Sharp drop in NDB H1 2022 profits

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 unprecedented depreciation in the exchange rate together with severe macro-stresses that resulted in higher provisions for investments, and provisions made on a prudent basis on loans to factor in expected stresses narrowed the profits. “Whilst we are augmenting the bank’s strength and stability through robust risk management frameworks amidst unique challenges faced by the financial services industry, we are also sharpening our focus on customer-centricity, so as to deliver precise solutions and support them towards gradually emerging from their economic woes,” he added.