NDB posts strong first quarter performance
National Development Bank PLC posted satisfactory results for the first quarter of 2023 reordering a post-tax profit of Rs 805 million for the first quarter ended March 31, 2023, a healthy growth of 33% over the same period in 2022.
Commenting on NDB’s performance, Director/ CEO Dimantha Seneviratne stated that prudent balance sheet management, diversified revenue focus and cost optimization ensured that the Bank generated sound returns to its shareholders.
“We are cautiously optimistic of the economy’s recovery, particularly as the banking sector remains vulnerable with cascading effects of the economic crisis exerting pressure on sector capital adequacy,” he added.
As demonstrated over the years, NDB’s core banking operations posted resilient performance with gross income growing by 75% to Rs 33.5 Bn in the period under review. All income categories grew impressively, with the only exception in other operating income. Net interest income grew by 38% to Rs 8.5 Bn, driven by interest income of Rs 32.8 Bn and interest expenses of Rs 24.2 Bn, which were higher by 113% and 165% over the comparative period respectively.
The Bank effectively deployed the funds raised via deposits in interest efficient products whilst maintaining adequate liquidity, resulting in a net interest margin (NIM) of 4.01%. Net fee and commission income was Rs 1.9 Bn an improvement of 13% over the comparative period driven mainly by trade activities, digital transactions and credit card transactions.
Other operating income had a Rs 2.2 Bn revaluation loss on account of the rupee appreciation on the Bank’s foreign currency reserves.
Impairment charges continued to weigh down profits with a charge of Rs 4.8 Bn reported for the quarter. The Impairment cover (Stage 3) to Stage 3 Loans Ratio was 37.60% (2022: 37.44%) whilst the Impaired Loans (Stage 3) Ratio was 7.30% (2022: 6.24%) by end March 2023.
NDB continued its cost disciplines well into 2023, and reported total operating expenses of Rs 3.1 Bn for the first quarter. The year on year increase in costs was stemmed at 16% amidst high inflation and taxes. This was ably supported by the Bank’s digital drive in customer solutions as well as process automations, with 85% of the Bank’s total transactions driven via digital platforms.
The cost to income ratio reported was 33%. The resultant pretax operating profit was Rs 1.4 Bn up by 45%.
In tandem with the industry-wide asset de-growth, NDB also posted a 6% drop in its asset base to Rs 782 Bn compared to the end 2022 position. Gross loans to customers decelerated by 7% to Rs 536 Bn, whilst customer deposits closed in at Rs 629 Bn with a 6% deceleration.
Total assets at the Group level stood at LKR 788 Bn. Regulatory Liquidity Coverage Ratio (Rupee), Liquidity Coverage Ratio (All Currency) and Net Stable Funding Ratio stood well above the regulatory minimum requirement of 90% at 301.03%, 237.92% and 131.95% respectively.
Tier I and Total Capital Adequacy ratios by the end of Q1 2023 stood at 10.08% (Group: 10.62%) and 13.99% (Group: 14.46%), ahead of the regulatory minimum levels of 8.5% and 12.5% respectively.
NDB has also announced its plans to raise Tier II capital via Basel III compliant listed, rated, unsecured, subordinated, redeemable debentures within a one-year time frame ending 30 March 2024, of up to Rs 10 Bn, in further strengthening its capital position.
Return on average equity and Earnings per share for Q1 2023 were 5.07% (Group: 5.06 %) and Rs 8.59 (Group: Rs 9.11) respectively. Pre-tax Return on Average Assets was 0.70% (Group: 0.75%) and Net asset value per share was Rs 172.02 (Group: Rs 182.50), with both ratios having enhanced over the ratios for the financial year 2022.