“Debt servicing could cause pressures on exchange rate”

There may be upcoming pressures on the exchange rate with resumption of debt servicing opined NDB’s Head Treasury, Niran Mahawatte at the NDB Investor Earnings Call event on March 20,

“We have heard that already some of the line credits have started repayments, this is including Asian Clearing Union payments so we see pressure can come in but even but in the short run I think there’s still more room for the currency to appreciate.”

NDB will take a wait and see approach in the pricing and roll out of its announced corporate debentures expecting an imminent slight reduction in rates.

The bank’s leadership anticipates a 50-100 basis point reduction in interest rates in the second half of the financial year 2024. This prediction aligns with recent policy changes that have led to a significant reduction in rates, with the AWLR settling at around 11.3% down from 12.9% in December.

“These policy shifts, alongside a 650-basis point reduction in central bank interest rates, have already spurred some lending activity, hinting at the potential for increased credit growth asthe economy gains momentum.”

Moreover, NDB has observed a demand for import credit growth in January plateauing in February and March, signaling a revival in economic activity.

Despite a contraction in the industry loan book by about 2.6% year-on-year, the bank remains optimistic about the future, seeing “green shoots” of recovery and an environment that is becoming increasingly conducive to consumption growth.

The bank also outlined its plans for an ISB restructure and improvements incredit quality, indicating a strategic approach to managing impairments and risks.

A marked improvement in impairments, decreasing by about 30% compared to 2022, and a more conservative approach to loan impairments underscore NDB’s commitment to maintaining a robust financial position.

Meanwhile, in a strategic move to capitalize on favorable economic conditions, NDB CEO Kelum Edirisinghe announced plans to expand the bank’s loan book. Edirisinghe highlighted the bank’s optimism towards a recovering economic environment and the anticipated dip in interest rates as key drivers for potential growth in consumer spending.

“We need to have access to a legal framework that we could protect both the shareholders and the depositors, removing the parate action is going to be detrimental to the banking sector,” said Edirisinghe. (TP)

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