INVESTOR WEBINAR FY 2017 National Development Bank PLC NDB:N0000 02 February 2018 : 1430 hrs : Colombo Sri Lanka December - 2016
Corporate Participants Presented by Dimantha Seneviratne Director/ Chief Executive Officer Panelists Lalith Fernando Group Chief Financial Officer Buwaneka Perera - Vice President - Corporate Banking Sanjaya Perera - Vice President Personal Banking Branch Network Management Niran Mahawatte Vice President-Treasury Indika Ranaweera Vice President - SME, Middle Market and Business Banking Ms. Suvendrini Muthukumarana - Assistant Vice President - Finance & Planning
Forward Looking Statements Forward Looking Statements This document has been prepared by National Development Bank PLC ( NDB, Bank or the Group ) solely for use at its presentation to potential & current investors. By accepting this document, you agree to maintain absolute confidentiality regarding the information disclosed in this document. The information contained in this document should be considered in the context of the circumstances prevailing at the time and has not been, and will not be, updated to reflect material developments which may occur after the date of the presentation. Not the Bank nor any of its respective affiliates, advisers or representatives shall have any liability whatsoever (in negligence or otherwise) for any loss howsoever arising from any use of this document or its contents or otherwise arising in connection with this document. This document contains proprietary information and no part of it may be reproduced, redistributed or passed on, directly or indirectly, to any other person (whether within or outside your organization/firm) or published, in whole or in part, for any purpose. This presentation and subsequent discussion may contain certain forward-looking statements with respect to the financial condition, results of operations, capital position and business of the Group. These forward-looking statements represent the Group s expectations or beliefs concerning future events and involve known and unknown risks and uncertainties that could cause actual results, performance or events to differ materially from those expressed or implied in such statements. Forward-looking statements speak only as of the date they are made. The Group makes no commitment to revise or update any forward-looking statements to reflect events or circumstances occurring or existing after the date of any forward-looking statements. 3
Agenda 1. Business Overview 2. Macro Economic Analysis Country & Sector 3. FY 2017 Financial Performance 4. Awards 5. Q&A Session 4
Agenda 1. Business Overview 2. Macro Economic Analysis Country & Sector 3. FY 2017 Financial Performance 4. Awards 5. Q&A Session 5
Business Overview - Corporate Profile Our Vision To be the driving force for a financially empowered Sri Lanka Our Mission To be the catalyst in the financial services industry by creating superior shareholder value and contributing to the national development through the empowerment of individuals with innovative financial solutions delivered by an inspired and dedicated team committed to excellence Our Values Integrity Creativity Excellence Sincerity Accountability Our Commitment. Your Success. Corporate Profile Established in 1979 as a Development Financing Institution Conversion in to a fully-fledged commercial bank in 2005 A staff strength of over 2,000 employees National Long Term Rating of A+ (lka) by Fitch Ratings Lanka Limited (affirmed in December 2017) Reach A robust branch network of 107 branches spread across the country Supplemented by an ATM network of 121 ATMs and one Cash Recycle Machine Banking services offered through multiple channels of internet banking, mobile banking and branchless banking LKR 4 billion worth of transactions routed via the Mobile App in 2017 Strategic Focus Driven on a strategy spanning up to year 2020 devised with professional input of the International Finance Corporation (IFC) 6
