Resilient NDB maintains growth momentum

Friday, 13 November 2020 00:08 -     - {{hitsCtrl.values.hits}}

  • Crosses Rs. 600 b in total assets with 13% growth amidst macro-challenges
  • Pre-tax profitability up by 2% to Rs. 7.7 b
  • Post-tax profitability up by 34% to Rs. 4.5 b
  • Gross loan book expansion of 8% to Rs. 443 b and customer deposits expansion of 15% to Rs. 464 b
  • CASA deposits crosses Rs. 100 b, an impressive YTD growth of 26% 
  • Cost-to-income ratio improved to an industry best of 35.9%
  • Over Rs. 18 b approved under the CBSL’s ‘Saubhagya’ loan scheme, the fourth highest bank for such loan approvals

Chairman Eshana De Silva
Group CEO Dimantha Seneviratne

National Development Bank PLC (NDB) said yesterday it had recorded yet another quarter of sound performance amidst macro-economic challenges brought in by the COVID-19 pandemic. 

In a statement, NDB said the bank continued its support towards pandemic-affected customers through financial and advisory support, whilst maintaining banking services as usual. 

NDB released quarterly financial statements for the nine months ending 30 September to the Colombo Stock Exchange on 12 November, where its profits for the nine months were duly certified by the bank’s external auditors Ernst & Young.

NDB Director/Group Chief Executive Officer Dimantha Seneviratne commented that living with pandemic concerns had now become the new norm until a lasting solution was found and in that backdrop, the duty of the banking sector was to provide undisrupted banking services and support the economic revival despite such challenges. 

“The nine months ending 30 September was one of the most challenging times we encountered in recent history. Yet, NDB managed to steer through with resilience and make a meaningful contribution to the economy and in the process generate solid returns to its shareholders and touch the lives of many other stakeholders. In September 2020, the bank achieved a milestone in its growth journey by crossing Rs. 600 billion in total assets, well in line with its growth aspirations, attributable to precise execution of strategic imperatives,” he further mentioned.

Gross income for the nine months ending 30 September (Q3 2020) saw an increase of 6% to Rs. 46.7 billion. Within gross income, net interest income (NII) recorded a growth of 4% to Rs. 13.7 billion. NII was impacted by the net interest margin (NIM) of 3.23% for Q3 2020 which was a 30 Basis Points (BPS) dip from 3.53% in 2019. NIM came under pressure given the interest rate caps introduced on certain products, impact of the moratorium on interest, restructuring of facilities, etc. 

Fee and commission income also grew by 5% year-on-year (YOY) to Rs 2.9 billion. The uptake of digital financial services, driven by the dual factors of restricted physical banking by customers due to the pandemic and NDB upgrading its NEOS platforms with many user-friendly features, was a key contributor towards driving fee income up. The increase in business volumes with the country opening up and the economy gradually returning to normalcy during the window before the second wave of the pandemic set in, also benefited fee income. 

Net gains from trading was Rs. 779 million, a marginal increase of 2% YOY. The Bank realised capital gains from Government Securities portfolio, as reflected under net gains from de-recognition of financial assets. Accordingly, Total Operating Income had a healthy 11% growth to record Rs 19.6 billion for the period under review. 

Impairment charges for loans and other losses for Q3 2020 was Rs. 4.8 billion, a 68% YOY increase. The increase in the impairment charges continued to be caused by the increase in the collective provision charge in line with the growth in the loan book and provisions made at individual levels in response to elevated risks caused by the pandemic and other stresses. The Bank also accounted for the day 01 impact on the moratoriums, where significant interest concessions were given amounting to Rs. 583 million, under other impairment charges as prescribed by SLFRS 09: Financial Instruments. The regulatory Non-Performing Loan [NPL] ratio was 5.57% for Q3 2020, which is on a gradual increase, reflecting the wider industry NPL behaviour. 

