NDB June quarter net profit up 40% on strong loan growth, better margins

National Development Bank PLC, the development lender turned commercial bank, reported earnings of Rs.4.48 a share or Rs.748. 1 million for the April -June quarter, recording an increase of 39.7 percent from a year ago as the bank managed to maintain the growth in advances and margins despite difficult market conditions, the interim financial accounts showed.

NDB was the first bank to release results in the second quarter earnings season and for the 1H17 the banking group made a net profit of Rs.1.49 billion or Rs.8.90 a share, increasing from Rs.6.56 a share, which translated to a 37 percent increase from a year ago. The bank’s Chief Executive Officer, Dimantha Seneviratne in an earnings release said the bank had been able to well maintain the sound growth coming from all sectors, diversifying the core banking income base. 

NDB with a total asset base of Rs.365 billion managed to expand its loan book by strong Rs.24 billion or 10.3 percent during the 6 months, virtually doubling its loan growth during 1Q17, which was Rs.13.4 billion. 

This was despite the improved quality of assets as the bank’s gross non-performing loan ratio fell to 2.22 percent from 2.63 percent in December 2016. 

This is below the industry average of around 2.9 percent.

However, the bank made provisions of Rs.440.6 million against possible bad loans, majority of which were made against some selected clients. This is an increase of 32.4 percent from the provision made during the same quarter, last year. 

Meanwhile, the net interest income (NII) grew by 15.3 percent during the quarter from a year ago to Rs. 2.49 billion as the bank managed to maintain its net interest margin – the spread between the interest yield of its assets and the cost of its funding book – around 2.74 percent, little down from 2.78 percent by the end of the 1Q17. 

The bank had a loans and receivables book of Rs.257. 7 billion by end of June. 

The bank’s growing retail focus as well as some aggressive re-pricing of its lending book appears to have helped in maintaining margins. 

Meanwhile, the deposits also grew by Rs.35.4 billion or 17.4 percent during the 6 months, out of which Rs.24 billion came during the 1Q17. 

NDB now has a deposit base of Rs.239.3 billion. The low cost deposit base, measured by the current and savings account (CASA) ratio remained largely unchanged around 21.9 percent. 

The net fee and commission incomes grew by 9.4 percent year-on-year (YoY) to Rs.807.3 million during the quarter.  The bank on a standalone basis made a net profit of Rs.1.15 billion for the quarter and Rs. 2.3 billion for the 1H17 recording an increase of 141.7 percent and 81 percent respectively due to some hefty group dividend received during the April – June period as the banking group operates with multiple subsidiaries.

As of June 2017, controversial primary dealer, Perpetual Treasuries had 4.45 percent of the bank being the seventh largest shareholder. Another 2.03 percent stake is held by Perpetual Equities (Private) Limited. 

Hence, according to the top 20-shareholder list of NDB, Perpetual group held a 6.48 percent stake, up from 6.17 percent held in December 2016.   

The government held a stake slightly above 30 percent through Bank of Ceylon, Employees’ Provident Fund and Sri Lanka Insurance Corporation.