NDB reports robust performance in first nine months

National Development Bank PLC posted enhanced income and profitability during the nine months ended 30 September 2023. 
The bank continued to adopt prudent measures in balance sheet management in line with the external developments which affirmed sound returns, optimum liquidity and capital adequacy. 

“Sri Lankan economy is emerging well from the crisis and the bank is recording similar performance. With critical economic factors such as interest rate, exchange rate and inflation stabilized, there is greater certainty and confidence in doing business,” NDB’s Director/ CEO Dimantha Seneviratne stated
“The timely finalization of the Domestic Debt Optimization is noteworthy and we expect expedited finalization of the international debt structuring too, which will further enhance internal conditions and also the external profile of Sri Lanka,” he added.

Rebounding from consecutive quarters of less than potential profitability attributable to external challenges, the NDB Group comprisingthe NDB Bank as the parent and its subsidiary companies posted Rs. 10.0 billion profit before all taxes for the nine months ended 30 September 2023 which compared with Rs. 1.2 billion of the same period in 2022. 

Profit after tax at the Group level was Rs. 5.4 billion whilst the same at the bank level was Rs.  5.2 billionwhich compared with Rs. 691 million and Rs. 561 million respectively of the nine months of 2022 (YoY). Healthy performance on revenue, reduction in impairment provisions compared to the comparative period and effective cost management across all operations enabled enhanced profitability. 

At the bank level Gross income for the period was Rs. 102.9 billion, up by 38 percent YoY. Net interest income (NII) was Rs. 24.4 billion, an increase of 10 percent. Interest income of Rs. 93.7 billion which increased by 44 percent and interest expense of Rs. 69.3 billion which increased by 61 percent drove NII. 
As market interest rates continued to decline, in response to Central Bank’s relaxing monetary policy, the Bank passed on the benefit to customers with reduced loan rates. The deposits book was also re-priced simultaneously, with the bank achieving a NIM of 4.00 percent. Net fee and commission income also drove profitability with a marked improvement of 24 percent to Rs. 5.4 billion. 

Impairment charges for the nine months ended 30 September 2023 were Rs. 13.9 billion, a YoY reduction of 37 percent, primarily due to higher impairment provisions made for FCY Investments in the same period of 2022. 
Adopting a prudent basis, the impairment charge for loans and advances increased over the corresponding period, given the economic conditions.  NDB continued to maintain provisions on investments in foreign currency bonds, for the expected International Sovereign Bond (ISB) restructuring to be announced by the Government of Sri Lanka during the year. 

The Impairment cover (Stage 3) to Stage 3 Loans Ratio was 36.57 percent (2022: 37.44 percent) whilst the Impaired Loans (Stage 3) Ratio was 9.18 percent (2022: 6.24 percent) by end September 2023, reflecting the industry-wide concerns on credit quality. 

Total operating costs for the period was Rs. 10.1 billion, up by 20 percent.  General increase in price levels, particularly energy and foreign currency denominated expenses drove costs up. The resultant cost to income ratio was 30.2 percent and compared well within the industry. Taxes netted Rs.4.3 billion, comprising taxes on financial services of Rs. 2.4 billion and income tax of Rs. 1.9 billion. 

NDB posted a total assets figure of Rs. 789 billion as of end September 2023. The same figure at the Group level was Rs. 796 billion. This was a 5 percent reduction over the total assets position in 2022, predominantly attributable to the appreciation of the Sri Lankan Rupee.
Gross loans at the end of the period closed in at Rs. 514 billion – down by 11 percent over 2022. With economic activity slowly improving it is anticipated that the industry-wide decline in gross loans will enter positive territories in the near future. 

Customer deposits closed in at Rs. 627.7 billion, a 7 percent reduction over 2022, with the reduction partly attributable to the appreciation of the Sri Lankan Rupee. 
The balance sheet remained dynamic and resilient and the bank maintained sound liquidity and capital adequacy. Regulatory Liquidity Coverage Ratio (Rupee), Liquidity Coverage Ratio (All Currency) and Net stable Funding Ratio stood well above the regulatory minimum requirement of 100 percent at 333.73 percent, 269.95 percent and 141.66 percent respectively.

The Statutory Liquid Assets Ratio of 37.90 percent (2022: 27.24 percent) was also well above the regulatory minimum requirement of 20 percent. Tier I and Total Capital Adequacy ratios as of end September 2023 stood at 11.06 percent (Group: 11.54 percent) and 14.46 percent (Group: 14.87 percent), well ahead of the regulatory minimum levels of 8.5 percent and 12.5 percent respectively. 
NDB has also announced its plans to raise Tier II capital via Basel III compliant listed, rated, unsecured, subordinated, redeemable debentures in further strengthening its capital position, and the Issue is set to be concluded before the end of this year.