# SANASA DEVELOPMENT BANK PLC Financial Summary

Canonical URL: https://pal.lk/updates/sdb-financial-summary
Symbol: SDB.N0000
Company: SANASA DEVELOPMENT BANK PLC
Sector: Banks
Published: 2026-08-15T19:48:06Z
Last updated: 2026-08-15T19:48:06Z

# 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.