Costly Interest

Aug 28, 2008 (LBO) – Sri Lanka’s National Development Bank (NDB) group net profit for the June 2008 quarter fell 35 percent to 363.5 million rupees, interim accounts filed with the Colombo Stock Exchange showed.

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Revenue grew 14 percent to 3,097.3 million rupees, while interest expenses grew a steep 46 percent to 1,755.3 million rupees, allowing net interest expense to grow by only 5.1 percent, over the same quarter last year.

Other income, from forex and equity, grew 44.4 percent to 429.2 million rupees.

Loan loss provisions fell to just 7.9 million rupees from 36 million.

The second quarter results compares with a 249 million rupee extraodinary gain reported last year, indicating that core operations have done better than the bottom line suggests.

“In a testing economic environment they will reap the benefits of being conservative and maintaining good portfolio quality,” says Channa Amaratunga of CT Capital.

While net interest income has fallen, there are increases in non-interest income which is a strategy banks should follow, when credit growth is weak.”