National Development Bank PLC (NDBN0000) Earnings Call Transcript & Summary

Good afternoon, everyone. We extend a warm welcome to National Development Bank PLC's Analyst Webinar to discuss its financial results for the period ended September 30, 2025. We take the opportunity to thank you all, foremost, for taking time to be with us this afternoon. As the first order of business, please allow me to introduce our panel for our discussion. Foremost, we have our Director, Chief Executive Officer; Mr. Kelum Edirisinghe; our Deputy Chief Executive Officer, Mr. K. V. Vinoj; our Senior Vice President, Personal Banking and Customer Experience, Mr. Sanjaya Perera; our Vice President Treasury; Mr. Damitha Samaranayake; our Vice President, Risk, Mr. Alex Perera; our Vice President, Strategy, Ms. Nadika Ranasinghe; and myself, Vice President Finance, Azzam Ahamat. In terms of structure and format for this afternoon, it is similar to our previous webinars, where our Director, Chief Executive Officer, will take you through a detailed presentation covering different aspects of the bank's performance. He will touch upon -- give you a snapshot of the bank's results and then deep dive into some of the income statement and balance sheet highlights, after which I'll take you through some of the key performance indicators covering both liquidity and solvency, amongst others. And then give you some flavor in terms of our strategic road map over the next few years to give you a sense of what you could reasonably expect going forward. And after which, he will open up the forum for a Q&A, during which you may raise any and all your questions that you have using the chat option. Before I hand over to our Director, Chief Executive Officer, for his presentation, please allow me to set out 2 ground rules. Foremost, we kindly ask you to keep your video switched off at all times as well as your mics on mute. And this webinar will be recorded and placed in the Investor Relations section of our website later this evening for later reference, should you need to. And for any question that you remain unanswered, we'll be more than happy to schedule a one-on-one with our senior leadership team at any point of your mutual convenience. So thanking you. I'm going to hand over to Director, Chief Executive Officer, for his presentation. CEO?

