NDB shows strong loan growth; best quality loan book in the industry

The NDB Bank managed to grow its net loan book by 8.5% during the last quarter and 43.4% year on year to Rs 101 billion as at December 31, 2011, the bank said this week.

Analysts said that NDB'S loan book was primarily driven by small and medium enterprise lending where it entered into an agreement with the Sri Lankan government to promote small and medium enterprise development facility projects. They said that NDB also has the best quality loan book in the industry. "Prudent underwriting policies and well-defined risk acceptance criteria helped the bank to maintain its high quality loan book despite the impressive growth in bank's lending portfolio," an analyst said. According to the bank statement, its gross non-performing loan (NPL) ratio stood at 1.3% during the last quarter (compared to 1.9% in the same period last year) and the net NPL ratio was at 0.3% against 0.5% in the same period last year.

Non-interest income of NDB grew 134% year on year to Rs 1.1 billion. Bank's commission and fee based income recorded an impressive growth of near two folds. A loan growth of 43.4% year on year and higher contributions from its investment banking arm supported the growth. Further the bank's foreign exchange income is also up 88% year on year to Rs 279.5 million (Government devalued the rupee by 3% in Nov '11). Despite the competition in the private commercial banking industry, NDB is expected to maintain its interest margin around 3.8%, having the best quality loan book whilst continuing to benefit from its diversified exposure into financial services sector we remain bullish on NDB.

Analysts noted that NDB remains well capitalized despite a 43.4% year on year credit growth with Tier I capital at 14.4% (Regulatory limit is at 5%) and Tier II capital at 16% during the last quarter. The NDB Group's net profit for the year was Rs 2.94 billion which is a growth of 35% over the previous year. The profit attributable to shareholders for the year was Rs 2.7 billion and compares with Rs 2.1 billion for 2010, a growth of 29%. This significant increase in group profits was attributable to the growth in the core banking income of NDB by 13% over the previous year and the improved performance of the fee based group companies, according to the NDB statement.