National Development Bank PLC, Sri Lanka’s fourth largest listed bank continued to demonstrate its resilience to external shocks and ability to deliver consistent results, as reflected in financial statements released to the Colombo Stock Exchange for the six months ended 30 June 2021.
NDB’s pre-tax profits crossed Rs. 6 billion up by 21% and the bank’s, post-tax profits of Rs 3.9 billion incresed by 32%.
The review period was marked by month-long travel restrictions imposed to curb the spread of the third wave of the pandemic in Sri Lanka, which affected business momentum. NDB’s Director and Group CEO Dimantha Seneviratne commented that notwithstanding these deepening challenges, the Bank stayed in top form in delivering uncompromised value to all our stakeholders, thanks to its agile strategies and committed team.
“Banking sector has always played a crucial role in national economic development, and its importance is more pronounced in a situation like this. With the nation-wide vaccination program successfully rolling out there is expectancy of an expedited return to economic normalcy.” NDB recorded a total operating income of Rs 15.4 billion which grew by 19% over six months ended June 2020 (YoY). Operating income was strengthened by net interest income (NII), net fee & commission income and consolidated other non-fund based income, all of which recorded a growth over the comparative period. NII, the majority contributor in operating income (67%), grew by 17% to Rs 10 bn. Reflecting the reduced interest rate environment, both interest income and interest expenses declined YoY with the letter posting a larger decline at 18%. Deposit portfolio’s improving skewness towards CASA base, with over 50% of the fresh deposits growth for H1 2021 over H1 2020 coming from CASA deposits and a significantly improved CASA ratio of 26% (H1 2020: 21%) contributed to reduced interest expenses.
Net fee and commission income grew by an impressive 48% to Rs 2.6 bn supported by growth in the loan book (YoY 14%), trade business and digital banking transactions conducted through NDB NEOS platforms. All other non-fund based income, including net gains from trading and derecognition of financial assets collectively grew by 6% to Rs 2.4 bn. Impairment charges for loans and other losses for H1 2021 was Rs 4.2 bn, an increase of 31% YoY. Costs continued to be well managed, benefiting from the Bank’s organization-wide Operational Efficiency and Effectiveness improvement programme (OEE) and strong digital drive. Total operating expenses for H1 2021 was Rs 5.1 bn, with the YoY increase managed at 10%, amidst business volume growth and a host of other customer-centric initiatives. Operating profit before all taxes for the period was Rs 6.1 bn, up by 21% YoY.
Total taxes for the period was LKR 2.2Bn, comprising VAT on financial services – which recorded an increase of 16% due to increase in business volumes, and income tax - which reduced by 4% amidst an increase in profits due to the income tax rate reducing to 24%(effective from the prior year) from 28% in the prior year.
Total assets for H1 2021 was LKR 664 Bn, up by 6% over 2020. On YoY terms this was a growth of 18%. Loan book growth was broad-based, to LKR 487 Bn, a YTD growth of 10% and YoY growth of 14% (quantum of growth – LKR 43.5 Bn and LKR 58.2 Bn respectively), with lending increasing to all segments.
On aspects of funding, the Bank’s deposits base crossed the LKR 500 Bn mark for the first time with deposits closing in at LKR 515 Bn.
Return on equity of the Bank for H1 2021 increased to 13.81% (2020: 13.13%) whilst the same at the Group level was 13.91% (2020: 11.20%). Pre-tax ROA of the Bank was 1.68% (2020: 1.59%) and of the Group was 1.79% (2020: 1.58%). Earnings per share of the Bank was LKR 28.89 (2020: LKR 23.77), whilst the same for the Group was LKR 30.96 (2020: LKR 21.99).
The net asset value per share of the Bank and the Group were LKR 161.48and LKR 170.94. On capital adequacy, Tier I capital adequacy ratio and Total capital adequacy ratio of the Bank were 10.43% and 14.73% respectively. The same ratios for the Group were 10.83% and 15.03%. With the completion of Tier I capital infusion netting LKR 9.5 Bn, and further funds secured through credit lines, NDB is poised for accelerated growth as market opportunities warrant.
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