National Development Bank PLC (NDB) recorded a growth in pre-tax profit to Rs. 7.7 billion in Q3 2020 from the corresponding period in 2019. NDB released quarterly financial statements for the nine months ended 30 September 2020 to the Colombo Stock Exchange (CSE) on 12 November 2020, where its profits for the nine months were duly certified by the bank’s external auditors MS Ernst & Young (EY). The total tax charge for Q3 2020 was Rs. 3.2 billion with an effective tax rate of 42% (Q3 2019: 56%). Post-tax profit was Rs. 4.5 billion, up by 34%, whilst profit attributable to shareholders at the group level was Rs. 3.9 billion, up by 32%. NDB Director/Group Chief Executive Officer Dimantha Seneviratne commented that living with pandemic concerns has now become the new norm till a lasting solution is found, and in that backdrop, the duty of the banking sector is to provide undisrupted banking services and to support the economic revival despite such challenges. “The nine months ended 30 September 2020 was one of the most challenging times we encountered in recent history. Yet, NDB managed to steer through with resilience and make a meaningful contribution to the economy and in the process generate solid returns to its shareholders and touch the lives of many other stakeholders. In September 2020, the bank achieved a milestone in its growth journey by crossing Rs. 600 billion in total assets, well in line with its growth aspirations, attributable to precise execution of strategic imperatives,” he further mentioned. The gross income for the nine months ended 30 September 2020 (Q3 2020) saw an increase of 6% to Rs. 46.7 billion. Within gross income, net interest income (NII) recorded a growth of 4% to Rs. 13.7 billion. The NII was impacted by the net interest margin (NIM) of 3.23% for Q3 2020 which was a 30 bps dip from 3.53% in 2019. The NIM came under pressure given the interest rate caps introduced on certain products, impact of the moratorium on interest, restructuring of facilities, etc. Fee and commission income also grew by 5% year-on-year (YoY) to Rs. 2.9 billion. The uptake of digital financial services driven by the dual factors of restricted physical banking by customers due to the pandemic and NDB upgrading its NEOS platforms with many user-friendly features, was a key contributor towards driving fee income up. The increase in business volumes with the country opening up and the economy gradually returning to normalcy during the window before the second wave of the pandemic set in, also benefited fee income. Net gains from trading was Rs. 779 million, a marginal increase of 2% YoY. The bank realised capital gains from the Government Securities portfolio, as reflected under net gains from the de-recognition of financial assets. Accordingly, the total operating income had a healthy 11% growth to record Rs. 19.6 billion for the period under review. Impairment charges for loans and other losses for Q3 2020 was Rs. 4.8 billion, a 68% YoY increase. The increase in the impairment charges continued to be caused by the increase in the collective provision charge, in line with the growth in the loan book and provisions made at individual levels, in response to elevated risks caused by the pandemic and other stresses. The bank also accounted for the day one impact on the moratoriums where significant interest concessions were given amounting to Rs. 583 million, under other impairment charges, as prescribed by SLFRS 09: Financial Instruments. The regulatory non-performing loan (NPL) ratio was 5.57% for Q3 2020, which is on a gradual increase, reflecting the wider industry NPL behaviour. The bank said it continued vigorous cost management initiatives, particularly by embracing digital technology and process re-engineering to achieve leaner and efficient processes. The outcome was reflected in other operating expenses reducing by 10% YoY. Total operating expenses reduced by 2% to Rs. 7 billion, leading to a cost-to-income ratio of 35.9%, one of the best cost-to-income ratios in the baking industry. The YoY headcount increase was marginal at 22, compared to the considerable increase in business volumes, again attributable to streamlined automated processes together with the effective deployment of staff in a productivity enhancement manner, the bank noted.