NDB on an ambitious comeback trail

The National Development Bank (NDB) has announced an ambitious plan to stage a comeback. The development bank, which over the past few years saw its commercialization/privatization dream go up in smoke and profits take a hefty knock comes back with a ‘lower lip bitten’ determination. This was announced by the bank’s Chief Executive Officer (CEO), Lorato Morapedi, at a media briefing on independence eve.

To recoup the commercialization/privatization dream, and to steer the bank back to profitability, the CEO said the bank has, in the short-term, adopted a three year turnaround plan. NDB aims to reduce non-performing loans by 80 percent, aims for a zero non contamination on new disbursements, and will focus on high yielding products. The CEO said the bank is still in a system settling phase and was attending to both system and data issues that have come up as a result of improved controls on the core banking system environment.

According to Morapedi, in the medium to long term, NDB will pursue its commercialization/privatization dream. “A new business model has been drawn and awaits approval by the Ministry of Finance and Development Planning. Once approved, the bank will apply for a banking license,” she said. Morapedi added that the process was an enabler for efficient banking through product development and improvement. She said it would allow them to widen banking services including to the unbanked and rural communities. “This is expected to improve profitability and sustainability,” she said.

NDB has consistently enjoyed profits which averaged P40 million since 2005 but took a dramatic knock in 2014 when the bank recorded a loss of P86.4 million. NDB attributed the loss to a sharp rise in impairments (bad debt) which jumped 76% from P38.5million in 2013 to P163.7million in 2014.
While the bank showed a “strong” financial position with the bank’s asset base having increased 11.55% in value from P1.415 billion in 2013 to P1.58 billion in 2014, it turns out over 82% of NDB’s assets are loans and advances to customers who, given the high impairment charge, are not paying. If this trend maintains, there is high risk that a good part of the funds disbursed as loans and advances to customers may not be retrieved.

According to the results for the year ended March 2014, overdraft facilities taken out by NDB also shot up from a little over P54 million in 2013 to well over P383 million in 2014, a scenario which may demonstrate a dependence on borrowed funds from other financial institutions for liquidity. In a statement at the announcement of the results, the CEO had pointed to a tough economic environment which was characterised by a squeezed interest rate environment. She also alluded to the bank’s core mandate of supporting start-up businesses as well as agricultural projects, which are periodically affected by drought and livestock diseases and this significantly contributed to a sharp rise in impairments allowance affecting the financial performance of the Bank.
The bank expects to release to release financial results for the year ended March 2015 before the end of the current calendar year.