1,183 mn as at December 31, 2007.

As per the recent Banking Act Direction No.9 of 2008 issued by the Central Bank of Sri Lanka, the criteria relating to the requirement to classify loans as NPLs were relaxed. However, the Bank opted to follow the more stringent earlier basis. Had NDB Bank followed the new basis, the non performing loans would have declined by Rs 193 m to Rs 1,082 as at 31 December 2008. Accordingly the NPL ratio would have been 1.95%.