Business Overview - Group Structure 58.7% Licensed commercial banking* 99.9% 100% Investment banking 77.8% Property management Full service investment banking 100% 100% Wealth management Investment banking (Bangladeshi arm) 60.0% Investment advisory & securities trading Management of private equity funds The only banking institution in the country which offers a full spectrum of banking and capital market solutions through dedicated entities within the Group NDB Investment Bank Best Investment Bank in Sri Lanka as adjudged by EuroMoney Magazine for the sixth consecutive year NDB Wealth Management - Largest private sector fund management company in Sri Lanka NDB Capital Limited Bangladesh - Best Investment Bank in Sri Lanka as adjudged by EuroMoney Magazine for the third consecutive year 7
Agenda 1. Business Overview 2. Macro Economic Analysis Country & Sector 3. FY 2017 Financial Performance 4. Awards 5. Q&A Session 8
Macro Economic Analysis Country & Sector Sri Lankan Economy Moderate economic growth of 3.7% up to Q3 2017 Agriculture sector affected by adverse weather conditions Increase in export earnings as well as import expenditure resulting in a further widening of the trade deficit USD 8,591 mn up to 11 months in 2017 vs. USD 7,916 mn in the same period 2016 1.9% depreciation of the Sri Lankan rupee against the US Dollar up to end December 2017 Positive developments recorded in the fiscal sector Credit to the private sector decelerated in November 2017 as well (November 15.4%, October 16.2%) Headline inflation of 7.1% and core inflation of 4.3% in December 2017. This is the lowest core inflation recorded for the year Banking Sector Developments Monetary policy rates remain unchanged : SDFR - 7.25%, SLFR - 8.75% and SRR 7.5% since March 2017 until the end of the year, and to date LKR 10.3 trn in total assets YoY assets growth of 13.8% in 2017 Industry ROE at 17.6% in 2017 Source: CBSL & DCS and Publications
Agenda 1. Business Overview 2. Macro Economic Analysis Country & Sector 3. FY 2017 Financial Performance 4. Awards 5. Q&A Session 10
FY 2017 Financial Performance Summary - Bank FY 2017 FY 2016 Growth Net Interest Income 10,750 8,487 27% Profitability (LKR Mn) Net Operating Income 14,893 11,784 26% Operating Expenses 7,346 6,449 14% Profit after Tax 4,352 3,170 37% Profit Attributable to Shareholders (PAS) (Group) 3,716 2,691 38% Financial Position (LKR Bn) Total Assets 383 335 15% Total Loans 274 228 20% Total Deposits 273 204 34% Cost to Income Ratio (CIR) 45.51% 49.04% Efficiency & Return (%) Net Interest Margin (NIM) 3.00% 2.64% Return on Average Equity 16.22% 13.36% NPL Ratio 1.83% 2.63% Loan to Deposits Ratio 102% 115% Business Capacity (%) Capital Adequacy Ratio 13.89% 12.95% Liquidity Ratio (DBU) 22.13% 21.50% 11
Income Statement - Summary Bank Group LKR Mn FY 2017 FY 2016 Change Change FY2017 FY2016 LKR % LKR % Net Interest Income 10,750 8,487 2,263 27 11,086 8,861 2,226 25 Other Income 5,402 4,663 738 16 5,597 4,816 781 16 Operating Income 16,152 13,151 3,001 23 16,683 13,677 3,006 22 Impairment 1,259 1,367 (108) (8) 1,290 1,425 (134) (9) Operating Expenses 7,346 6,449 897 14 8,201 7,159 1,042 15 Operating Profit 7,547 5,335 2,212 41 7,192 5,094 2,098 41 Tax 3,196 2,165 1,031 48 3,347 2,279 1,067 47 PAT 4,352 3,170 1,181 37 3,845 2,815 1,030 37 PAS (Group) - - - - 3,716 2,691 1,025 38 Impressive growth in Net Interest Income (NII) of 27%, to LKR 10,750 million Enhanced NIM of 3% Increased loan volumes Exceptional growth in PAT by 37% to LKR 4,352 million Group PAS of LKR 3,716 million, up by 38%. 12
