National Development Bank PLC (NDB) recorded a post-tax profit (PAT) of Rs. 3,170 million for its financial year ended 31 December 2016, a 10% reduction over the PAT of 2015 (2015: Rs. 3,511 million)
Whilst the core banking operations improved during the year, leading to a growth of 8% in total operating income up to LKR 13,151 million (2015: LKR 12,209 million), at a profitability level, this improved performance was affected by one-off specific provisions made for few customers and the higher effective tax rate in 2016 compared to 2015, which was partly due to the increase in the financial services VAT rate from 11% to 15%.
NDB Group Profit Attributable to Shareholders (PAS) of LKR 2,691 million was impacted by lesser than anticipated capital market activities during the year, which resulted in a 24% reduction over the prior year (2015 : LKR 3,542 million).
The Bank’s net interest income (NII) grew by 13% up to LKR 8,487 million (2015: LKR 7,522 million), resulting in a sustained net interest margin (NIM) of 2.64%, which is satisfying, given the tapering interest margins that were experienced across the industry over the year.
Net fee and commission income from core banking operations grew by 12% up to LKR 2,253 million (2015: LKR 2,016 million), a commendable growth resulting from the Bank’s
strategic focus in this area.
Impairment charges for loans and other losses of the Bank for the year was LKR 1,367 million (2015: LKR 712 million).
The cost to income ratio (CIR) of the Bank improved to 49.0% as compared to 49.6% in 2015. The CIR of the Bank excluding equity income was 52.0% and indicates the CIR of the Bank’s core operations.
In terms of the Balance Sheet performance, the Bank’s total assets base increased by 8% to LKR 335 billion (2015: LKR 309 billion). Total assets at a Group level increased by the same rate and stood at LKR 341 billion (2015: LKR 315 billion).
Within total assets, loans and receivables to customers of LKR 228 billion grew by 9% (2015: LKR 210 billion). The Bank was able to reprice its loan book in tandem with the interest rate increases in the industry.
Asset quality remains high as reflected by a gross non-performing loan ratio (NPL) of 2.63% (2015:2.43%) well within the Bank’s consistently low NPL range and also well below the industry average. Net NPL ratio stood at 1.16% as at 31st December 2016.
Customer deposits grew by 10%, crossing the LKR 200 billion mark for the first time in the Bank’s history and reached LKR 204 billion (2015: LKR 185 billion). This landmark in customer deposits was achieved by the Bank in a gratifyingly short period of just over 10 years, since the Bank attained commercial banking status in 2005.
Bank Tier I capital adequacy ratio for 2016 was 9.31% whilst its total capital adequacy ratio was 12.95%. The same ratios for the Group were 11.55% and 15.27% respectively.
The Bank’s return on average shareholders’ funds (ROE) for the year ended 31 December 2016 was 13.36% with earnings per share (EPS) of LKR 19.19. Commenting on the 2016 performance, the Chairman of NDB, Ananda W Atukorala mentioned that the year was a reflection of the Bank’s ability to steer itself through challenges and secure stable results to its shareholders and other stakeholders. The newly appointed CEO Dimantha Seneviratne, reflected on the key strengths which NDB possesses; such as the unique business proposition of “development oriented commercial banking” which is gradually shifting towards the retail and SME space, the market leadership position in capital & investment banking cluster that can be integrated well to capitalize on cross selling opportunities.
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