NDB 3Q profits surge on strong loan growth despite higher provisions

National Development Bank PLC (NDB) reported higher profits for the three months to September (3Q21) as the bank defied the fresh challenges that stemmed from virus-induced restrictions to maintain its growth momentum set off at the start of the year though it set aside more from its profits for possible bad loans. 

The bank reported earnings of Rs.6.78 a share or Rs.1.87 billion for the July-September quarter compared to earnings of Rs.6.78 a share or Rs.1.50 billion in the corresponding period last year, logging 24.4 percent increase.
In the nine months to September, the bank reported earnings of Rs.21.60 a share or Rs.5.97 billion, up 54 percent from a year ago. 

Maintaining its growth momentum, the bank gave Rs.22.4 billion in new loans in the three months, bringing total new loans in the nine months to Rs.65.9 billion, translating into a robust 15 percent growth.

The bank reported a net interest income of Rs.5.61 billion, up 14.7 percent from the same period last year as the lower interest rates pushed the bank’s interest expense down faster than the decline in the interest income, helping the bank to stretch its net interest margin to 3.26 percent from 3.07 percent at the beginning 
of the year. 

The continuous improvement in the current and savings account (CASA) portfolio helped the bank to keep its funding cost in check. 

The bank saw this portfolio of low costs deposits growing by 15 percent or Rs.18 billion, improving the CASA ratio to 27 percent from the total deposit portfolio to record the highest CASA ratio recorded by the bank since its conversion to a fully-fledged commercial banking entity in 2005, from the previous DFI model, the bank said in a press release.  

Meanwhile, the bank set aside Rs.2.5 billion for possible bad loans and other losses, up sharply from Rs.1.65 billion in the same period last year in line with the growth in new loans and the additional precautions taken in respect of the fresh hardships faced by borrowers due to the virus restrictions. 

The gross non-performing loans ratio slightly increased to 5.46 percent from 5.35 percent at the end of last year.
The bank’s fee incomes rose by 17.1 percent to Rs.1.80 billion for the quarter under review, while trading gains rose to Rs.902 million in the three months from Rs.241.8 million in the year earlier period buttressing profits. 

The bank earlier in the year raised Rs.9.46 billion from a combination of a rights issue and a private placement with Norway’s Norfund, bolstering its Tier I capital. 

NDB in September announced plans to raise Rs.6.0 billion via a debenture with an option to raise up to another Rs.2.0 billion to further cushion its capital adequacy ratios which provide the bank with space to continue with the growth push.  

By the end of September 30, 2021, Norfund held 9.99 percent stake in NDB being its single largest shareholder while the government collectively held nearly 33 percent through State-owned institutions including 9.5 percent stake by the Employees’ Provident Fund.