Thank you, Azzam, and good afternoon to everyone who has joined us today for the 9-month results performance -- rather performance discussion. So let me start with a performance snapshot. Take you through some of the key achievements. I just want to start by saying we had a solid 9 months. We had 3 consecutive quarters of solid performance and even a better third quarter. For the 9-month period, we reported LKR 7.5 billion of PAT, a growth of 65.5% year-on-year. This was driven mainly through the bank's core banking operations. And I also want to mention that this is the highest PAT that we have reported on a normalized basis for the bank. Among the other notable achievements, our impairments were down by 46.7%, again, reflecting the hard work that we have done over the last couple of years, again, a good performance as well as some of the key matrices, particularly on the ROE front, where we have been committing that our midterm strategy is to get to mid-teen returns. And in that regard, for the 9-month period, we reported 12.4% ROE. But most notably, for the third quarter, on a stand-alone basis, we reported a 16% ROE, again, reaffirming our vision to get to mid-teen returns and maintain ROE at an acceptable level. From a balance sheet standpoint, a strong performance again, reporting a little over 22% growth in net loans, and 7.2% and 10.6% growth in deposits and total assets. So there are a few footnotes there, again, similar to what we presented in the last quarter performance, regarding a special arrangement where we have lent to customers based on their deposits. So we will actually cover that in the next couple of slides. One thing that we can be really proud of is that the growth has actually come from all business lines. And again, most notably from the SME side where we reported 24% growth in the asset book year-on-year. On the liquid and solvency front, as the PowerPoint presentation shows, we remain very well liquid and well capitalized. So that's something that we have been working on, and we'll continue to work on for the rest of the periods to come. On other qualitative indicators, again, happy to say that we won the Best Digital Bank for SMEs awarded by Euromoney as well as NDB Bank was certified as a Great Place to Work for the third time, again, something that we are very proud of and also shows our commitment to the employees. With regard to branch network and staff numbers, they remain broadly same as previous quarter. So coming to the note that I mentioned previously, this again remains consistent with the previous quarter. We have, at the moment, about LKR 46.8 billion of deposits, which are -- which has been lent out against a lien placed by the customers. So when we look at the balance sheet, both the asset side and the liability side is increased by, or inflated by this amount. So where it is relevant, we have made certain adjustments when we are reporting the numbers to bring the true picture of the growth, both on the deposits and the asset side. Coming to the income statement and profitability. I will take you through the numbers. From -- when you look at the NII growth, it's up 6.4% year-on-year. That is notwithstanding the low interest rate environment. But most notably, our net fees and commission is up by a healthy 13.8% year-on-year. That is a reflection of additional business volumes that we have been able to garner over the period. And again, coming back to perhaps 1 of the key achievements that I mentioned in the previous slide, in terms of the impairments, we are -- we reported that LKR 5.9 billion. down LKR 5.1 billion compared to the same period in the previous year or 46.7% down compared to the previous year. Therefore, on net operating income level, we were up 32.3% and settling at LKR 28.4 billion. And other operating expenses were at LKR 13.9 billion. Again, that was up 14.8%. But again, compared to what we have planned, that is pretty much in line with our budgeted figures. On a PBT basis, we reported LKR 4.5 billion compared to LKR 9.4 billion in the previous year, up almost 55% or more -- precisely 54.7%, while our profit after tax settled at LKR 7.5 billion, LKR 3 billion above history and 65.5% on percentage terms. I think what I want to really sort of pay attention to is the 3 quarters' performance. So first quarter PAT was LKR 1.9 billion. In the second quarter, it was LKR 2.3 billion. And in the third quarter, it was LKR 3.3 billion. So this really shows the trajectory of the business, built on sound asset growth, sound deposit growth as well as how we have managed our impairments, which is again, thanks to the hard work that was done by the -- by everyone who's involved in it. And when you look at fourth quarter, looking at what we have done so far to build the asset pipeline, we believe that we can end the year on even a stronger footing. On NIMs, on a low rate environment, we were able to still report LKR 64.4 billion, marginally down compared to previous year that was 2.4%, whereas our interest expenses came off slightly at a higher pace. Therefore, on an NII basis, we were able to report 6.4% growth year-on-year at LKR 25.9 billion or LKR 1.5 billion in absolute rupee terms. When we look at the interest income and again, the trajectory is what is really important here. For Q1, it was LKR 20.4 billion. For Q2, it was LKR 21.5 billion. And for Q3, it was LKR 22.1 billion. Again, clearly shows the trajectory of our net interest income growth, whereas on the interest expense side, it is either flat or marginally up in the third quarter, but more importantly, at an NII level, we have reported growth quarter-on-quarter, ending up at LKR 9 billion for the third quarter 2025. NIM trajectory, again, is something that we have been paying keen attention to. On a reported basis, it is at 4.1%. But as I mentioned previously, once the special arrangement or notional pooling arrangement is netted off, our underlying NIM is at 4.3% compares very well with the market. And generally, at a -- when we look at in comparison to the numbers that are coming out, I think we're happy to say that we have been able to maintain NIM, whereas generally, when you look at the trajectory of the market, the NIMs are, in fact, coming off. On nonfund-based income, I will look at the numbers in more detail. So compared to LKR 5.1 billion we reported for the same period in 2024, I'm happy to