LKR Million % Revenue Analysis Net Interest Income LKR Mn FY 2017 FY 2016 % Interest Income 37,119 28,618 30 Interest Expenses 26,369 20,131 31 Net Interest Income (NII) 10,750 8,487 27 Net Interest Margin (NIM) 3.00 2.64 - NII & NIMS 40,000 3.1 3.0 3.0 35,000 2.9 3.0 30,000 2.9 25,000 2.6 2.8 2.7 2.8 20,000 2.7 15,000 10,000 2.6 5,000 2.5 NII & NIM behavior Q4 recorded the highest interest income and NII on a quarterly basis during the year NII grew by an impressive 27% over 2016 NII improved due to 36 basis points increase in NIMs LKR 46 billion quantum growth in the loan book LKR 70 billion increase in deposits, thereby reducing the reliance on high cost institutional borrowings NIMs improved due to Timely re-pricing of assets and liabilities during the year Effective balance sheet management - FY 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 FY 2017 2.4 Interest Income Interest Expenses NII NIM - % 13
Revenue Analysis Non Interest Income LKR Mn FY 2017 FY 2016 % Net fee and commission income 2,521 2,253 12 Net gain/(loss) from trading 1,064 982 8 Net gain/(loss) from financial investments 570 211 169 Other operating income 1,248 1,217 3 Total non interest income 5,402 4,663 16 Net fee and commission growth of 12% Key contributors Focus on growing retail and SME products Accelerated growth in trade financing solutions and remittances Highest contributor to Net fee & commission income from Retail & SME Net Fee & Comm Income Segmental contribution 9% 33% 54% 4% Commercial Banking PIF Retail & SME Other 14
LKR million Operating Expenses Bank Group LKR Mn FY 2017 FY 2016 % FY 2017 FY 2016 % Personnel expenses 3,611 3,435 5 4,025 3,793 6 Depreciation & amortization 417 435 (4) 472 491 (4) Other expenses 3,317 2,580 29 3,704 2,875 29 Total operating expenses 7,346 6,449 14 8,201 7,159 15 20,000 15,000 10,000 5,000 - Income, Costs and CIR - Bank 49.04% 45.51% 2016 2017 50.00% 49.00% 48.00% 47.00% 46.00% 45.00% 44.00% 43.00% Total operating income Total operating expenses CIR Major cost drivers during the year 3 new branches added 5 ATMS installed 2 branch re-locations 4 new product launches and 1 re-launch Net increase in staff base by 61 employees Cost to Income Ratio (CIR) Vastly improved in 2017 to 45.51% 15
LKR Billion Balance Sheet Summary - Bank Total Assets LKR Mn FY 2017 FY 2016 % Cash & Cash Equivalents 21,480 20,130 7% Investments 80,657 80,597 0.1% Net Loans & Investments 274,029 227,677 20% 500 400 300 200 5 year CAGR of 18.6% 120% 100% 80% 60% 40% Total assets Fixed Assets 2,741 2,447 12% Other Assets 4,165 3,693 13% 100 0 201 263 309 335 383 2013 2014 2015 2016 2017 20% 0% Total Assets 383,073 334,545 15% Debt securities & borrowings 48,344 76,358-37% Customer deposits 273,369 203,867 34% Subordinated Term Debts 19,337 19,447 (1)% Other Liabilities 13,125 10,128 30% Equity 28,898 24,745 17% Total Liabilities & Equity 383,073 334,545 15% Impressive incremental growths of Total loans LKR 46 Bn Customer deposits LKR 70 Bn Group Balance Sheet Position LKR Mn FY 2017 FY 2016 Growth Total assets 388,645 340,732 14% Shareholder Equity 33,436 29,937 12% 16
LKR Billion Loans & Advances Loan Growth Loans - Segment Composition 300 28 30 4% 250 200 150 100 50 0 20 20 18 9 274 210 175 142 228 2013 2014 2015 2016 2017 25 20 15 10 5 0 % Total loans and advances Growth 40% 22% 33% Commercial banking PF Retail & SME Other Impressive loan growth of 20%, above industry average of 16.1% Loan growth recorded across all the segments of the loan book Market share well retained 17
