NDB pulls off robust 4Q amid adversities; reports Rs.2.37bn profit

National Development Bank PLC (NDB) reported some solid numbers in the three months to December to close the year despite coming under enormous pressure from what were seen as unprecedented economic challenges ever faced by Sri Lanka’s banking sector last year. 

The bank reported a net interest income of Rs.8.72 billion in the three months, up 52.3 percent from a year ago as the bank capitalised on the higher margins on interest. The bank expanded its net interest margin to 4.0 percent from 3.25 percent. 
Sri Lanka’s banking sector fattened their margins last year as the Central Bank raised key policy rates by an unprecedented 950 basis points in 2022 to tamp down inflation by crushing demand for bank credit and goods and services.  

uted substantially as borrowers were pushed to sidelines while the banks tightened their credit standards.  
NDB saw its loan book growing by 10.0 percent but much of it came from the devaluation of the rupee which inflated the loans in foreign currency. 
However the asset quality came under pressure as the bank’s asset quality matrix, the Stage 3 loans ratio rose to 6.24 percent from 4.55 percent a year ago.  
The bank also provided a massive Rs. 7.06 billion for possible bad loans and other financial asset losses, up from Rs.3.61 billion in the same period in 2021. 

The bank said the bulk of its impairments were for the foreign currency denominated government securities. 
“Impairment provisions for loans also increased during the period, to reflect macroeconomic impact on loan book quality, the major factor being reduced debt serviceability of customer across all segments, exacerbated by high inflation and negative GDP growth”, an earnings release from the bank said.  The bank reported earnings of Rs.6.23 a share or Rs.2.37 billion in the October – December quarter compared to Rs.2.83 a share or Rs.936.19 million a year ago. 

The earnings were also supported by fee incomes which grew by Rs.2.09 billion in fee incomes which went up by 2.83 percent.  The bank’s CEO Dimantha Seneviratne, commenting on the performance for the period stated that 2022 was notable for the never-before seen challenges affecting the Sri Lankan economy, from both domestic and international fronts. 

“Unprecedented and unchartered times like these put to test the true resilience, versatility and agility of corporates. I am pleased to note that NDB gracefully withstood these challenges, particularly in preserving liquidity and capital adequacy – which were made possible by its agile strategy tactically recalibrated in response to shifting operating landscape”, he added.  Norfund, the Norwegian Investment Fund for developing countries held 9.99 percent in NDB, being its single largest shareholder while the government with its constituent parties collectively held 32.86 percent in the bank.