say that we were able to clock in at LKR 5.8 billion or LKR 700 million up year-on-year, or in terms of percentages, 13.8%. At a total non-fund income base, we reported a growth of 2.5%, although it may seem marginal. One thing to note is that in 2024, in the first quarter, we had a one-off trading gain that we crystallized through some of our bond sales that is not reported here. So the LKR 1.7 billion that is reported in this number is a general BAU trading gains that we have made. So therefore, on a like-with-like comparison, I'll probably pay more attention to the growth in our fee business, which will continue to accrue in the coming quarters. The other point to note here is that, again, looking at the quarter-on-quarter performance, there is a clear upward trajectory from LKR 1.7 billion in Q2 to LKR 2.1 billion in Q3, again, showcasing the kind of business that we have built and the upward trajectory that we could expect in the next couple of quarters to come as well. On the operating expense side, probably I'll first focus on the cost-to-income ratio. This is something that we have been very keenly looking at and managing. We believe that for an organization of our size and complexity, the sweet spot is between 38% to 40%, and we are very much at that level. And when we compare that against the market, that is a very comparable percentage. Going or diving into the more granular details. Personnel expenses stays the same trajectory that we spoke between in Q1 and Q2. These represent the salary adjustments that we have done in the past and pretty much in line with the budget. The other expenses predominantly on the depreciation and other expenses reflect the investments that we have made in the organization to -- on a BAU basis, and those are, again, pretty much in line with the budget, which confirms the cost-to-income ratio of 40.4%. Credit cost, this is something that we have been really, really critically looking at. On a like-with-like comparison, in 2024, our credit cost was LKR 11 billion, comprising of both loan book as well as on the investments. And in 2025, we were able to bring that down to LKR 5.9 billion. In other words, LKR 5.1 billion down year-on-year or 46.7% on percentage terms. This again reflects all the hard work that we have done also to improve our underwriting standards and having a very clinical approach in assessing credit and taking appropriate action at the right time. And on the right-hand side of the presentation, you will also be able to see the downward trending trajectory. For 9 months in 2023, our credit cost was something in the region of LKR 13.6 billion. In 2024, it was LKR 9.7 billion. And in 2025, the reported 9 months period, it was LKR 5.7 billion. And we really remain confident on this, and I can probably sum this up in 2 statements. The improvement is a reflection of the improvement of our credit profile. And on the second point that we have got our downside risk covered. So we are very confident of how we can manage the credit risk in the coming quarters or the next couple of years. This gives a great segue to -- from that discussion. On the gross income dispersion, maybe 2 key call-outs. Compared to the 9-month period in 2024, our interest expenses have come down by about 300 basis points and a bit to 52.8%. But most notably, the total credit cost from 14.9% to 8.1%. And that has resulted in the PAT ratio as a percentage of earnings increasing from 6.1% to 10.3%, some 400 basis points up year-on-year. Coming to the balance sheet assessment. I've again briefly covered this in my previous slides. But just to sum it up, we had a fantastic 9-month performance. Our first quarter performance from a growth perspective was slightly soft, but we were able to catch up in quarter 2 and quarter 3 and thereby reporting a growth of almost LKR 100 billion or LKR 97.4 billion to be precise, or 22.1% growth in the asset book. The asset growth was represented by all business lines, but again, most notably, SME growth was quite positive. It was about 24%, and the book has now reached LKR 100 billion. This again showcases our commitment to support the engine of growth in the economy, if I may say that, and SME being the critical -- the role that SME plays in that critical journey. Looking into Q4 and beyond, again, remain very confident of the pipeline that we have built, and we will be able to continue the momentum in the months and quarters to come. From a currency mix perspective, our loan book represent 30% in dollars and 70% in rupees. From a pricing point of view, we felt that this chart might be relevant because there are -- there have been some questions in the past as well. We remain 31% and 68% on fixed and floating, again, a good balance to also lock in interest rates and the NIMs for the future. On credit quality, the charts are self-explanatory, but I'll take a few minutes to sort of take you through some of the numbers. So in 2023, we were at a slightly elevated level at 8.6% compared to 7% of the market. and that has been gradually coming off, and we now represent 4.5% compared to 5.3% of the sector, which again shows the benefits of hard work that we have done over a period of time. Looking at the credit quality that can be seen on the right side of the chart, but more precisely, the work that we have done to build impairments, which is now at 55.6%, very comparable with the industry and also showcases the prudent measures that we have taken to protect our downside risk and making sure that all the credits are managed in a prudent manner so that there's less vulnerability or risks in the next coming quarters or months. Again, something that we can be really proud of. And when you look at how the ROE uptick has taken place, credit quality also plays a pivotal role. And as a percentage of income when we did that comparison, it also shows the downward trajectory of the cost of credit as we go forward. On the currency-wise deposit analysis, this, again, is a strong testament to our strong PRV franchise. It's a great deposit generator, and we have been lucky to grow that business further. We have had some good growth on the dollar side as well as on the rupee side, and we will continue to maintain that momentum. We have done the adjustments to net off the notional pooling arrangement and the numbers are given below. So net of notional pooling, our LC, FY deposit growth