NATIONAL DEVELOPMENT BANK PLC Financial Summary
NDB.N0000 · NATIONAL DEVELOPMENT BANK PLC · Banks · 2026-07-22
National Development Bank PLC Financial Summary and Investment Analysis
Executive Overview
National Development Bank PLC is a Sri Lankan licensed commercial bank serving retail, high-net-worth, SME, middle-market, corporate and institutional customers. Its subsidiaries extend the Group’s activities into investment banking, wealth management, stockbroking, private equity and property management.
Key periods covered: Q3 2023 to Q2 2026; CY2023, CY2024 and CY2025.
The reports show a strong recovery in the underlying banking franchise through loan growth, fee-income expansion, improving asset quality and greater digital adoption. However, the investment profile changed materially following the discovery of fraudulent transactions in 2026.
The estimated fraud impact was revised from LKR 13.20 billion to LKR 13.58 billion following Deloitte’s interim forensic review. The latest allocation was:
- LKR 1.42 billion to periods before 2025-01-01.
- LKR 9.62 billion to CY2025.
- LKR 2.55 billion to Q1 2026.
Consequently, Bank profit after tax was restated from LKR 9.03 billion to LKR 8.18 billion for CY2024 and from LKR 11.04 billion to LKR 5.90 billion for CY2025. The CY2025 audited annual report was released before the fraud was discovered; the H1 2026 interim statements provide the latest restated financial position.
Despite the loss, National Development Bank PLC remained profitable, liquid and above regulatory capital requirements at 2026-06-30. The principal uncertainties are now governance remediation, fraud recovery, regulatory outcomes, capital rebuilding and dividend normalisation.
Financial Performance
Revenue and Profitability Trends
For a commercial bank, gross profit and EBITDA are not meaningful measures. Net interest income, total operating income, net interest margin and cost-to-income ratio are used instead.
| Period | Gross Income | Net Interest Income | Net Profit | NIM | Net Profit/Gross Income |
|---|---|---|---|---|---|
| CY2023 | LKR 132.33 Bn | LKR 31.95 Bn | LKR 5.37 Bn | 3.96% | 4.1% |
| CY2024 restated | LKR 99.38 Bn | LKR 34.21 Bn | LKR 8.18 Bn | 4.34% | 8.2% |
| CY2025 restated | LKR 98.20 Bn | LKR 34.96 Bn | LKR 5.90 Bn | 4.06% | 6.0% |
| H1 2026 | LKR 53.82 Bn | LKR 17.42 Bn | LKR 4.83 Bn | 3.75% | 9.0% |
Gross income declined from CY2023 because market interest rates normalised from the exceptionally high-rate environment. However, net interest income increased at an approximate two-year CAGR of 4.6%, supported by balance-sheet growth and active repricing.
CY2024 included material one-off benefits from Sri Lankan International Sovereign Bond restructuring. Management identified effects on interest income, fee income and impairment, making normalised comparisons more relevant than reported growth.
CY2025 underlying operations improved substantially:
- Gross loans expanded approximately 26%.
- Net fee and commission income reached LKR 8.07 billion.
- Credit costs declined from LKR 13.3 billion to approximately LKR 5.7 billion.
- Net Stage 3 loans declined to 3.75%.
- Underlying PAT before the fraud remained LKR 11.04 billion.
After recognising the fraud, CY2025 statutory PAT fell to LKR 5.90 billion and the cost-to-income ratio increased from an underlying 41.04% to approximately 61.7%.
Recent Quarterly Performance
| Period | Gross Income | Total Operating Income | Net Profit | Main Development |
|---|---|---|---|---|
| Q1 2025 restated | LKR 22.98 Bn | LKR 10.57 Bn | LKR 0.04 Bn | Comparative period heavily reduced by fraud restatement |
| Q1 2026 latest basis | LKR 26.50 Bn | LKR 12.77 Bn | Approximately LKR 1.82 Bn | Included LKR 2.55 Bn latest fraud allocation |
| Q2 2026 | LKR 27.32 Bn | LKR 12.36 Bn | LKR 3.01 Bn | No comparable new fraud charge |
In Q2 2026:
- Gross income increased 12.5% YoY.
- Net fee and commission income increased 20.1%.
- Impairment declined 7.9%.
- Operating expenses declined 13.9%.
- Profit before tax increased 58.7%.
- PAT increased 59.5% YoY.
For H1 2026:
- Gross income increased 12.8% YoY.
- Net interest income increased 2.8%.
- Net fee and commission income increased 22.4%.
