- Net interest margin of 4.21%, consistently above the 4.00% mark
- Strong handle on costs and impairment enabling profits preservation
- Pre-tax profit of Rs. 9.4 Bn at Bank level
- Enhanced Earnings per Share of Rs. 13.69
- Continued moderation in portfolio growth attuned to macro-economic conditions
Analysis of financial performance
Income and Profitability: NDB recorded a net operating income of Rs. 21.5 Bn for the period under review covering the nine months ended 30 September 2024, a 9% increase over the comparative period of 2023 (YoY). The notable reduction in impairment charges by 21% YoY augured well in maintaining the healthy growth in net operating income against de-growth seen in some key revenue lines. Net interest income remained largely static over the comparative period at Rs. 24.4 Bn, within which both interest income and interest expenses declined, attributable to the tapering interest rate environment in the economy. The timing of the deposits book repricing led to a larger decline in interest rate expenses, benefiting NIM. Driven by the strong strategic focus in this aspect, the Bank posted a NIM of 4.21%, consistently above the 4.00% mark for the third consecutive quarter. Net fee and commission income for the period was Rs. 5.1 Bn which continued to normalise over a relatively high base in 2023 alongside moderate balance sheet expansion, with a YoY decline of 7%.
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Impairment charges for the period was Rs. 11.0 Bn, comprising charges on the loan book and investment portfolio. Enhancing loan book quality, another key cog of NDB’s mid-term strategy remained well on track, as demonstrated in continually enhancing related ratios. Impaired Loans (Stage 3) Ratio improved by 213 bps to 6.45%, whilst Impairment (Stage 3) to Stage 3 Loans Ratio increased to 49.40% by 829 bps over the end 2023 position. Strengthening asset book quality in turn bolstered the Bank’s NIMs in the low interest rate climate. On the investment book, the Bank continued to provide adequate provisions in line with prescribed industry norms.
Strong cost discipline across the organisation, driven by a focused governance mechanism led to discretionary costs increase being curtailed at 8% YoY. Total operating costs, comprising such discretionary costs, personnel expenses and depreciation and amortisation netted Rs. 12.1 Bn, a YoY increase of 19%. The resultant cost to income ratio was 37.1%
Bank level pre-tax profitability for the year was Rs. 9.4 Bn, a marginal decline of 2% YoY, whilst post- tax profitability was Rs. 4.5 Bn. Profit attributable to shareholders at the NDB Group level was Rs. 4.9 Bn.
Balance Sheet Performance, Liquidity and Capital Adequacy: NDB’s strength and stature is demonstrated in its dynamic balance sheet, which stood at Rs. 763.2 Bn as at end September 2024. Gross loans to customers was Rs. 501.1 Bn, whilst customer deposits was Rs. 611.5 Bn as at the end of the period, leading to a loans to deposits ratio of 82%. Deposits composition shifted favourably, despite an overall marginal decline of 1% over the end 2023 position (YTD), wherein CASA deposits grew by 10% enhancing the CASA ratio by 244 bps to 25.04%. Total equity base stood at Rs. 71.7 Bn, demonstrating the dynamism of the funding base.
Funding Ratio stood well above the regulatory minimum requirement of 100% at 326.87%, 280.39% and 143.77% respectively. Tier I and Total Capital Adequacy ratios by the end of 3Q2024 stood at 11.07% (Group: 11.61%) and 15.70% (Group: 16.10%), above the regulatory minimum levels of 8.5% and 12.5% respectively. On 12 September 2024, the Bank allotted Rs. 5.0 Bn in Tier II capital via Basel III compliant listed, rated, unsecured, subordinated, redeemable debentures post an oversubscribed debenture issue at the Colombo Stock Exchange. The Bank will issue debentures carrying the same features for a further Rs. 5.0 Bn subject to regulatory approvals. The funds raised via both the debenture issuances serve the objectives of improving and further strengthening the capital adequacy ratio in line with the Basel III guidelines and facilitating future expansion of business activities of the Bank.
Investor KPIs and regulatory ratios
Return on Average Equity and annualised Earnings per Share for 3Q2024 were 8.02% (Group: 8.22%) and Rs. 13.69 (Group: Rs. 14.92) respectively. Pre-tax Return on Average Assets was 1.53% (Group:1.64%) and Net Asset Value per Share was LKR 172.64 (Group: LKR 183.87).
Outlook
As Sri Lanka’s political landscape stabilises and the national economic agenda prioritises growth and enhanced living conditions, confidence in the country’s investment potential is rising. These developments signal positive momentum for the economy, and NDB stands ready to support this journey. Guided by our strategy, NDB is well-positioned to contribute to national progress and upliftment as a longstanding banking institution committed to empowering communities and driving sustainable growth. Together, the Bank looks forward to building a more prosperous future for all Sri Lankans.