Asset Quality Sector Composition of the Loan Book Manufacturing 300 NPL & Provision Cover 3.5 3% 5% 8% 18% 10% 1% 11% 25% 11% Traders Infrastructure Agriculture & Fishing Financial and Business Services Tourism Transport Other New Economy 250 200 150 100 50 0 2.97 2.51 2.63 2.43 2.48 2.78 2.52 2.58 1.83 1.37 141 180 215 234 278 2013 2014 2015 2016 2017 3 2.5 2 1.5 1 0.5 0 Gross Loans NPL Ratio % Impairment Provision Cover over Gross Loans - % Sector NPL Ratio Financial and Business Services 0.1% Infrastructure 0.2% New Economy 0.9% Manufacturing 2.1% Agriculture & Fishing 2.2% Tourism 2.3% Traders 2.6% Transport 3.0% Other 4.8% One of the lowest NPLs recorded amidst high loan growth NPL well below the industry rate of 2.5% Contributors to improved NPL Sound risk management processes from loan origination up to disbursement Dedicated and effective recoveries process Incentivized recoveries 18
LKR Billion LKR Billion Customer Deposits Customer Deposits Growth Trend CASA Growth 300 250 200 150 100 50 0 34 21 22 17 10 130 152 185 204 273 2013 2014 2015 2016 2017 40 35 30 25 20 15 10 5 0 60 40 20-25% 58 46-2% 2016 2017 30% 20% 10% 0% -10% Total deposits YTD Growth - % CASA Deposits CASA base growth 34% growth in deposits, well ahead of the industry deposits growth rate of 17.5% Highest deposits growth recorded over the last 5 years Resultantly, Loans to Deposits Ratio (LDR) improved to 102% from 115% in 2016 Preserved CASA ratio at 21.2% Substantial improvement in CASA base over 2016, amidst marginal overall drop in industry CASA for 2017 Deposit growth including CASA supported by a full suite of life style deposits suitable for any individual/ entity 19
Capital Management BASEL III FY 2017 Bank Group Common Equity Tier 1 Capital Ratio (Minimum Requirement -5.75%) 8.85% 10.55% Tier 1 Capital Ratio (Minimum Requirement - 7.25%) 8.85% 10.55% Total Capital Ratio (Minimum Requirement - 11.25%) 13.89% 15.24% Capital adequacy metrics well above the minimum Basel requirements Strong ICAAP framework in place, ensuring healthy capital levels at the current business growth levels Further capital infusion plans under discussion to strengthen the capital base in light of Impact of IFRS 9 on the capital base Envisaged business growth in the future 20
Investor Ratios Investor Ratios Bank Group FY 2017 FY 2016 FY 2017 FY 2016 Price per share (LKR) 136.40 156.0 NA NA EPS (LKR) (Annualized) 25.57 19.19 21.84 16.29 ROE (%) 16.22 13.36 11.73 9.23 ROA (%) 1.21 0.99 1.02 0.82 Book value per Share (LKR) 168.52 149.80 194.98 181.23 P/E (times) 5.3 8.1 NA NA Price to Book value (times) 0.8 1.0 NA NA Enhanced ROE at Bank level 16.22% ; closer to industry ROE average of 17.6% Group ROE improvement to 11.73% from 9.23% in 2016 Price to book value drop of 0.2x to 0.8x from 1x in 2016 21
Agenda 1. Business Overview 2. Macro Economic Analysis Country & Sector 3. FY 2017 Financial Performance 4. Awards 5. Q&A Session 22
Awards Close to 40 awards titles won by the Bank and the Group companies at both local and foreign awards programs, with several titles defended for consecutive years. Overall excellence National Business Excellence Awards 2017 - Runner Up under the Banking Category The Ceylon Chamber of Commerce - "Best Corporate Citizen Sustainability Award 2017" - Winner - Top Ten Corporate Citizen Category Asian Banking & Finance Magazine of Singapore - Domestic Retail Bank Sri Lanka 2017 (Fifth consecutive year) SME Bank of the Year Sri Lanka 2017 (Fifth consecutive year) Domestic Project Finance Bank of the Year Sri Lanka 2017 (Third consecutive year) Domestic Cash