- Impairment charges declined 22.9%.
- Statutory PAT reached LKR 4.83 billion.
- PAT excluding the fraud impact was approximately LKR 6.21 billion.
Interest expense grew faster than interest income during H1 2026, causing NIM to decline from approximately 4.1% to 3.75%.
Balance Sheet Analysis
| Position | Total Assets | Net Loans | Customer Deposits | Total Equity | Net Loans/Deposits |
|---|---|---|---|---|---|
| 2023-12-31 | LKR 779.90 Bn | LKR 452.66 Bn | LKR 615.64 Bn | LKR 70.15 Bn | 73.5% |
| 2024-12-31 restated | LKR 794.27 Bn | LKR 460.71 Bn | LKR 631.68 Bn | LKR 76.82 Bn | 72.9% |
| 2025-12-31 restated | LKR 926.14 Bn | LKR 593.60 Bn | LKR 707.17 Bn | LKR 80.03 Bn | 83.9% |
| 2026-03-31 | LKR 977.20 Bn | LKR 623.11 Bn | LKR 731.73 Bn | LKR 78.46 Bn | 85.2% |
| 2026-06-30 | LKR 949.02 Bn | LKR 595.28 Bn | LKR 712.50 Bn | LKR 80.05 Bn | 83.6% |
From restated 2024-12-31 to 2025-12-31:
- Assets increased 16.6%.
- Net loans increased 28.9%.
- Deposits increased 12.0%.
- Equity increased only 4.2%.
Loan growth therefore materially outpaced deposits and common equity. The loan-to-deposit ratio rose, while equity/assets declined from approximately 9.7% to 8.4% by H1 2026.
The balance sheet contracted between Q1 and Q2 2026, with lower loans, deposits and total assets. Management maintained focus on balance-sheet resilience and recalibrated growth following the fraud.
CASA declined from 27.0% at 2025-12-31 to 25.6% in Q1 2026 and 23.6% in Q2 2026, increasing sensitivity to deposit costs.
Reported loans and deposits also include notional-pooling arrangements:
| Date | Special Arrangement Balance |
|---|---|
| 2025-09-30 | LKR 46.8 Bn |
| 2025-12-31 | LKR 29.2 Bn |
| 2026-03-31 | LKR 21.5 Bn |
| 2026-06-30 | LKR 13.6 Bn |
These balances affect headline loan, deposit and CASA comparisons and should be separated when assessing organic growth.
Cash Flow Analysis
| Period | Operating Cash Flow | Investing Cash Flow | Financing Cash Flow | Net Cash Movement |
|---|---|---|---|---|
| CY2023 | LKR 51.69 Bn | LKR -26.76 Bn | LKR -1.99 Bn | LKR 22.94 Bn |
| CY2024 | LKR -0.16 Bn | LKR -21.74 Bn | LKR 0.23 Bn | LKR -21.67 Bn |
| CY2025 | LKR 13.15 Bn | LKR 5.27 Bn | LKR -16.27 Bn | LKR 2.16 Bn |
| H1 2026 | LKR 6.44 Bn | LKR -15.60 Bn | LKR 15.31 Bn | LKR 6.15 Bn |
H1 2026 financing inflows mainly reflected the LKR 16.0 billion Basel III-compliant Tier 2 GSS+ bond issue.
A simple operating-cash-flow less capital-expenditure proxy was approximately:
- LKR 11.60 billion in CY2025.
- LKR 3.95 billion in H1 2026.
This is not a conventional free-cash-flow measure because customer lending, deposits and financial investments are core banking operations.
Dividend sustainability is currently constrained by regulation. The LKR 6.46 cash portion of the CY2025 dividend remained unpaid after the Central Bank directed the Bank to suspend cash dividend payment in connection with the fraud.
Key Financial Ratios and Growth Indicators
| Ratio | CY2023 | CY2024 | CY2025 Restated | H1 2026 |
|---|---|---|---|---|
| NIM | 3.96% | 4.34% | 4.06% | 3.75% |
| ROE | 8.03% | 12.22% reported | 7.52% incl. fraud | 12.69% |
| Pre-tax ROA | 1.25% | 3.09% reported | 1.37% incl. fraud | 2.15% |
| Cost-to-income | 30.41% | 36.91% | 61.70% incl. fraud | 48.44% incl. fraud |
| Net Stage 3 ratio | 8.58% | 5.18% | 3.75% | 3.30% |
| Stage 3 coverage | 41.11% | 54.48% | 59.10% | 62.91% |
| CET1/Tier 1 ratio | 11.67% | 13.68% | 11.26% | 9.67% |
| Total capital ratio | 15.90% | 19.09% | 14.81% | 15.32% |
| Rupee LCR | — | 358.12% | 257.29% | 163.45% |
| All-currency LCR | — | 308.26% | 208.54% | 163.23% |
| NSFR | — | 152.43% | 131.12% | 129.49% |
At 2026-06-30, the Bank remained above regulatory minimums, but the Tier 1 buffer was approximately 1.17 percentage points above the 8.5% requirement. Total capital improved after the GSS+ Tier 2 bond, but Tier 2 debt does not replace common equity.
