NDB’s ‘solid’ capital buffer expected to drive stronger earnings

Impairment saw an increase amidst growth in lending

by Sanath Nanayakkare

First Capital Research expects stronger earnings for NDB and maintain their earnings and fair value targets for the Bank at LKR 110.0 for 2021 and at LKR 130.0 for 2022.

Referring to NDB’s recently completed Rights Issue the report said,” Rights Issue to accelerate the growth drive. NDB’s earnings saw an increase of 90%YoY in the 1Q2021 to LKR 2.4bn while surge was led by the growth in NII, net fee and commission income and other income. However, impairment saw an increase amidst growth in lending and in response to elevated risks caused by the pandemic.”

“We believe that NDB’s recently completed Rights Issue and Private Placement amounting to LKR 9.5Bn (amount raised from the RI is broadly in line with the value estimated in our Event Update report which published on 30th Apr 2021) to alleviate its capital related concerns and aid in enhancing the future loan growth. As mentioned in the event update report, with a solid capital buffer, we expect stronger earnings for NDB and maintain our earnings and fair value targets at LKR 110.0 for 2021 and at LKR 130.0 for 2022,” First Capital said.