for the year was 3.7%. We had a strong growth on FCY deposit at 17.2%. So on a combined currency basis, our growth was 7.2%. On the currency mix, again, it's 70-30, similar to the deposit mix. So the bank actually has a natural hedge in terms of providing the necessary required funding for the dollar book. On the product-wise deposit analysis, we continue to play -- pay a lot of attention to growing our CASA base, and we can see that in the numbers. On an adjusted basis, our 9-month CASA ended up at 23.8% compared to 22.5% for the full year in 2024. The numbers are on the right-hand side, on adjusted basis, our total CASA growth for the year was 13.3% or LKR 23.8 billion and time deposits have grown by LKR 76 billion or 5.5%. So the growth in the CASA as a percentage actually gets slightly adjusted because of the growth of the book. But again, something that we remain pretty focused on to grow in the next couple of quarters to come. On solvency and capital ratios, can really sum it up by saying we remain well capitalized, and we are very solvent, well above the regulatory minimum requirements. The slightly download looking trajectory that is on the right-hand side, reduction of 19.1% to 15.4% is as a result of primarily 2 things. Firstly, the profit certification has not been done for the 9-month period ended in September. So the 3-month profit certification is not there as well as amortization of some of the debentures that has matured. So we will continue to build on that as we go forward. Again, on the liquidity front, very liquid. Some of the liquidity obviously had to be channel for the asset growth, and that's part of the reflection of the downward-looking trend, but again, remain well within -- well above the regulatory minimum requirements. Coming to the key investor ratios. We ended the 9-month period in September with the share price closing at LKR 142. Today, it is trading at about LKR 156. So there's a slight improvement in that regard as well after we released the numbers. So from a price-to-book perspective, we ended 2024 at $0.60 or 60%, and it is now at -- sorry, we closed at $0.70 to LKR 1 in September, and it is now trading at $0.80. So that again shows how well the market has received our performance. On the ROE front, we ended the September full 9 months at 12.4%. But for the third quarter alone, it was 16%. And therefore, we remain pretty confident of being able to maintain our mid-teen returns as we go forward. So those are the 3 data points that we have shown at the bottom for Q1, it's 10%. For Q2, it is 11.8% and for Q3, 16%. But most notably, on a return on assets standpoint, we have again shown that upward looking trajectory starting from 1.9% in Q1 to 2.1% in Q2 and a very healthy and a solid 2.6% in Q3. Just want to give some background to our strategic plan for the next couple of years. So this is actually stemming from the results announcement that we made public, indicating our -- the work that we are doing with BCG. We have actually partnered with BCG to build a strategy for 2020 -- 2030. This has now been fleshed out and got Board approval. So there are investments that are linked to it, and we will carry out those activities quite diligently run by a project management team overseen by our Head of Strategy, Nadika. So what do we really want to look at in terms of our strategy is to build a very sustainable and a profitable business for the long term, increase our market share, improve profitability and provide superior customer service. And there are a number of elements that will contribute to this. On that, we will focus on strengthening our core franchises. PRV, retail banking, SME, to name a few. So we have very specific action points and agendas for each of those. We also want to focus on areas that we believe can drive growth or underpenetrated in the market as well as for ourselves. Again, as an example, SME and retail banking, where we have seen some solid performance in the 3 quarters this year. We will also pay a very focused role in strengthening our digital and the risk backbone. So when you look at our digital agenda, how do we make customer acquisition, underwriting and disbursement a seamless process. So in that regard, we are in the process of building customer journeys to make sure that it is frictionless and services can be delivered at a -- with a minimum time lag, so the customer convenience can be upheld. On the operating side, looking at the digital agendas and the rest of the efficiencies that we want to bring in. We are looking at reengineering some of our processes, really challenging the status quo and bringing state-of-the-art processes and procedures. This will all be managed through a structured PMO team overseen by the Board, having a clear ownership, measurable targets and rigorous tracking process so that we can hold ourselves accountable for the specific outcomes that we have committed to the Board. So in 3 words, our plan for up to 2030 is gain market share, improve profitability and by a measure of ROE and building sustainable profits and superior customer surveys. So in that regard, as I said previously, we will look at under-indexed businesses, how do we channel our capital and funding to areas where we can generate more revenues. We will look at optimizing our NIMs, growing our CASA balances through a focused acquisition strategy as well as reduced cost of acquisition through the digital agenda. Along with the journeys that we will build in the months to come, we are looking for a frictionless onboarding system as well as the money is being disbursed without -- with minimum delays. Overall, improving our turnaround times and really driving a superior customer service that we could be proud of when we get all the strategies in place. So that's what we are looking for in terms of the long-term strategic plan, which we have now put in place and will be covered in our presentations in the next quarters to come as well. So that brings us to the end of the presentation. And before I hand over the Q&A session to Azzam, I just want to take a moment to thank the leadership team who has worked tirelessly with absolute commitment as well as to my entire NDB staff for the service that they have rendered and what they do to keep the franchise safe and support our customers. So with that, I'll now hand over to Azzam to take us through the Q&A session.

