National Development Bank PBT crosses Rs.6.5bn in 1H24

National Development Bank (NDB) posted a pre-tax profit of Rs.6.5 billion for the first half of 2024 (1H24), a growth of 58 percent, predominantly driven by the healthy net interest income.  
The bank recorded a total banking revenue of Rs.22.9 billion for the period under review, a growth of 24 percent over the comparative period in 2023 year-on-year (YoY). The net interest income posted a healthy 10 percent growth to Rs.16.5 billion, commendable in the low-interest rate environment that prevailed through the period. 
The decline in the bank’s interest income was offset by the reduction in interest expenses, on account of faster repricing of the deposits book. The net interest margin reached an all-time high of 4.26 percent, a growth of 29 basis points over the end-2023 position. 
The net fee and commission income for the period was Rs.3.4 billion, which normalised over a relatively high base in 2023, as reflected in an 8 percent YoY decline. Other non-fund-based income categories all performed well, netting a gain of Rs.3.9 billion, save and except for those classified as other operating income, which recorded a loss of Rs.779 million on foreign revaluation reserves – attributable to the appreciation of the Sri Lankan rupee.    
Impairment charges for the period was Rs.8.4 billion, a YoY increase of 7 percent versus the comparative period. The impairment (stage three) to stage three loans ratio improved to 44.33 percent, from 41.11 percent in 2023, reflecting continued build-up of impairment to absorb the potential losses in the stage three category, as part of the bank’s prudent credit risk management efforts. The impaired loans (stage three) ratio was 7.68 percent, a consistent improvement from 8.58 percent of the financial year 2023, demonstrating the soundness of the bank’s focused recoveries measures. 

Also, the strong cost disciplines, together with the enhancements in income enabled a cost to income ratio of 34.9 percent for the period under review, well within the target level of 35.0 percent. Total operating expenses were Rs.8.0 billion, a YoY increase of 23 percent, mainly driven by the increase in personnel expenses due to annual revisions to staff emoluments. 

he other expenses category, which comprises manageable costs, was well contained, at 9 percent YoY.   Taxes netted Rs.3.3 billion, with a resultant post-tax profitability of Rs.3.2 billion, which was a notable YoY growth of 37 percent. 
The bank’s balance sheet closed in at Rs.764 billion as at end-June 2024. Within total assets, gross loans to customers grew by 2 percent over the end-2023 position (YTD) to Rs.505 billion, reversing the negative growth trend experienced over the last five quarters. 
Customer deposits followed a similar trend growing, although at a marginal one percent to Rs.619 billion.  Rupee deposit base grew by 4 percent YTD with marked improvement in current and savings deposits, benefitting CASA. Foreign currency deposits declined by 8 percent YTD, predominantly attributable to the exchange rate appreciation.  The return on average equity and annualised earnings per share for 1H 2024 were 7.38 percent (group: 7.58 percent) and Rs.12.52 (group: Rs.13.67), respectively. Pre-tax return on average assets was 1.39 percent (group: 1.50 percent) and net asset value per share was Rs.170.55 (group: Rs.181.54). 
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 284.31 percent, 262.09 percent and 143.28 percent, respectively. Tier I and total capital adequacy ratios by the end of 1H 2024 stood at 11.09 percent (group: 11.64 percent) and 14.83 percent (group: 15.28 percent), above the regulatory minimum levels of 8.5 percent and 12.5 percent, respectively. Prudent measures adopted in balance sheet management enabled the bank to maintain sound liquidity and capital adequacy.  The bank will raise up to Rs.10 billion in Tier II capital via Basel III-compliant listed, rated, unsecured, subordinated, redeemable debentures during the year, with requisite regulatory approval, towards which the shareholder approval was obtained in early August 2024. The funds are to be raised with 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 bank remains committed to driving sustained bottom-line performance and enhancing shareholder value. The mid-term strategy will guide the bank in this regard. In its course of business, NDB will also prioritise on the well-being of all other connected stakeholders and the economy at large, by deploying perfected commercial and development banking expertise available to its credit.