Asset Quality and Growth Indicators
- Net Stage 3 ratio improved from 8.58% in CY2023 to 3.30% in H1 2026.
- Stage 3 coverage increased to 62.91%.
- SME loans increased to LKR 124.7 billion in CY2025 and LKR 133.47 billion by H1 2026.
- SME lending represented approximately 20% of total loans.
- Off-balance-sheet commitments and contingencies increased to approximately LKR 464 billion.
- Approximately 71% of domestic credit exposure was concentrated in the Western Province.
Digital and Product Growth
NEOSBIZ performance from CY2024 to CY2025:
| Indicator | CY2024 | CY2025 | Growth |
|---|---|---|---|
| Active customers | 2,999 | 4,900 | 63.4% |
| Transactions | 412,740 | 768,900 | 86.3% |
| Transaction value | LKR 73.3 Bn | LKR 127.2 Bn | 73.5% |
Other developments included NEOS 2.0, TradeLinc supply-chain financing, a new Loan Origination System, vehicle-finance partnerships, SME refinance schemes and new renewable-energy financing products.
Valuation Indicators
| Basis | Share Price | EPS | NAVPS | Approx. P/E | Approx. P/B |
|---|---|---|---|---|---|
| 2025-12-31 restated | LKR 141.25 | LKR 13.83 | LKR 187.67 | 10.21x | 0.75x |
| 2026-06-30 | LKR 112.50 | LKR 23.49 annualised | LKR 185.21 | 4.79x | 0.61x |
H1 2026 annualised P/E should be treated cautiously because Q1 included the fraud allocation and Q2 did not.
Economic and Market Context
Sri Lanka’s economy continued recovering in CY2025:
- GDP grew 5.4% in Q3 2025 and approximately 5.0% during the first nine months.
- Inflation moved from deflation to positive territory during the second half.
- The policy rate was reduced to 7.75%.
- Prime lending rates and deposit rates declined.
- Tourism earnings reached approximately USD 3.2 billion.
- Worker remittances reached approximately USD 8.1 billion.
- Gross official reserves were approximately USD 6.8 billion.
- The rupee depreciated approximately 5.6% against the US dollar.
Banking-sector private credit increased approximately 26%, supporting loan growth but increasing competition for deposits and pressure on margins.
Lower rates improved borrower repayment capacity and reduced impairment. However, they also compressed asset yields, while funding costs did not decline as quickly during H1 2026.
Cyclone Ditwah demonstrated physical climate risk to agriculture, SMEs, tourism, infrastructure and branch operations. National Development Bank PLC concluded that the direct impact on its loan portfolio was not material but provided relief and restructuring to affected customers.
Future Potential and Outlook
Management’s Strategic Roadmap 2030 targets:
- Market-share gains.
- Improved profitability.
- Superior customer experience.
Five strategic levers support these objectives:
- Strengthen core franchises.
- Expand Retail, SME and high-net-worth segments.
- Build future-ready technology and risk infrastructure.
- Improve operational efficiency.
- Embed customer centricity.
Near-term priorities include data-driven risk monitoring, AI-based scorecards, digital onboarding, process automation, SME trade-finance innovation, wealth products and omnichannel banking.
Potential growth drivers include:
- Economic and private-credit recovery.
- Vehicle leasing following the reopening of imports.
- SME, tourism, export and trade financing.
- Digital transaction and fee-income growth.
- Cross-selling through wealth management and investment banking.
- Renewable-energy and GSS+ lending.
- Cost reductions through automation.
- Possible recovery of fraud-related funds.
The GSS+ bond issue strengthened total capital and supports eligible green, blue, social and sustainability-linked lending. However, its coupons exceed 11%, adding fixed funding costs.
Risks and Challenges
- Fraud and governance: Final forensic findings remained pending, and additional regulatory or governance consequences were possible.
- Recovery uncertainty: Future recovery of the LKR 13.58 billion loss was not assured.
