SANASA DEVELOPMENT BANK PLC Financial Summary
SDB.N0000 · SANASA DEVELOPMENT BANK PLC · Banks · 2026-08-15
SANASA Development Bank PLC Financial Summary and Investment Analysis
Executive Overview
SANASA Development Bank PLC is a Sri Lankan licensed specialised bank focused on development banking, SME and cooperative finance, agriculture/value-chain lending, retail/personal banking, corporate and trade finance, leasing and digital financial services. Its wholly owned Payment Services (Private) Limited operates UPay but is treated as immaterial and is not consolidated.
Periods covered: Q4 2023-Q2 2026, CY2023-CY2025 audited annual information, and the report's trading snapshot to 2026-08-14.
The central trend is a transition from balance-sheet contraction in 2023-2024 to renewed loan growth in 2025-2026. Net customer advances rose 15.46% in CY2025 and another 3.87% by 2026-06-30. Asset quality improved materially through 2025, while margins held up despite falling market rates. However, profitability remains weak relative to equity, H1 2026 earnings declined, and capital/liquidity headroom has narrowed as lending expanded.
The CY2025 financial statements received an unmodified audit opinion. Expected-credit-loss impairment on customer loans was a key audit matter.
Financial Performance
Revenue and Profitability Trends
For a bank, gross profit is not meaningful; interest income, net interest income (NII), operating income and PAT are the relevant equivalents.
| Period | Interest Income (LKR Mn) | NII (LKR Mn) | PAT (LKR Mn) | EPS (LKR) |
|---|---|---|---|---|
| Q4 2023 | 6,858.7 | 2,447.9 | 284.0 | 1.77 |
| Q1 2024 | 5,975.9 | 2,113.2 | 113.9 | 0.71 |
| Q2 2024 | 5,333.5 | 2,155.0 | 128.6 | 0.78 |
| Q3 2024 | 4,856.5 | 2,237.3 | 161.9 | 0.99 |
| Q4 2024 | 3,839.1 | 1,315.0 | 5.2 | 0.03 |
| Q1 2025 | 4,306.9 | 2,013.3 | 56.1 | 0.34 |
| Q2 2025 | 4,272.3 | 2,057.3 | 100.1 | 0.61 |
| Q3 2025 | 4,346.3 | 2,171.8 | 97.5 | 0.59 |
| Q4 2025 | 4,173.1 | 1,990.3 | 151.3 | 0.92 |
| Q1 2026 | 4,236.0 | 1,971.5 | 60.1 | 0.37 |
| Q2 2026 | 4,404.0 | 2,065.1 | 46.7 | 0.28 |
CY2025 interest income fell 14.53% to LKR 17.10 Bn, but interest expense fell 27.24% to LKR 8.87 Bn, lifting NII 5.27% to LKR 8.23 Bn. Net fee and commission income rose 15% to LKR 674.7 Mn and total operating income rose 7.53% to LKR 9.50 Bn. PBT increased 16.94% to LKR 800.2 Mn, yet PAT slipped 1.13% to LKR 404.9 Mn because tax charges increased. Cost-to-income improved to 75.54% from 77.36%.
The weakest quarter was Q4 2024, when PAT fell to only LKR 5.2 Mn. Q4 2025 then recovered to LKR 151.3 Mn. In H1 2026, interest income rose 1% YoY, but NII fell about 1%, operating income fell 2%, PBT fell 13% and PAT fell 32% to LKR 106.8 Mn. Standalone Q2 2026 PAT was only LKR 46.7 Mn, down 53% YoY and 22% QoQ. The main pressure was below operating profit: Q2 operating profit before financial-services taxes rose 2%, but VAT rose 11%, SSCL 159% and income tax 33%; fee income and fair-value gains were also weaker.
The Q2 2026 narrative calls LKR 106 Mn "Q2 PAT", but the income statement shows this is H1 cumulative PAT; standalone Q2 PAT is LKR 46.7 Mn.
