National Development Bank PLC (NDB) reported a resilient performance for the nine months ended September 30, 2024, navigating the challenges and optimising the emerging opportunities in a reviving economy. 

NDB recorded a net operating income of Rs.21.5 billion for the period under review, covering the nine months ended September 30, 2024, a 9 percent increase over the comparative period of 2023 year-on-year (YoY). The notable reduction in impairment charges by 21 percent YoY augured well in maintaining the healthy growth in the net operating income against the degrowth seen in some key revenue lines. 

The net interest income remained largely static over the comparative period at Rs.24.4 billion, within which both the interest income and interest expenses declined, attributable to the tapering interest rate environment in the economy. The timing of the deposits book repricing led to a larger decline in the interest rate expenses, benefiting NIM. 

Driven by the strong strategic focus in this aspect, the bank posted a NIM of 4.21 percent, consistently above the 4.00 percent mark for the third consecutive quarter. The net fee and commission income for the period was Rs.5.1 billion, which continued to normalise over a relatively high base in 2023 alongside moderate balance sheet expansion, with a YoY decline of 7 percent. 

The impairment charges for the period was Rs.11.0 billion, comprising the charges on the loan book and investment portfolio. Enhancing the loan book quality, another key cog of NDB’s mid-term strategy remained well on track, as demonstrated in continually enhancing related ratios.

The impaired loans (Stage 3) ratio improved by 213 bps to 6.45 percent, whilst the impairment (Stage 3) to Stage 3 loans ratio increased to 49.40 percent by 829 bps over the end-2023 position. Strengthening asset book quality in turn bolstered the bank’s NIMs in the low-interest rate climate. On the investment book, the bank continued to provide adequate provisions in line with the prescribed industry norms. 

Strong cost discipline across the organisation, driven by a focused governance mechanism led to discretionary costs increase being curtailed at 8 percent YoY. The total operating costs, comprising such discretionary costs, personnel expenses and depreciation and amortisation netted Rs.12.1 billion, a YoY increase of 19 percent. The resultant cost-to-income ratio was 37.1 percent. 

Bank level pre-tax profitability for the year was Rs.9.4 billion, a marginal decline of 2 percent YoY, whilst post-tax profitability was Rs.4.5 billion. Profit attributable to shareholders at NDB group level was Rs.4.9 billion. 

NDB’s strength and stature is demonstrated in its dynamic balance sheet, which stood at Rs.763.2 billion as at end-September 2024. Rs.501.1 billion was gross loans to customers, whilst Rs.611.5 billion was customer deposits as at the end of the period, leading to a loan-to-deposit ratio of 82 percent. Deposit composition shifted favourably, despite an overall marginal decline of one percent over the end-2023 position (YTD), wherein the CASA deposits grew by 10 percent, enhancing the CASA ratio by 244 bps to 25.04 percent. Total equity base stood at Rs.71.7 billion, demonstrating the dynamism of the funding base. 

The 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 326.87 percent, 280.39 percent and 143.77 percent, respectively. The Tier I and total capital adequacy ratios by the end of 3Q 2024 stood at 11.07 percent (group: 11.61 percent) and 15.70 percent (group: 16.10 percent), above the regulatory minimum levels of 8.5 percent and 12.5 percent, respectively. 

On September 12, 2024, the bank allotted Rs.5.0 billion in Tier II capital via Basel III-compliant listed, rated, unsecured, subordinated, redeemable debentures, post an oversubscribed debenture issue at the Colombo Stock Exchange. The bank will issue debentures carrying the same features for a further Rs.5.0 billion, subject to the regulatory approvals. The funds raised via both the debenture issuances serve the objectives of improving and further strengthening the capital adequacy ratio, in line with the Basel III guidelines and facilitating future expansion of business activities of the bank.

The return on average equity and annualised earnings per share for 3Q 2024 were 8.02 percent (group: 8.22 percent) and Rs.13.69 (group: Rs.14.92), respectively. The pre-tax return on average assets was 1.53 percent (group: 1.64 percent) and the net asset value per share was Rs.172.64 (group: Rs.183.87).