Thank you, Kelum. The forum is open for all your questions. [Operator Instructions] We've got first few questions, CEO. I'm going to route this 1 to you. Question number one. CBSL Governor has quoted saying he would like to see the banking industry NIMs to normalize around 3.5%. When do you think the bank will normalize to this level.

Thank you. Thanks, Azzam for the question, and thank you for posting this. Yes, this was discussed at the governance meeting. So I think we got to look at the drivers of NIM. Drivers of NIM is not just the spread between the assets and deposits. So there are some investments that has been made in the past as well. If you look at the entire industry, NIMs are well above 4%. So I think that will continue to remain at least for some time. I think the more important point here is that maybe it's not necessarily the NIM. It is how we pass on the benefit to the clients. So I think for ourselves, I can maybe refer to 2 things. The fact that 24% of our growth actually came from the SME segment, which is the focus area of the Central Bank as well as the government needs to support that. So we have played a part in that. And in terms of the interest rate reduction, that can already be seen in some of the data that has been published. So as opposed to looking at NIMs coming down to 3.5%, I would probably look at how we support the sectors in the economy and play the role that the bank should play. And I think I'm happy to say that we are playing that.

Question number two, I will take this. Do you think 55.6% impairment on Stage 3 ratio is appropriate, or any intention to increase the provisioning in the future? First of all, let me just start off by saying, in terms of provisioning, SLFRS 9 requires you to provide on a reasonable supportable basis. So the provisioning is a function of the underlying credit and the potential risk that you see. So if you look at September 30, our provision coverage on Stage 3 was 55.6%. And if you look at the industry number, that was 55.5%. So the industry, we are a more or less on par with the industry. And to answer the question, do we think it's sufficient? Yes, we do. We feel these levels, as also seen in the industry numbers, these levels are sufficient to cover our potential risk on account of our Stage 3s. And we don't see these levels significantly increase. It's fair to say we don't see these levels significantly increase from its current level in terms of a provision coverage. So that's on the provision coverage number for Stage 3. Question number three, I'm just going to route this to our VP Treasury, Damitha. The AWPLR of many banks increased significantly last week compared to the previous week. NDB's AWPLR went up from 8.17% to 8.85%. What are the reasons for that?

Thank you for the question. If you look at last 2, 3 weeks, the whole markets, AWPLR was on the upward trend, that is because of some tightness in the deposit rates, so which is reflected in this AWPLR. But as far as NDB is concerned, I would say this is mainly purely maybe because of a one-off transaction. But overall, our AWPLR also remained around the market level of 8.25%. This is maybe purely due to a one-off transaction.

Thank you, Damitha. Question number four, ROE currently stands at 16% for the quarter. Yet it had been low for quite some time. What contributed to the underperformance? I'm going to take that CEO. The CEO touched on this in his Slide 12 and 13, talking of credit costs. That has been sort of a key source in which -- has positively contributed to our ROE. The credit cost significantly coming down. He cited, in the first 9 months of '23, our credit cost was LKR 13.6 billion, 9 months of '24, LKR 9.7 billion, and for the 9 months of '25, on account of our loan book being LKR 5.7 billion. So that's been a primary contributor to our improvement in ROEs as well as he's also spoken on the fact that credit cost is a function of our top line. Our banking revenue has been 16% in the 9 months of '24. That's down to about 8% in the 9 months of '25. So that's been 1 primary reason. And also, it must be said, the growth in our core banking operations, every aspect of our business, as articulated in the presentation has also positively contributed to this ROE. And for us, the goal is to sustain it at these levels, and we are confident that reasonably we could do so going forward. So thank you for that question. Question number five. I'm going to route this to our Deputy CEO, Mr. K. V. Vinoj. What is the expected trend in credit? Is it slowing down?

So I would think like especially retail and SME, we'll see an uptick definitely next year also. And that's the momentum that we see and that the momentum that we also want to maintain. With regard to the corporate banking and project finance, probably it will even out, maybe it plateau out for a while, but I think SME and retail will definitely see an uptick, and that's the expectation from the bank and that's why we also will be driving towards in 2026.

