NDB Group records 30 percent growth in overall profits

Bank’s stability reaffirmed in first quarter:

The NDB Group reported a growth of 30 percent in overall profits in the first quarter of 2009 over the corresponding period in 2008.

The profit before and after tax also showed a significant growth of 22 percent and 20 percent during the same period. The financial conglomerate’s commendable performance comes in the wake of the challenging global and local economic environment.

NDB Bank, the group’s core financial institution, remains the most well-capitalised bank among local banks with a Tier 1 Capital Adequacy Ratio of 13.61 percent and a Tier 1 and 2 ratio of 16.38 percent. NDB Bank’s core banking revenue (net interest income and other income) of Rs. 1.5 billion for the first quarter of this year compares very favourably with Rs. 1.1 billion for the corresponding period last year.

The Bank’s profit before and after tax for this period, also grew by 26 percent and 30 percent. The increase in core banking revenue was mainly due to a significant growth in net interest income by 34 percent over the first quarter of 2008.

The increase in net interest income was in part due to the reduction in the reserve requirement mandated by the Central Bank of Sri Lanka for Licenced Commercial Banks from 10 percent to 7 percent by January 2009, due to the prevailing economic conditions.

The benefit to NDB Bank was approximately Rs. 26 million at net interest income level. During the first quarter of 2009 NDB Bank strengthened its liquidity position through an increase in customer deposits by 8 percent over December 31, 2008 and by gaining additional credit lines from multi-lateral agencies.

Due to the Bank’s stringent policies in maintaining the quality of its loan book, the ratio of Non Performing Loans (NPLs) to the gross lending portfolio remained at 2.6 percent as at March 31, 2009 and March 31, 2008. Following the recent Banking Act Direction No.9 of 2008 by the Central Bank of Sri Lanka, the criteria relating to the requirement to classify loans as NPLs were relaxed.

However, NDB Bank opted to follow the earlier more stringent process to ensure the strict management of its loan book.

In the event that NDB Bank followed the new NPL classification basis, the NPLs would have declined by Rs. 68 million to Rs.1,338 million resulting in a lower NPL ratio of 2.44 percent.

The other income, which consists of fee based income, forex profits and gains from the trading portfolio of Government securities also increased by 18 percent in the first quarter of 2009 over the corresponding period in 2008.

By adopting effective cost reduction methods during the year in the wake of challenging economic conditions, NDB Bank recorded only a marginal increase of 8 percent in overheads, compared to the first quarter of 2008. NDB Bank’s cost income ratio excluding exceptional items was 42 percent for the period and this ratio is one of the lowest amongst the local banking industry.