The Bank continued vigorous cost management initiatives, particularly by embracing digital technology and process re-engineering to achieve leaner and efficient processes. The outcome was reflected in other operating expenses reducing by 10% YOY. Total operating expenses reduced by 2% to Rs. 7 billion, leading to a cost-to-income ratio of 35.9%, one of the best cost-to-income ratios in the banking industry. YOY headcount increase was marginal at 22%, compared to the considerable increase in business volumes, again attributable to streamlined automated processes together with the effective deployment of staff in a productivity enhancement manner. 

The total tax charge for Q3 2020 was Rs. 3.2 billion with an effective tax rate of 42% (Q3 2019: 56%). Post-tax profit was Rs. 4.5 billion, up by 34%, whilst profit attributable to shareholders at the Group level was Rs. 3.9 billion, up by 32%. 

Total assets as of 30 September stood at Rs. 600.1 billion, which is a 13% growth over the December 2019 position (YTD growth). Gross Loans and receivables grew by 8% YTD, which was equivalent to Rs. 33.6 billion. Gross Loans grew by 14% YOY, which translated to Rs. 53 billion. Customer deposits grew by an impressive 15% YTD to Rs. 464 billion, which was a Rs. 59.3 billion increase. The YOY growth was 24% equal to Rs. 90 billion. Within overall deposits, CASA deposits recorded an impressive YTD growth of 26% crossing the Rs. 100 billion mark, bringing up the CASA ratio to 22% from 20% in 2019. 

NDB raised Rs. 6.5 billion via Tier II Listed Rated Unsecured Subordinated Redeemable Debentures issued in September 2020, wherein, the Issue was oversubscribed within the day of opening itself. During June 2020, debentures worth of Rs. 10 billion issued in 2015 with a tenor of 5 years were redeemed. Furthermore, in October 2020, the Bank announced its plans to raise Rs. 8 billion via a Rights Issue at the ratio of 28 new ordinary voting shares for every 61 ordinary voting shares held (up to 106,780,489 shares to be issued), at a consideration of Rs. 75 per share. The purposes for which the proceeds of the Rights Issue are to be utilised are to further strengthen the equity base of the bank and thereby improve Capital Adequacy Ratios in line with Basel lll guidelines and to part finance the growth in the loan portfolio of the bank.

Tier I and total capital ratios as at 30 September were 9.21% and 14.21% at bank level, whilst the same were 9.77% and 14.62% at Group level [minimum requirements of 8.0% and 12.0% respectively]. 

Liquidity Coverage Ratios were 138.83% and 139.16% for Rupee and All Currency respectively as of 30 September and were well above the statutory minimum requirement of 90%. The Net Stable Funding Ratio was 108%, above the statutory minimum requirement of 90%. 

The Return on Average Shareholder Funds [ROE] for the bank was of 13.37% [2019 - 13.73%] and the Earnings per Share was Rs. 23.92 [2019 - Rs. 23.05] for Q3 2020. The same ratios for the Group were 10.85% [2019 - 11.59%] and Rs. 21.01 [2019 – Rs. 21.53] respectively. Return [before tax] on Average Assets for the bank was 1.70% [2019 - 2.01%] and for the Group was 1.65% [2019 - 1.97%]. The net asset value per share of the Bank was Rs. 187.97 and compared with a closing share price for the quarter of Rs. 89.

NDB has approved over Rs. 18 billion of loans under CBSL’s ‘Saubagya’ COVID-19 Renaissance Facility, and is the fourth highest bank to approve such loans in the industry. Approximately 30% of its loan book was granted debt moratoriums as of 30 September. 

The Bank also continues support to affected customers through their indigenous solutions such as ‘NDB Jayagamu Sri Lanka,’ special support to female customers through ‘NDB Araliya’ and strategic tie-ups with third parties such as Maersk, Daraz, iLoans and ThinkCube Solutions for the benefit of SMEs, entrepreneurs and exporters. The Bank has been proactive in identifying customer needs and supporting them stay afloat though the challenges.

NDB has been on an accelerated growth trajectory over the past three years, maintaining a CAGR of 17% in total assets, 20% in loans and 26% in customer deposits, well ahead of the industry averages. It has also made bold and prominent strides in the Sri Lankan banking arena with digitised solutions, innovative product launches and the unique value proportion offered by the NDB Group in both banking and capital market services.