National Development Bank PLC demonstrated resilient performance amid challenging macro-economic and market conditions, and booked in a pre-tax profit exceeding Rs 5 billion (Bn) for the first six month of 2019 [period under review], an increase of 8% over the same period, prior year. Post tax profitability of Rs 2.22 Bn was a drop of 15% over the comparative period, primarily owing to the high taxes, including the newly introduced Debt Repayment Levy.
Income sources performed exceptionally well during the first half of 2019 in the backdrop of reduced economic activity and challenging market conditions. Gross income grew by 22% to Rs 28.9 bn, whilst total operating income recorded a 14% growth to Rs 11.5 Bn. Net interest income [NII] which contributed to 75% of total operating income grew by an impressive 27% to Rs 8.7 Bn, benefiting from a number of asset and liability management strategies deployed by the Bank. The Bank’s Net Interest Margin for the period under review was 3.36%.
Net fee and commission income grew by 22% to Rs 1.8 Bn benefiting from the increase in business volumes including credit cards, and notably steep uptake of digital financial solutions of the Bank. Net gains from trading, improved by 15% to Rs 676 million (Mn) whilst net gains from financial investments doubled to Rs 2.9 Mn.
Other operating income on the other hand was a reduction of 89% down to Rs 101 Mn, predominantly due to the exchange losses incurred on the revaluation of the foreign currency reserves of the Bank, resulting from the appreciation of the Sri Lankan Rupee during early 2019 in comparison to the depreciation of the Sri Lankan Rupee in the comparative period.
Total impairment charges for loans and other losses for the period under review was Rs 1.9 Bn, an increase of 24% over the prior period.
Commenting on the period’s performance, the Group Chief Executive Officer of NDB, Dimantha Seneviratne stated that the Bank has performed well under trying circumstances where all industries, including the banking sector have faced many challenges in the present economic context.
The Bank’s non-performing loan [NPL] ratio, which has been on an upward trend since end 2018 increased to 4.56%, reflective of the wider industry trajectory for NPLs, yet below the industry NPL ratio of 4.8%.
Operating expenses for the six months ended 30 June 2019 was Rs 4.7 Bn, an increase of 18% over the prior period. Personnel expenses [applicable to 2,766 employees as at end June 2019 compared to 2,381 in H1l 2018], comprised the greater portion of total expenses. Depreciation and amortization of Rs 260 Mn saw an increase of 22% over the prior period, driven by investments made by the Bank in the branch network and digital finance infrastructure over the last year.
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