NDB Bank is not averse to a merger with a bank like Commercial Bank (CB), according to a top NDB official. "The way to get to be a bigger bank is through a merger and we have always believed in it. The environment is now far more favourable for a merger and (the banks) need to look far more seriously into this,” Eran Wickramaratne, CEO NDB told the Sunday Times FT.
He said that NDB is looking to merge 'up' and not 'down' and as a result they are looking to merge with a 'bigger bank' (like CB). "As it is NDB is an attractive bride," he said.
NDB tried to merge with CB in early 2007, but this attempt did not materialise as CB officials pointed out that the merger didn’t work as NDB had a highly centralised culture as opposed to the decentralised culture at CB. CB’s Committee of the Executive Officers' Association said in a letter at the time that such a negative impact far outweighs the benefits like size, raising capital adequacy and share structure.
NDB’s non performing loan (NPL) portfolio during the last six months has declined from 3% to 1.9%, but the loans have not grown. "The first half of 2009 NDB's loan book has not grown due to the quality of assets reducing drastically during the last six months. But during the next six months it will as project financing projects that have been in the pipeline are beginning to draw down," Mr. Wickramaratne said.
He also noted that NDB has the lowest cost to income ratio (at 41%) in the industry as at June.
Therefore our operating model, where the back office is centralized is working very well.”
When asked whether NDB has any plans for the Rs. 3 billion excess capital it has, he said the bank is strongly positioned to expand its balance sheet and take on more loans because of this.
"There is a capital write-off of US $ 7 trillion in the world and US$ 4 trillion of this is in the banking sector. So in this situation we are well positioned as we have the capacity to grow," he said.
NDB, which was originally a development finance institution, merged with NDB Bank, its commercial banking subsidiary in August 2005 to become a commercial bank.