National Development Bank PLC posted solid financial results for the financial year ended 31 December 2020. Gross income growth moderated to 3% in 2020 compared to 2019 (YoY) to LKR 60.7 Bn, reflecting reduced business volumes in the year, impact of interest rates concessions and interest deferments stemming from moratoria granted - phenomena experienced across the industry due to the effects of the pandemic.
As a result, NII was LKR 17.7 Bn, with a narrow growth compared to 2019. Interest income slightly dipped over that of 2019, to LKR 53 Bn, whilst interest expenses reduced by 1% to LKR 35 Bn, largely attributable to the rate reductions led by the CBSL as stimulus to economic growth. Pressure exerted on the NIM by interest rate concessions on loans brought the ratio down to 3.1% (2019: 3.5%).
However, Net fee and commission income bolstered overall income with a growth of 9% YoY to LKR 4 Bn. Exponential growth in the use of digital banking services, driven by the pandemic impact and the user-friendly features available in the NDB NEOS digital banking platform together with the Bank’s continued focus on enhancing fee based income, were key contributors in this aspect.
Net gains from trading for FY 2020 was LKR 967 Mn a marginal decrease of 2% YoY. However, the Bank realized capital gains from Government Securities portfolio, as reflected under net gains from de-recognition of financial assets amounting to LKR 1.5 Bn. Accordingly, Total Operating Income recorded a healthy growth of 7% to LKR 25.4 Bn.
Impairment charges for loans and other losses for FY 2020 was LKR 6.8 Bn, an increase of63%YoY. Individual impairment increased by 41%, whilst collective impairment increased by 113% to LKR 3.8 Bn and LKR 2.4 Bn respectively. Director/ Group Chief Executive Officer Dimantha Seneviratne, reflecting on the year stated that 2020 was one which put to test, the capabilities and capacities of each one of us to adapt to unforeseen challenges. NDB stood up to these challenges boldly and gracefully, demonstrating NDB’s dynamism, versatility and proficiency in serving the nation through many economic cycles.”
Despite the hive of operations carried out, operating expenses recorded a marginal reduction in 2020 compared to 2019 and was LKR 9.4 Bn. The total tax charge of the Bank for FY 2020 was LKR 3.7 Bn (2019: LKR 4.9 Bn) whilst the effective tax rate was 39.9% (2019: 49.2%). During 2020 Nation Building Tax (NBT) on Financial Services and Debt Repayment Levy were abolished.
NDB’s total assets crossed the Rs. 600 billion mark in 2020, with the asset base closing at LKR 627 Bn by end 2020, resulting in an impressive YoY growth of 18% which translated to a quantum growth of LKR 97 Bn. Gross Loans and Receivables however moderated in growth at 8% YoY to LKR 444 Bn (quantum growth of LKR 34 Bn).
Despite bank deposits becoming less attractive in a low interest rate climate, the Bank recorded an impressive growth of 21% in deposits, which translated to a quantum growth of LKR 85 Bn.
During 2020, NDB raised LKR 6.5 Bn via Tier II Listed Rated Unsecured Subordinated Redeemable Debentures issued in September 2020.
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