The National Development Bank PLC recorded a pre-tax profit of Rs. 3.0 bn for Q1, 2019 ended 31 March 2019, a growth of 9% over Q1, 2018. The Bank’s profit after tax of Rs. 1.4 bn was however, a 12% decline over Rs. 1.6 bn reported for the comparative period, due to higher taxes, including the new Debt Repayment Levy and the impact from exchange losses incurred on the revaluation of the foreign currency reserves of the Bank. The reported results are largely reflective of the subdued macroeconomic and industry conditions experienced during the first quarter of the year.
Group Chief Executive Officer of NDB Bank, Dimantha Seneviratne said the Bank saw a moderation in growth having accounted for the prevailing economic conditions and the industry-wide trends in escalating NPLs.
Gross income recorded an 18% growth to Rs. 14.1 bn from Rs. 11.9 bn in the corresponding quarter. Total operating income was Rs. 6.0 bn, and was strengthened by the robust growth in net interest income and net fee and commission income. Net interest income was Rs. 4.7 bn for the quarter under review, an increase of 39% year-on-year (YoY). Within NII, interest income grew by 29%, and interest expense increased by 24%.
The Bank’s Net Interest Margin was 3.41%, compared to 3.49% in Q1 2018. The high rates offered on deposits, particularly time deposits by banks and non-banking financial institutions have resulted in higher interest costs. This is, however, expected to ease out with the measures taken by the Central Bank of Sri Lanka to introduce a cap on deposit interest rates.
Net fee and commission income grew by 22% to Rs. 864 mn YoY.Total operating expenses increased by 16% to Rs. 2.2 bn in Q1 2019. Personnel expenses increased by 14% to Rs. 1.2 bn.
The quarter saw moderation in the business expansions of the Bank. The total assets base of the Bank grew by 2% over 31 December 31, 2018.
Balance sheet expansion was supported by the expansion of the loan book [net] by 2% to reach Rs. 351 bn, which translated to a growth of Rs. 6.7 bn.
The gross non-performing loan (NPL) ratio was 3.37% in Q1 2019, a 52 bps increase from end 2018. This increase is a reflection of the wider trend in industry NPLS, as a result of the challenging conditions experienced in the country.
As a part of the Bank’s capital augmentation plans, to meet the enhanced capital adequacy levels under Basel II guidelines, and to support the Bank’s growing franchise, the Bank issued 50 mn Basel III compliant, listed rated unsecured and subordinated debentures with a par value of Rs. 100 and a tenor of five years in March 2019, which was oversubscribed, and raised Rs. 5.561 bn as Tier II capital.
The impairment charge for the quarter ended March 31, 2019 was Rs. 842 mn.