Key highlights and outlook
- Net interest income declines despite loan book growth: NDB reported gross loan book growth of 16.7% YoY in 3Q15, supported by the ‘Retail and SME’ and the ‘Project Finance’ segments. However, a decline in average interest rates resulted in lower net interest income (NII) of LKR1.9bn (down 7.9% YoY), while the net interest margin (NIM) contracted 61bps to 2.8% in 3Q15.
- Operating profit declines by 21% YoY and net income by 32% YoY: Noninterestincome rose 20.3% YoY, driven by fee income and forex income, which helped to offset the NII decline. NDB’s net revenue came in at LKR3.5bn (up 3.0% YoY) in 3Q15. Operating profit declined 20.6% YoY to LKR1.4bn due to increased impairment charges in line with the loan book growth and other non-interest expenses, mainly due to branch expansion. The cost-to-income ratio (CIR) stood at 50.2% (vs. 45.1% in 3Q14). NDB posted LKR844m in net income (down 32.1% YoY) and EPS stood at LKR5.12 (versus LKR7.62 in 3Q14).
- LKR854m Super Gain Tax (SGT) payable during 2015E: NDB reported that it is liable to pay LKR854m as the SGT on or before 31 December 2015.
- Valuation: Rolling over to one-year forward BVPS and EPS values yields a valuation range of LKR225-264. NDB’s share price has declined significantly, in line with the current market downturn.
National Development Bank PLC (NDB.N0000) – 3Q15 results
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