40-year old NDB pre-tax profit up amidst challenging market conditions
View(s):The National Development Bank PLC (NDB), which is celebrating its 40th anniversary, demonstrated resilience amidst challenging macro-economic and market conditions to report a pre-tax profit exceeding Rs. 5 billion for the first six months of 2019, up by 8 per cent over the same period in the previous year.
Post-tax profit of Rs. 2.22 billion, however, was a drop of 15 per cent over the comparative period, primarily owing to the high taxes, including the newly introduced Debt Repayment Levy, the bank said in a media release last week.
Income sources performed exceptionally well during the first half of 2019 in the backdrop of reduced economic activity and challenging market conditions. Gross income grew by 22 per cent to Rs. 28.9 billion, whilst total operating income recorded a 14 per cent growth to Rs. 11.5 billion.
Net interest income which contributed to 75 per cent of total operating income grew by an impressive 27 per cent to Rs. 8.7 billion, benefiting from a number of asset and liability management strategies deployed by the bank.
Total impairment charges for loans and other losses for the period under review was Rs. 1.9 billion, an increase of 24 per cent over the prior period. Coupled with political uncertainties, the macroeconomic condition of the country continued to be under pressures, with subdued performance across many sectors.
The bank’s non-performing loan (NPL) ratio, which has been on an upward trend since end 2018 increased to 4.56 per cent, reflective of the wider industry trajectory for NPLs, yet below the industry NPL ratio of 4.8 per cent.
Operating expenses for the 6-month period was Rs. 4.7 billion, an increase of 18 per cent over the earlier period. Personnel expenses (applicable to 2,766 employees as at end June compared to 2,381 in H1l 2018), comprised the greater portion of total expenses. Depreciation and amortisation of Rs. 260 million saw an increase of 22 per cent over the prior period, driven by investments made by the bank in the branch network and digital finance infrastructure over the last year.
Total assets grew by 4 per cent over the end December 2018 position to reach Rs. 490.2 billion.
Deposits, continuing the slow growth demonstrated from the beginning of the year, recorded a moderate growth of 2 per cent over end December 2019, to reach Rs. 355 billion. “The cap on deposit interest rates introduced by the Central Bank of Sri Lanka with a bid to reduce lending rates and enhance the credit flow to the economy also has contributed towards the slowdown in the deposits growth, as customers resort to alternate investment options yielding higher returns over bank savings,” the bank said.