- Privatisation suspended
- Restructuring delays privatisation
- NDB IPO missed 2013 set date
A cocktail of problems, amongst them being losses made by the National Development Bank (NDB) as well as ballooning impairments have delayed the privatisation of the development finance institution, it has emerged.
Delivering the national budget speech this week, Finance and Economic Development Minister Kenneth Matambo said that efforts to restructure the National Development Bank continue.
“Once fully restructured, the NDB will be commercialised, with the ultimate objective of privatising it,” he said. Interestingly, NDB privatisation has been on the cards for years now, but was halted after the bank losses escalated, with Minister Matambo saying NDB can only be sold after it becomes profitable. The bank has since embarked on a restructuring exercise meant at reducing costs and ultimately making it profitable. It is only then that it would be privatized.
These problems have led to the postponement in selling 49 percent of the 53 year-old development bank to the public, minister of Finance and Development Planning, Kenneth Matambo told Parliament previously that the privatisation was halted to fine tune the bank to profitability. Almost five years ago, legislators gave thumbs up to the NDB Transitional Act, which paved the way for the privatisation of the development bank as well as registering the bank as a company. Matambo said a number of challenges such as decline in profitability, reduced banking rates and strained disposable income have put brakes on the bank’s privatisation exercise, which could have been at an advanced stage by now. Like BTCL, NDB’s privatisation process would also see the bank floating 49 percent shares in the domestic bourse. However, the time is not now, as NDB has to be profitable before it can be sold.
It emerges that with increasing impairment charge, reducing balance sheet due to write offs, increasing cost to income ration which is above 150 percent, against a bench mark in the banking sector of 50-60 percent. The last time NDB made profit was in 2013, when it made P45 million. Its troubles began in 2014, when it struck a P161 million impairment, driven by a rise in Non-Performing Loans (NPLs). The rise in impairment was because the high risk projects that NDB finances without guarantee or collateral underperformed and the clients were unable to pay NDB. Losses then shot to P87 million. NDB losses were lower at P48.7 million in 2015, while impairments were at P83 million. In 2016 the bank made P21 .2 million in losses before shooting up significantly to P168.6 in 2017.