The NDB Group reports a growth of 30% 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% and 20% respectively during this same period. The financial conglomerate’s commendable performance comes in the wake of the challenging global and local economic environment.

NDB Bank has developed a reputation for innovative banking products and services that meet the real needs of its customers. The Bank offers a wide range of commercial banking services through its growing island-wide branch network. In addition, as part of the NDB Group, its customers have access to the a full range of banking and financial services, including market driven and consumer-oriented retail banking, corporate banking, project finance, SME Lending, investment banking, stock brokering, insurance solutions and wealth management, making NDB a truly universal bank.

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% and a Tier 1 & 2 ratio of 16.38%. NDB Bank’s core banking revenue (net interest income and other income) of Rs. 1.5 billion for the 1st 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% and 30% respectively. The increase in core banking revenue was mainly due to a significant growth in net interest income by 34% 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 Licensed Commercial Banks from 10% to 7% 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 was also able to strengthen its liquidity position through an increase in customer deposits by 8% over 31 December 2008 and by gaining additional credit lines from multi-lateral agencies.

Non Performing Loans

Further 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% as at 31 March 2009 and 31 March 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 in order to ensure the strict management of its loan book. In the event that NDB Bank followed the new NPL classification basis, the NPL’s would have declined by Rs. 68 million to Rs.1,338 million resulting in a lower NPL ratio of 2.44%.

Financial Gains

Other income, which consists of fee based income, forex profits and gains from the trading portfolio of government securities also increased by 18% 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% in overheads, compared to the first quarter of 2008. NDB Bank’s cost income ratio excluding exceptional items was 42% for the period and this ratio is one of the lowest amongst the local banking industry.