Balance Sheet Analysis
| Period End | Net Advances | Deposits | Total Assets | Equity |
|---|---|---|---|---|
| 2023-12-31 | 98.87 Bn | 108.12 Bn | 156.96 Bn | 14.27 Bn |
| 2024-12-31 | 95.14 Bn | 106.99 Bn | 145.16 Bn | 14.59 Bn |
| 2025-12-31 | 109.84 Bn | 105.68 Bn | 146.96 Bn | 14.80 Bn |
| 2026-06-30 | 114.09 Bn | 110.75 Bn | 149.76 Bn | 14.91 Bn |
CY2025 reversed several years of lending contraction: net advances rose 15.46%; management reports gross loans rose 16.72% to LKR 116.40 Bn, with more than LKR 100 Bn of disbursements and over 25% of lending directed to SMEs. Deposits nevertheless fell 1.22%, so the net loan/deposit ratio moved from about 88.9% in 2024 to 103.9% in 2025. By Q2 2026 deposits had rebounded 4.8% from year-end, slightly faster than net advances, easing the ratio to about 103.0%.
Other borrowings increased to LKR 20.62 Bn in 2025 to support growth, then fell to LKR 18.05 Bn by Q2 2026. Equity growth has been modest relative to asset growth.
Cash Flow Analysis
CY2025 operating cash flow was LKR -14.71 Bn, versus +LKR 3.03 Bn in 2024, primarily because LKR 18.18 Bn was advanced to customers while deposits declined. This was funded by LKR 17.12 Bn of investing inflows, mainly reductions/maturities in securities, plus LKR 1.55 Bn of financing inflows.
H1 2026 improved materially: customer lending used LKR 4.86 Bn, but deposits generated LKR 5.03 Bn; operating cash flow before taxes was +LKR 489 Mn and -LKR 124 Mn after taxes. Investing produced +LKR 1.55 Bn while financing used LKR 2.57 Bn, leaving cash equivalents at LKR 6.26 Bn.
Conventional industrial-company free cash flow is not meaningful for a bank because loans, deposits and securities are core operating/funding items.
Key Financial Ratios and Growth Indicators
| Ratio | 2024 | 2025 | Q2 2026 |
|---|---|---|---|
| Net interest margin | 5.18% | 5.37% | 5.47% |
| ROA before tax | 0.96% | 1.11% | 0.73% |
| ROE | 2.84% | 2.76% | 0.71% |
| Gross NPL | 11.11% | 8.85% | 8.71% reported |
| CET1 | 15.00% | 14.20% | 13.84% |
| Total capital ratio | 16.37% | 15.24% | 14.94% |
| LCR | 279.65% | 151.86% | 132.89% |
| NSFR | 173.02% | 144.82% | 139.47% |
Capital and liquidity remain above regulatory minima, but the trend is clearly downward. At Q2 2026, total capital was 14.94% versus the 12.50% minimum and LCR was 132.89% versus 100%.
Asset-quality disclosure is mixed. The headline NPL ratio improved from 11.11% in 2024 to 8.85% in 2025 and 8.71% by Q2 2026. However, Q2 2026's regulatory Stage 3 calculation, which explicitly includes undrawn credit facilities, shows gross Stage 3 at 11.82% versus 11.34% at 2025 year-end, net Stage 3 at 5.96% versus 5.42%, and Stage 3 coverage falling to 49.73% from 52.61%. These measures use a different basis from the annual 5.36% Stage 3 ratio and should not be mixed directly.
From CY2023-CY2025, interest-income CAGR was about -24.4%, reflecting rate normalisation, while NII CAGR was only -1.6%; net advances CAGR was +5.4% and PAT CAGR about -6.9%.
Economic and Market Context
The reports describe Sri Lanka as continuing its economic recovery through 2025, with lower interest rates, recovering private-sector activity and stronger tourism/remittances, but with Cyclone Ditwah disrupting agriculture and infrastructure late in the year. The Bank also flags geopolitical energy-price shocks, global stagflation risk and climate-related disruptions as material external risks.
