Sharp drop in NDB H1 2022 profits
View(s):NDB has posted a pre-tax profit of Rs.2.7 billion for H1 2022, a sharp reduction of 56 per cent over the first half of 2021, largely due to high impairment provision.
However the bank, cushioned the blow, saying in a statement that the deceleration in profits was equitable compared to the considerable quantum of impairment charges factored in for the period, and is predominantly attributable to strong revenue generation and expenses management by the bank amidst external challenges.
Taxes were Rs.973 million with post-tax profits reported at Rs.1.7 billion, down by 57 per cent from nearly Rs. 4 billion in the 2021 period.
Total operating income of Rs.22.4 billion, an increase of 46 per cent over the comparative period, bolstered by both fund and non-fund based income. Net interest income, for the period under review was Rs.15 billion, up by 45 per cent over the comparative period.
On non-fund based income, net fee and commission income improved by 19 per cent to Rs.3.1 billion, whilst sources of other non-fund based income totalled Rs.4.3 billion, predominantly benefitting from the revaluation gains on the bank’s foreign currency denominated reserves, due to the sharp depreciation of the LKR against the US dollar.
The period under review saw the bank booking impairment charges of Rs.13.9 billion, an increase of 235 per cent over the comparative period. The greater portion of impairment charges comprised provisions made for foreign currency denominated government securities, factoring in the revisions to the sovereign rating of the country earlier this year on account of the country’s debt restructuring measures and the impact arising from rupee depreciation. The bank said it strengthened the impairment provisions for loans, given heightened economic uncertainty exacerbated by political instability and social unrest during the period, impacting customer debt serviceability.
“With our strategy recalibrated to match external developments well on track, NDB was able to achieve its core banking revenue targets,” said Dimantha Seneviratne, Director/ CEO of NDB.
The report said that given further tightening of the monetary policy by the Central Bank, rising inflation, supply-side disruptions caused by fuel and import deficits, etc, economic activity is anticipated to remain low for the remainder of 2022.
“With customer debt serviceability directly affected, and the full effects of moratoria which ended in December 2021 now unwinding, the bank will place significant focus and efforts in preserving quality of the loan book. Gradual political stability and expedited discussions with the International Monetary Fund towards finalising relief measures to Sri Lanka will auger well for the country and its citizens. NDB remains committed in its role as a banking and capital market services group, to support the Sri Lankans and the country’s economy in this recovery path,” it said.
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