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Sri Lanka’s NDB December profit down on higher impairment charges, taxes

Feb 22, 2017 17:33 PM GMT+0530 | 0 Comment(s)

ECONOMYNEXT – Sri Lanka’s National Development Bank (NDB) said December 2016 quarter group net profit fell 42% to Rs726 million from a year ago with tax costs and provisioning for bad loans sharply higher.

Interest income grew 41% to Rs8.2 billion in the quarter while interest expenses grew 59% to Rs3.7 billion with net interest income up 11% to Rs2.3 billion, according to interim accounts filed with the stock exchange.

Individual impairment charges more than doubled to Rs397 million in the quarter.

Net fee and commission income was lower in the quarter and while net gains from trading grew, gains from investments were sharply lower with other operating income also lower.
 
Diluted earnings per share for the December quarter were Rs4.40. NDB’s share was last traded at Rs148.90.

EPS for the year ended 31 December 2016 were Rs16.29 with annual group net profit down 24% to Rs2.69 billion although net interest income went up 13% to Rs8.86 billion.

The accounts showed primary dealer Perpetual Treasuries had increased its stake in NDB to 4.45% and was now the seventh largest shareholder.

The top shareholders were Bank of Ceylon, Employees Provident Fund, Rusi Captain, Sri Lanka Insurance Corporation and Sena Yaddehige.

A statement said that while National Development Bank’s core banking operations improved during the year, performance was affected by “one-off specific provisions made for few customers and the higher effective tax rate in 2016 compared to 2015.”

This was partly due to the increase in the financial services VAT rate from 11% to 15%.

NDB group profit was impacted by “lesser than anticipated capital market activities during the year,” it said.

The bank’s sustained a net interest margin (NIM) of 2.64%, which it said was “satisfying, given the tapering interest margins that were experienced across the industry over the year.

“Strategic and focused expansion of the assets and liabilities growth compared to that of lending growth, whilst being conscious of product pricing led to these sustained NII.”

The bank’s total assets base increased by 8% to Rs335 billion in 2016 from Rs 309 billion the year before.

“Asset quality remains high as reflected by a gross non-performing loan ratio (NPL) of 2.63% (2015:2.43%) well within the bank’s consistently low NPL range and also well below the industry average,” the statement said. Net NPL ratio stood at 1.16% as at 31st December 2016.

Customer deposits grew by 10%, crossing the Rs200 billion mark for the first time and reached Rs 204 billion.

NDB said that increasing its CASA (current accounts and savings accounts) ratio -  the ratio of deposits in current and saving accounts to total deposits - from its current range of 22% is “a key strategic priority”.

It said this is a “challenge to the industry at large in an increasing interest rate environment, as depositors’ preference largely skews towards time deposits.

“This skewness is further augmented by the considerable interest rate gap that prevails between the savings and time deposits in the Sri Lankan banking and non-banking sphere, which will also pressurize the industry NIMs.”
(COLOMBO, Feb 22, 2017)



 


 

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