NDB 2Q profit soars on higher loans, improved margins

Opening the banking sector earnings for the June quarter (2Q21), National Development Bank PLC (NDB) reported some stellar financials on robust growth in loans amid improving margins.

The development lender-turned fully-fledged commercial bank reported a Rs.5.24 billion net interest income for the quarter under review, up 15.4 percent year-on-year (YoY), as the bank accelerated its loans while the margins expanded with deposits getting reprised at lower interest rates. 

The decline in the interest expenses outstripped the corresponding decline in the interest income by at least three times to improve the net interest margin to 3.23 percent, from 3.07 percent at the start of the year. 

The bank also attracted more low-cost deposits, as out of the Rs.25.0 billion deposits it raised during the first six months, Rs.13.0 billion were low cost. 

Despite the virus-related restrictions, the bank churned out loans worth of Rs.24.9 billion during the three months, bringing the total loans disbursed in the first half to Rs.43.5 billion. 

This translated into a strong 9.8 percent expansion in the bank’s gross loans and advances in the first half of the year. 

During the quarter under review, the bank infused equity to the tune of Rs.9.46 billion, raised through a rights issue and a private placement with Norfund, bolstering its core capital and the Tier I capital adequacy. 

NDB is now the fourth largest private commercial lender, with assets of Rs.663.6 billion on a standalone basis. 
“With the completion of Tier I capital infusion netting Rs.9.5 billion and further funds secured through credit lines, NDB is poised for accelerated growth as market opportunities warrant,” the bank said in an earnings release. 

NDB reported earnings of Rs.7.08 a share or Rs.1.73 billion for the quarter under review, up by 54.5 percent from the same period last year. The bank booked corporate income tax at the reduced rate of 24 percent, bringing its effective tax rate down to 36 percent. 

The bank’s share closed at Rs.77.00, 70 cents or 0.92 percent higher yesterday. 

The bank reported a gross non-performing loans ratio of 5.63 percent by June-end, slightly up from 5.40 percent in March. NDB made provisions of Rs.1.96 billion against possible bad loans, up 4.2 percent from the same period in 2020. 

The bottom line was also buttressed by the fee and commission income, which rose by 82.4 percent to Rs.1.67 billion from the same period last year, as business volumes grew across the board while the cost-to-income ratio was also kept at 33 percent, reflecting higher efficiency. 

As at June 31, 2021, Norfund held a 9.99 percent stake in NDB, being its single largest shareholder while the government collectively held nearly 33 percent via several state-owned institutions, including a 9.5 percent stake by the Employees’ Provident Fund.