Thank you, Vinoj. Question number six. During the quarter, banks amortized costs in OCI financial assets came down. What was the factor behind this? And was this mostly bonds or bills? Yes, it did by LKR 21 billion in aggregate on a net basis. It was mostly on account of bill maturities during the period. So that's been the primary reason in which -- why these financial assets across both amortized costs and OCI have come down. Routed to CEO; and then also get VP Strategies input. CEO, question number seven. Is the growth strategy you mentioned earlier, inclusive of acquiring a business such as an NBFI, given the ongoing pressure for further consolidation in that sector, can you provide some specifics on the growth plan?

Yes. And thank you for the question. So in terms of our growth plans, it's going -- we are primarily focusing on expanding our asset book. We have had some good success in that we want to continue. So in terms of acquiring an NBFI actually, that is not in the cards at the moment. But if that is the case, we'll probably let the market know. So for the moment, as far as NDB is concerned, the growth will be primarily on credit, streamlining the operations and making sure our processes are simplified, so we can go to market and do more volume with the existing resources. So that remains our strategy for next year as well.

Thank you, CEO. Question #8. I'm going to allow me to route this to Vinoj. Which areas do you expect your loan book to be driven by local currency?

So very similar to what I said before. I think for the next quarter and maybe towards 2026 also, we expect the loan book to be driven mainly by the SME and the retail sector. That's not to undermine the corporate banking, project finance, but like the growth areas would be retail and SME. That would be our focus areas as well.

Thank you, Vinoj. Question #9 to Damitha. Would you consider the interest rates have bottomed down with regard to AWPLR and lending rates, both the bank and the industry?

Yes. As far as interest rates are concerned, I think we are probably seeing the bottom. But by saying that, I don't expect interest rates to drastically move higher as well because when you look at the debt management by the Central Bank and the government, the government is sitting on a pretty good position with the cash buffers and everything. So therefore, probably throughout the next year, I would say, interest rate will either remain around this level or maybe 25 basis points up or down.

Thank you, Damitha. Question #10 is very similar to the previous 1 that Damitha took, but I would like to get our Head of Risk to share some thoughts on this. Question #10, please. Could you share your outlook on domestic interest rates over the next 12 months, particularly with the rising demand side pressure could trigger a potential upward adjustment in policy or market rates?

Thanks, Azzam, for that question. So as Damitha said, the outlook remains pretty benign with maybe 50 basis -- 25 basis points up or down. But if we look at some of the global market pressures where we see an easing cycle in some of the global economies. So if we see aggressive quantitative easing by some of the major economies, there might be certain downward pressures on the interest rates, but that is to be seen throughout the year, whereas the outlook from the bank's perspective remains as Azzam said.

Thank you, Alex. Question #1. I will take this. Would a significant growth in SME loan book compromise the impairment level of the overall portfolio going forward? The answer is no. In CEO's deck, he's cited in several instances, the improvement in underwriting and the emphasis on quality loan book growth. And also in discussing the new initiatives going forward with BCG, there is great emphasis on sort of improving -- further improving our underwriting standards from these levels. So we reasonably expect looking at what we've experienced so far in terms of sort of on our new -- the quality on our new grantings, if you look at the last 24 months, vis-a-vis looking ahead in terms of what pipeline the bank is building and looking at. We reasonably don't expect the impairment levels to spike as a result of an increased focus on SMEs.

And Azzam, if I may add, how we look at this is we have built strong guardrails. We are monitoring our early vintages and early vintages are, in fact, trending well below the historic trend line. So that's something that we are pretty closely watching. So in terms of the underwriting standards and the controls that we have built in, yes, we are confident that we will be able to manage our credit risk prudently.

Question number -- thank you, CEO. Question #12. Someone wrote this to you. On the industry level, how many banks provide notional polling facilities? And why is the impact reported separately on NDB, i.e., as a separate disclosure only for NDB?

So let me take that. So I think it's a common product, at least, it used to be a common product in some of the foreign banks. The reason why we felt that disclosure is required is in 2025 in second quarter, the quantum actually increased by quite a significant margin. I believe when we had the facility at a BAU level, it was about less than LKR 20 billion, and it went up to about LKR 50 billion. So the LKR 30 billion as a percentage of the asset and deposit growth was actually quite material. So if we hadn't disclosed that, we would be giving a different signal to the market, which we felt was not the right thing to do. And that is why we felt it is -- it's appropriate to disclose it separately. So growth in the assets, growth in liabilities as well as NIMs can be adjusted for the notional pooling arrangement. Of course, this product can have other names as well. Maybe it's balance offset, could be 1 such name, but it's not something that is actually uncommon.