Management Bank of the Year Sri Lanka 2017 (for the second year). Global Banking & Finance Review of UK Best SME Bank 2017 Annual report awards CA Sri Lanka 53rd Annual Report Awards Gold award for Corporate Governance Disclosures across all categories Silver award for the best reports from the Banking Institutions category Bronze award for Corporate Social Responsibility Reporting across all categories CMA Excellence in Integrated Reporting Awards 2017 Award for the best integrated report in the banking sector Award for the best ten integrated reports Across all categories Digital banking LankaPay Technnovation Awards 2017 - Runner Up for the 'Best Mobile Payment Application of the Year SLT ZeroOne Awards 2017 - 'Best use of Mobile under Financial Sector category Asian Banking & Finance Magazine of Singapore - Mobile Banking Initiative of the Year Sri Lanka 2017 Global Banking & Finance Review of UK - Best Mobile Banking Application Sri Lanka 2017 Transaction banking US Dollar STP Excellence Award from HSBC New York (for the third consecutive year) US Dollar STP Excellence Gold Award from Deutsche Bank New York 23
Awards Contd. Close to 40 awards titles won by the Bank and the Group companies at both local and foreign awards programs, with several titles defended for consecutive years. Investor relations CFA Sri Lanka Capital Market Awards 2017 - Gold award -Best Investor Relations (2 nd consecutive year) Global Banking & Finance Review of UK - Best Investor Relations Bank Sri Lanka 2017 Women friendly banking Women in Management organization in partnership with the International Finance Corporation - Best CSR Program Run by a Private Sector Entity for Women Empowerment Marketing Award for Brand Excellence within the Banking & Finance sector Award for Excellence in Social Media Marketing HR Best Training Partnership with External Vendors Best Employer Brand Award Most innovative use of Training & Development as an HR initiative for Organizational Development Award for Asia's Best Employer Brand Award Islamic financing Silver award for Turn-around Islamic Banking and finance of the year Bronze award for Best Window/ Unit of Islamic Banking and Finance of the year BRI China Best Local Bank in South Asia for Belt & Road Initiative (BRI) - Asiamoney New Silk Road Finance Awards 2017 Awards won by Group companies NDBIB Euromoney Awards 2017 - Best Investment Bank in Sri Lanka (Sixth consecutive year) Global Brands Magazine - Most Trusted Investment Banking Brand, Sri Lanka Asiamoney Banking Awards - Best Corporate and Investment Bank, Sri Lanka FinanceAsia s Annual Country Awards 2017 - Best Investment Bank in Sri Lanka Global Banking & Finance Review Awards 2017 - Best Investment Bank in Sri Lanka NDB Capital Ltd. Bangladesh Euromoney Awards 2017 - Best Investment Bank in Bangladesh (Third consecutive year) NDB Securities Pvt Ltd CFA Sri Lanka Capital Market Awards 2017 - Bronze award - Best stockbroking research team 24
Agenda 1. Business Overview 2. Macro Economic Analysis Country & Sector 3. FY 2017 Financial Performance 4. Awards 5. Q&A Session 25
Investor Relations Team Investor/ Analysts Support Clearly defined Quarterly Results Calendar released at the end of each quarter Webinar transcripts hosted to the NDB Corporate website/ IR page in playback video and written transcript forms Dedicated communication channels made available for any queries and clarifications Reach us; investor.relations@ndbbank.com T: + 94 112 448 448 Extn: 35317/35130/35301 www.ndbbank.com/investorrelations www.facebook.com/ndbbankplc www.twitter.com/ndbbank www.linkedin.com/ndbbank www.youtube.com/user/ndbbanksl instagram.com/ndbbank