NDB’s financial outlook revised upwards to ‘Stable’ | Daily News


NDB’s financial outlook revised upwards to ‘Stable’

National Development Bank PLC’s credit rating was affirmed at A+ (lka) by Fitch Ratings Lanka Limited in its latest rating actions on Sri Lankan banking institutions.

The outlook for the Bank was revised to stable from previous negative, reflecting Fitch’s expectation of reduced pressure on the Bank’s capitalization relative to its risk appetite. 

The rating announcement comes at a time when the country’s credit rating was revised downwards to ‘B-/Negative following the severe economic down turn in the aftermath of the COVID-19 pandemic.

The negative outlook at the sovereign level is reflected in the revised outlook of the larger banks as well. In this scenario, the upward revision in outlook while affirming the rating at A+ is an endorsement of the Bank’s demonstrated resilience of its diversified business model to unexpected stresses stemming from the COVID-19 pandemic and its ability to weather challenges, enabled by a strong business franchise.

The banks rapid response with the onset of the Pandemic to enable the smooth functioning of the financial services sector of the country and enable customers to carry out their day to day financial requirements helped set a precedence for other banks to follow. The bank introduced mobile ATM’s and Banking on Wheels taking the bank to the customers whilst adding to its digital presence with the introduction of its Online Banking portal for added customer convenience during the lock down period. This demonstrates the banks agility in providing innovative solutions in the face of unforeseen circumstances and magnitude.

The Bank’s dynamic balance sheet, well diversified in to different sectors with an equitable exposure in multiple segments ranging from retail, SME, corporate and project financing has proven its strength at times of acute stresses. Almost a quarter of the Balance Sheet is in long term project financing facilities which reflects the Bank’s expertise in this segment, an attribute which benefits the Bank at times of turbulences, given the long tenures of these loans.

The quality of the Bank’s loan book which is well preserved over the long term is yet another strength of the Bank. The Bank’s non-performing loan ratio was 4.78% as of Q1 2020 and is below the industry average levels. The quality of the Bank’s loan book will ensure that potential losses arising from the impact of the COVID-19 pandemic is well managed and measures deployed such as rescheduling of loans will be in deed effective.

Furthermore, at a time that the industry is marked by a low interest regime, the banks that would perform well are the one’s that are efficient in their processes. NDB is on a very strong platform in this regard. The Bank is presently upgrading its core banking system to the latest available version.

Deployment of digital technology together with other internal efficiencies have led to the Bank maintaining its cost to income ratio at healthy levels. The ratio for Q1 2020 was 36.5% and compares as one of the lowest with peers and industry average. Effective cost management has taken a new form within the Bank with a number of novel initiatives being implemented, integrating learning and experiences from the lockdown situation as well.

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