Lower rates reduced interest income but enabled deposit repricing and cheaper funding, supporting NIM. Inflation and wage increases continued to pressure operating costs.
Future Potential and Outlook
Management's 2026-2029 strategy, developed with Rabo Partnerships, focuses on SME/agriculture finance, cooperative banking, value-chain lending, digitalisation, impact measurement and sustainable banking. The Rural Upliftment Programme reached 3,991 beneficiaries in 2025; broader relief measures benefited roughly 15,000-16,000 borrowers. Around 12,000 customers received restructurings, resolving nearly one-third of the legacy troubled portfolio, although approximately LKR 1 Bn of relief reduced 2025 profitability.
The Bank is expanding agri-financing expertise, digital onboarding and UPay-linked capabilities and plans further value-chain projects. The 2025 report also stated that a rights issue and debenture issue were being prepared for 2026 to strengthen capital for growth and the Central Bank consolidation plan. At 2026-06-30 stated capital remained unchanged at LKR 11.41 Bn, indicating no new equity had yet appeared in the interim balance sheet.
Risks and Challenges
- Profitability: ROE remains low and H1 2026 PAT contracted sharply despite stable NII.
- Capital/liquidity compression: all ratios remain compliant, but buffers have reduced significantly during renewed credit growth.
- Funding: loans now exceed deposits; sustained growth requires deposit mobilisation, borrowings or new capital.
- Credit risk: headline NPL improvement is positive, but the expanded-basis Stage 3 ratios deteriorated in H1 2026 and coverage declined.
- Legacy restructurings: tenor-extended loans and customer concessions continue to create impairment and earnings pressure.
- Agriculture/climate exposure: strategic growth in agriculture increases sensitivity to floods, droughts and other weather shocks.
- Execution/dilution: the growth strategy requires operational execution and potentially new equity/debt capital.
Shareholder and Corporate Information
At 2026-06-30, major holders were LOLC Investment Holdings One 15.00%, Finco Holdings 15.00%, Senthilverl Holdings 10.13%, Belgian Investment Company for Developing Countries 10.00% and D.G. Wijemanna 4.26%. The top 20 held 72.46%. Senthilverl had reduced its stake from 15.00% at 2025 year-end.
Public holding was 82.75% (135,840,920 shares) with 38,872 public shareholders. At the Q2 closing price of LKR 55.30, market capitalisation was LKR 9.08 Bn and float-adjusted market capitalisation LKR 7.51 Bn. Directors' disclosed holdings were small: Prasanna Premaratna 1,532 shares and Romani De Silva 106,907 shares.
No cash dividend was paid for 2022-2025. The last reported dividend was LKR 1.50 per share for 2021. The share ended 2025 at LKR 58.10, Q2 2026 at LKR 55.30 and the report's 2026-08-14 snapshot at LKR 49.10, a 6.12% decline over the latest 90 trading sessions.
Investment Decision Indicators
Strengths: renewed loan growth; improving headline NPLs; resilient NIM; stronger fee income in 2025; cost-to-income improvement; high public float; capital and liquidity still above minimums; clear SME/agriculture/digital strategy.
Weaknesses: very low ROE; H1 2026 earnings contraction; declining capital/liquidity headroom; loan/deposit ratio above 100%; continuing legacy-credit concessions; no dividend since 2021.
Opportunities: 2026-2029 transformation, agri/value-chain finance, cooperative and SME penetration, digital onboarding, lower-cost deposits and proposed capital raising.
Threats: credit deterioration as the book expands, climate shocks, funding competition, higher taxes/levies, geopolitical energy shocks and potential shareholder dilution.
Overall assessment: the reports show a bank that has successfully restarted balance-sheet growth and materially improved headline asset quality, but has not yet converted that growth into strong shareholder returns. The most important indicators to monitor are quarterly PAT/ROE, Stage 3 migration and coverage, deposit growth versus advances, total capital/LCR headroom, and whether the planned capital raising is completed without excessive dilution.