NDB Bank aims to build loan pipeline amid muted credit demand

National Development Bank PLC (NDB Bank) is actively pursuing strategies to build a robust loan pipeline, despite facing muted demand for loans and advances.

NDB Bank’s financial performance for the first quarter of 2024 showed resilience in a challenging economic environment. However, the demand for banking loans and advances remains subdued. Edirisinghe acknowledged the current low-interest-rate environment and the broader economic uncertainties that have contributed to this muted demand. “The operating environment remains challenging, with declining interest rates and limited appetite for new credit,” CEO Kelum Edirisinghe noted.

This initiative was highlighted during the bank’s 21 May Q1 FY 2024 investor forum, where management provided an in-depth overview of the bank’s financial performance and strategic outlook.

The bank reported a modest growth in loans and advances for the first quarter, reflecting the cautious approach of borrowers amid economic uncertainties. Despite this, NDB Bank is committed to enhancing its loan portfolio. “We are focusing on building a strong loan pipeline in certain asset classes and client segments, and we are confident that we will be able to grow the balance sheet from here on,” said Edirisinghe.

To navigate the current economic landscape, NDB Bank is targeting specific sectors and products to drive loan growth. The bank is placing particular emphasis on the retail segment, including products like pawning and credit cards, which offer promising growth opportunities. Additionally, the bank is identifying and pursuing strategic asset classes and client segments within the wholesale lending space. “We have identified certain asset classes and client segments where we can take a bit more appetite,” Edirisinghe explained. This targeted approach is part of the bank’s broader strategy to enhance portfolio quality and improve the balance sheet.

NDB Treasury Head Niran Mahawatte provided insights into the bank’s expectations regarding interest rates. Mahawatte noted that there is still room for interest rates to decline further, both in the short term and long term. “We feel that there’s some more room for interest rates to decline in the longer term and also in the shorter term,” he said. Given the elevated rate structure against the interest rate trajectory, the bank will look to issue variable rate debentures if there is market appetite for such instruments. The bank is closely monitoring policy decisions, including an upcoming policy meeting that could influence interest rate trajectories. Recent trends, such as the decline in three-month Treasury bill rates to 8.76%, support the expectation of continued downward pressure on interest rates.

Despite the subdued demand for credit, NDB Bank is optimistic about its ability to navigate the challenging economic environment and deliver sustainable growth. The bank’s proactive repricing of its deposit book and focus on maintaining a strong capital and liquidity position underpin its strategic initiatives.

“We are committed to driving sustainable bottom-line growth and delivering stable returns to our valuable shareholders,” Edirisinghe affirmed. TP

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