Question #13. This is for Vinoj. The loan book has expanded by about 25% year-to-date in 2025. Where do you expect it to close by year-end? And what are your growth targets or guidance for '26?

We probably don't want to put a number where we want to end the year. But the growth targets are kind of what I said before. I think we will keep concentrating on the SME book and the retail book. But since it's a forward-looking number, probably, I don't want to give a number in terms of the growth, the year-end number. But the focus areas that we kind of spelled out, I think that will remain as it is.

Thank you, Vinoj. Question #14, I'm going to route this to Damitha. What is your current exposure on government securities?

About 33% of the balance sheet is being invested in government securities.

Thank you, Damitha. Question #15. In the event the banks exempted from the SSCL levy of 2.5%, will that have an impact on loan deposit pricing? I will take this. Ultimately, everything does have a bearing on our pricing. That's something we will consider once the exemption on SSCL is more, sort of more definitive in a sense that it doesn't translate to any other higher direct to indirect tax on the institution in lieu of the SSCL, that's exempted. So that's something the bank will consider at the point in which that the consequences are deemed more permanent. Question #16. It's on solvency. I will take this. CEO has touched on it before. The Tier 1 buffer reduced this quarter by 75 basis points to 3.04. How do you plan to increase this buffer further? CEO has touched on this in his presentation. So in the 6 months, when we published our 6 months, we took the 6 months profit of LKR 4.2 billion through an interim profit certification to our CET1 Tier 1 total CARs. And for the third quarter, the LKR 3.3 billion profit, we have not done a profit certification. And according to BASEL rules, if you don't, you cannot take it to your solvency. So at the end of the year, when we do -- when we conclude the audit of the bank, that profit, Q3 and Q4 can be taken to our CET1 Tier 1. So through that process, we reasonably expect to maintain a buffer of CET1 Tier 1 of north of 4% and a total CAR of over 4%. And our total CAR levels will also naturally be augmented through issuances as the bank has done in the past, and that's something the bank will look at doing on a year-on-year basis. So thank you for the question. Question #17, also linked to solvency. Aren't you planning a debenture issue soon? I assume that December 2023 issuance maturing this December 2025 will simply be settled, with no new issuances planned in the coming weeks. Let me say this, as and when the bank's Board of Directors approves and decides to issue a BASEL III Tier 2 issuance, we will make a market announcement, at which point we will actually keep you posted. One thing I can say is the augmented capital is a permanent fixture as part of our capital augmentation plans, something that we will look at on a year-on-year basis? Question #18, Sanjay. Do you anticipate a slowdown in leasing demand following the introduction of SSCL on vehicle imports under budget 2026? How do you assess vehicle and leasing demand trends going forward?

Looking at the demand, I don't think that will happen. So we see a very positive growth in the leasing book, and it will continue to do so in the future as well. So it depends on how we manage the business. And we are quite confident that we will have the same trends going forward.

Thank you, Sanjay. Question #19 for Damitha. Do you think the bank has sufficient liquidity levels to continue lending? Will there be a requirement to liquidate some of the treasury bills or not roll over maturing bills and use the funds for lending?

Right now, I would say we have sufficient liquidity levels with, I mean, the healthy LCR and NSFR limits. So -- but going forward, in case of a demand for loans comes in, so we -- since we have this facility right now, I think we can liquidate some of these treasury bills also. But probably that will come as the last resort.

Thank you, Damitha. Question #20, for you again, Damitha. What is the current bills versus bonds mix of the bank?

Actually, right now with bill rates at the bottom level is about 8%. If you look at the portfolio currently, I would say it's about 90% of investments are in bonds right now.

Thank you, Damitha. Question #21. I'm going to route this to our VP strategy, Nadika. Are there any plans to reduce the number of physical branches as part of the digitalization initiatives?

Thanks for the question. So digitalization is very much part of our strategy. But as we go forward, we'll look at where we can actually kind of leverage on this and see -- take a call on the brand strategy. But at the moment, we have -- we will maintain the current branch network. But this is something we will look at closely as we go forward.

