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Fitch affirms NDB at A+ backed up by Rights Issue

05 Aug 2021

Affirmation comes following private placement Fitch Ratings has affirmed NDB’s national long-term rating at A+, with the Outlook as Stable, in its annual rating action on National Development Bank PLC for 2021. This comes on the backdrop of a successfully concluded Rights Issue and a Private Placement by the bank which netted Rs. 9.5 billion in Tier I equity capital and consistent growth the bank has achieved over the past years in line with its business strategy, unabated by the macro challenges. The rating affirmation comes at a time where the operating environment is stressed with the effects of the Covid-19 pandemic and other factors as observed by Fitch in their rating announcement, and where at an industry level, asset quality is under pressure with industry-wide NPL ratios on an upward trend. At the same time, Fitch affirmed NDB’s outstanding subordinated debt at A-(lka).  Amidst the multiple challenges impacting the performance of banking institutions, NDB’s profitability is supported through improved cost efficiencies and increased focus on non-interest income, as per Fitch’s rating announcement. The bank has been driving digitisation and tech-based automations in its customer solutions as well as in internal process automations, which have led to considerable cost savings and an industry best cost-to-income ratio in the low 30% range. The bank’s innovative and rapid digital drive and the large uptake of the same by customers together with increase in business operations have enabled enhancements in non-interest income.  With the aforementioned capital infusion, NDB’s capital ratios have enhanced (Tier I ratio – 10.8%) and has placed the bank on a strong platform for envisaged strategic growth. Notwithstanding this enhancement in capital, consistent business performance and other positives cited above, a rating upgrade or a revision to the Outlook to Positive has not been considered at this point in time owing to the macro-economic challenges, the impact and the intensity of the pandemic, rate of economic recovery and the overall health of the banking industry.  Guided by its five-year strategy, NDB is on a steady growth trajectory, as the only financial services group of its kind in Sri Lanka, whilst supporting customers and making valid contributions towards national economic revival amidst the prevailing challenges. 


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