- Common-equity pressure: CET1/Tier 1 declined to 9.67%.
- Dividend uncertainty: The cash component of the CY2025 dividend was suspended.
- Rating deterioration: The interim statements reported an entity rating of A-(lka)/Negative, compared with A(lka)/Stable previously.
- Margin compression: NIM declined to 3.75%.
- Funding pressure: CASA fell to 23.6%.
- Rapid credit growth: CY2025 loan growth may create delayed asset-quality risks as facilities season.
- Portfolio concentration: Significant Western Province and SME trading-sector exposure.
- Off-balance-sheet risk: Commitments and contingencies increased materially.
- Climate risk: Agriculture, tourism, fisheries and SMEs remain vulnerable.
- Cybersecurity: Greater digitalisation increases data, fraud and system-resilience risks.
- Transformation execution: Technology spending, legacy integration and change management could delay expected efficiency gains.
- Sovereign and market exposure: Government securities, currency movement and economic-policy changes remain significant.
Shareholder and Corporate Information
| Indicator | 2025-12-31 | 2026-06-30 |
|---|---|---|
| Shares in issue | 426.89 Mn | 432.20 Mn |
| Closing price | LKR 141.25 | LKR 112.50 |
| Market capitalisation | LKR 60.30 Bn | Approximately LKR 48.62 Bn |
| Public holding | 81.76% | 81.76% |
| Public shareholders | 15,044 | 18,523 |
| Float market capitalisation | LKR 49.30 Bn | LKR 39.75 Bn |
Major shareholders at 2026-06-30 included:
| Shareholder | Holding |
|---|---|
| NORFUND | 9.94% |
| Employees’ Provident Fund | 9.46% |
| Bank of Ceylon | 7.91% |
| Richard Pieris and Company Limited | 6.18% |
| Sri Lanka Insurance Corporation – General Fund | 6.05% |
| Sri Lanka Insurance Corporation – Life Fund | 5.03% |
| Commercial Bank of Ceylon PLC/Metrocorp | 4.98% |
| Mr. Y. S. H. I. Silva | 4.30% |
| Employees’ Trust Fund Board | 3.38% |
| Dr. S. Yaddehige | 2.81% |
Top-five ownership was approximately 39.54%, while the top twenty held approximately 75.60%.
All directors disclosed at 2026-06-30 held no shares in the Bank.
Dividend history:
- CY2024: LKR 8.00 per share, comprising LKR 5.00 cash and LKR 3.00 scrip.
- CY2025: LKR 8.50 per share, comprising LKR 6.46 cash and LKR 2.04 scrip.
- The CY2025 scrip component was issued, but the cash component remained suspended.
Investment Decision Indicators
Strengths
- Strong underlying core-banking profitability.
- Rapid fee-income and digital-transaction growth.
- Major improvement in impaired loans and provision coverage.
- Strong SME, Retail, trade-finance and project-finance franchises.
- Broad financial-services ecosystem.
- Liquidity and total capital above minimum requirements.
- Attractive reported discounts to restated book value.
Weaknesses
- Material fraud and internal-control failure.
- CY2025 statutory profit reduced by approximately 46.6%.
- Lower common-equity capital and NAV.
- Narrow Tier 1 capital buffer.
- Suspended cash dividend.
- Declining CASA and NIM.
- Negative credit-rating outlook.
- Limited incremental Group profit contribution during H1 2026.
Opportunities
- Sri Lankan economic and private-credit recovery.
- Vehicle, SME, tourism and export financing.
- Digital and fee-income expansion.
- Wealth-management and investment-banking cross-selling.
- Sustainable-finance growth.
- Fraud recovery and eventual restoration of dividends.
Threats
- Further forensic or regulatory findings.
- Failure to recover fraudulent losses.
- Additional capital or dividend restrictions.
- Funding-cost and margin pressure.
- Delayed credit deterioration following rapid lending growth.
- Climate, geopolitical and sovereign risks.
- Cybersecurity or transformation failures.
Overall Assessment
National Development Bank PLC retains a profitable and increasingly diversified banking franchise, supported by improving asset quality, fee-income growth and strong SME and digital capabilities. However, the fraud materially weakened statutory earnings, common equity, dividend certainty and governance confidence.
The most important indicators for future assessment are the final Deloitte forensic findings, recovery of fraudulent funds, regulatory resolution, Tier 1 capital rebuilding, CASA stabilisation, sustainable NIM, performance of recently originated loans and restoration of normal cash dividends.