Thank you, Nadika. Question #23. I will take this. Can you please repeat what the special arrangement was that impacted NIMs this quarter? Special arrangement has no bearing on our NIIs. The NIMs we reported, the reason we exclude it is because both on the deposits and the loan front, there is sort of an impact on our assets. Our assets are inflated by that amount. So hence, we adjust it when we report NIM. So in CEO's presentation, when he indicated our NIMs are close to 4.3%, excluding the notional pooling effect, that's by adjusting the asset base for that increased -- for the increased notional pooling amounts during the 9 months. but it has no bearing on our NII. So thank you for that. Sanjay, on leasing. Question 24, what is the market share and composition of revenue that is from leasing business?

Well, exact figures, roughly about 25%. If you take the leasing -- the retail side of it, it will be about 25%.

Thank you, Sanjay. Question #25. Damitha, on foreign currency liquidity. With import growth picking up and external debt repayments ahead, how do you assess market FX liquidity? And how is foreign currency liquidity of NDB at the moment?

Quite at a -- I would say it's a healthy level right now. But if you look at the flows for next year, we don't have a large external debt repayments lined up because of the debt restructure. So -- and we expect some kind of demand buildup on the import side with this current credit growth. But to offset that, there will be sufficient and healthy worker remittances as well as foreign currency -- I mean as well as tourism inflows together with some planned FTIs coming in. So therefore, we don't see much volatility in the FX markets also next year.

Thank you, Damitha. CEO, I'm going to bring you in. Question #26. With NDB's acquisition of HSBC's card business and DFCC taking Standard Chartered, do you expect the credit card market to become easier or more challenging?

Thank you for the question. It's a pretty hypothetical one. Obviously, there are a few players then in the market. It will give certain opportunities, but whether it will become more easy or challenging and I think -- I don't think I can comment on that. You probably have to wait and see the outcome.

Thank you, CEO. Sanjay? This question is 2 parts. I will take the first part and Sanjay, I'll leave the second to you. What is the current composition on revenue from corporate versus retail customers? And what is the credit card market share? Corporate versus retail customers. give or take, it would be fair to say, 60-40 in favor of retail corporate. In terms of credit card market share, Sanjay, do you want to?

So it's hovering around 7.5%.

Thank you. Vinoj, question #30. Do you see a progressive recovery in construction and manufacturing activities in Sri Lanka, where the banking system has yet to fully capitalize on the lending opportunities?

So recovery definitely, yes. I think we have seen a recovery momentum in the manufacturing and the construction sectors. But still, it's trickling in. I mean if you look at the number of opportunities for the construction sector, it's not so much. But in terms of the recovery that we have seen, very good momentum, and especially the private sector opportunities are there. So I think that as of now, the large construction companies are actually benefiting. But as and well the economy progress is, I think there will be a lot of opportunity for the midsized players as well.

Thank you, Vinoj. CEO, I'm going to bring you in. Is the impairment improvement mainly driven by stringent underwriting over collection?

The answer to that is in part, yes, but also, we have been acquiring customers and those credit qualities are better. And again, the low interest rate environment is also helping the debt serviceability. So it's a combination of all 3 aspects.

Thank you, CEO. Question #32, I see this for you. What's the current situation with Parate execution? We've noticed a rise in auction notices in the papers and are concerned about potential downward pressure on property prices? Could you provide some color on this?

So Parate suspension was lifted. And that I've said previously also because this question has come up in the past webinars as well. We use Parate as the last resort. It's not our intention to put anyone out of business or out of their dwelling. That's not what we want to do. But we do use it like any other bank as -- for negotiating purposes. We have not necessarily seen a significant reduction in property prices. That, again, is driven by supply and demand. So that's -- I'm not able to comment. But as far as Parate action process is concerned, we'll always be sensitive to the individual circumstances where it is possible to revive the business or provide some kind of breathing space to the individual or the promoters who are running it, we will always take that as the first option.

Thank you, Kelum. Until further questions come through, let me just also remind you, if you have any questions that you feel remains unanswered or you have more questions, we'll be more than happy to schedule a one-on-one with the senior leadership team. So please do reach out if so. So that seems to be the questions that we've got for this afternoon. Thank you once again to everyone who's taken time to be with us. And sort of once again extend an invite should you wish to have a one-on-one with the senior leadership team, you may please reach out. So thank you once again. Wishing you all a pleasant afternoon. Thank you.