Financial Times

Higher tax charge hits NDB profits
NDB group after tax profits fell 17 percent to Rs. 747 million in the nine months ending September 30, 2004 mainly owing to higher value-added tax charges. "Group profits were impacted by an increased tax charge, write off of goodwill on acquisitions of Rs. 55 million and timing differences in accounting for the profits of Eagle Insurance Company Ltd.," a bank statement said.

The tax charges for both the bank and the group have increased significantly, primarily because of the increase in Value-Added Tax on financial services to 15 percent from 10 percent.

The effective overall tax charge including VAT increased to 22 percent from 13 percent for NDB, and to 29 percent from 14 percent for the group. Eagle recorded a consolidated profit after tax of Rs 107 million, which exceeded its budgeted profit by 20 percent, but the seasonality of earnings at Eagle, impacted on the group profits. "Fourth quarter results will reflect an upward adjustment on Eagle and thereby on group earnings due to this timing issue," the statement said.

The profit before tax of NDB increased by 11 percent for the nine-month period ended 30 September 2004 to Rs 920 million in comparison with the corresponding period for 2003. Profit after tax was flat at Rs 720 million.

NDB Bank's profit after tax at the end of the third quarter was Rs 121 million compared to Rs 96 million for the corresponding period of 2003. The consolidated results include profits of NDB Bank Ltd for the period of five months that elapsed since the acquisition of 92.52 percent of its issued shares by NDB.

The results of Eagle Insurance, NDB Housing Bank, NDB Investment Bank and NDB Stock Brokers Ltd, representing the spectrum of group businesses, have also been consolidated.

"The group has now positioned itself as an integrated financial services company, building on its well established project and SME lending strengths to provide a full range of financial services to its expanding customer base," the statement said.

"The proposed merger between NDB and NDB Bank will result in new opportunities for expansion and synergies within the group." NDB's own interest income declined by 28 percent during the period under review.

This was mainly due to the interest rate reduction granted to SME borrowers and the funding costs of investments in Eagle Insurance and NDB Bank. However, the net interest income of the group increased marginally to Rs 1.6 billion during the period ended 30 September 2004 from Rs 1.5 billion for the corresponding period last year.

The consolidated loan portfolio amounted to Rs 35 billion at 30 September 2004, compared with Rs 25 billion at 30 September 2003. Total assets at these dates were Rs 51 billion and Rs 38 billion respectively.

Back to Business