National Development Bank PLC ($NDBN0000)

Good afternoon, everyone. A warm welcome to National Development Bank plc's analyst webinar to discuss its financial results for the year ended December 31, 2025. For most, we take the opportunity to thank you all for taking time to spend with us this afternoon. By way of background, as you know, the analyst webinar, as similar to our previous quarterly webinars, is dedicated towards creating greater visibility and clarity in relation to our financial performance and progress, which very shortly, our Director, Chief Executive Officer, will take you through. As the first order of business, please allow me to introduce our panel for this afternoon. 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 Relationship, Mr. Sanjaya Perera; our Vice President Treasury; Mr. Damitha Samaranayake; Vice President, Risk, Mr. Alex Perera; Vice President, Strategy and Business Intelligence, Ms. Nadika Ranasinghe; and myself, Azzam Ahamat, Vice President Finance. The structure and format of our webinar is identical to our previous where our Chief Executive Officer will take you through a detailed presentation covering various aspects of the bank's performance. He will start off by giving you a synopsis of 2025 from a quantitative and qualitative standpoint, and then later take you through sort of a deep-dive in both our balance sheet and income statement numbers touching on some key performance indicators across solvency liquidity amongst many others. Thereafter, he will briefly touch upon our 2030 road map, premised on 3 levers simplify, strengthen and scale up, and afterwards touch on a pertinent matter, current circumstances considered. Afterwards, we will open the forum for a Q&A, during which you can raise any and all questions you may have. [Operator Instructions]. Prior to handing over to our Director, Chief Executive Officer, please allow me to set out a few housekeeping rules. Just to remind you to very kindly keep your microphone muted at all times during the session as well as keep your video switched off. And please note, the proceedings of this webinar, as always, will be recorded and later uploaded in due course on Investor portal of our website. So without further ado, let me hand over to our Director, Chief Executive Officer for his presentation. Thank you.

Thank you, Azzam, and good afternoon to everyone for joining our Investor webinar for the financial year ended December 31, 2025. As Azzam said, we are going to follow the same format that we have done in the past, and I'll take you through a presentation that we have put together to give some insights into how we performed in 2025. So looking at a snapshot, and I think I can firmly say that this is a great set of results, a great report card. NDB reported LKR 11 billion in PAT, 100% growth year-on-year on a comparable basis. This is the highest PAT that we have recorded in the bank's history, predominantly driven by bank's co-banking operations. We're also proud to report that our impairment charges were down by 57%, thanks to the concerted effort we put in throughout the year to improve credit quality. Along with that, the bank reported an EPS of LKR 25.90 and ROE of 13.5%. When we look at the balance sheet, it was a year of 2 halves, but putting everything together the bank reported a loan growth of 28.8%, and the balance sheet expanded by 17.6% as far as assets are concerned. We also grew our deposits by almost 12% and all business lines reported a very strong performance. One notable achievement in year 2025 is the growth in the SME book, where the bank reported 25% growth in the loan book year-on-year, underlining our commitment to the SME sector, which is the growth engine of the economy. On liquidity and solvency front, bank remains very solvent and liquid. I'm not going to necessarily go through each and every metric. We can discuss those later during the presentation. In terms of other quantitative indicators, proud to say that NDB was judged as the best digital bank for SMEs by Euromoney. We also won the #1 position in overall trade finance in Sri Lanka, competing with the other domestic banks. And we also were certified as a Great Place to Work for the third consecutive time. As far as the network and the employee population is concerned, the status quo remain by and large, same compared to last year. The other notable achievement, which is not mentioned here, but we reported recently, is the successful closing of our GSS+ bond, LKR 16 billion in total, and it was oversubscribed in the first day when we announced it to the market. That will help us to boost our capital and also prop up the balance sheet. This disclosure is similar to what we have been sharing in the past quarters as well. I think it is important to make a note that the reason why we made this disclosure is to be transparent with the assets and the deposit side of the balance sheet. Also, this actually has an impact on the way NIM is reported as far as the balance sheet numbers are concerned. So for the analyst community, and I think it is important to take note of this and we have also disclosed the NIM on a reported basis on an adjusted basis. So reporting the numbers, that's something that should be taken cognizance of. Moving on to the income -- on the P&L statement. There are a couple of things that actually stand out on this one. On the right-hand side, we have shown the 4 quarters performance, and that is something that we can be -- that we are really proud of where the bank has reported quarter-on-quarter PAT increase from LKR 1.9 billion to LKR 3.5 billion in 1Q and 4Q, respectively. As I said previously, there were a lot of efforts that we put in during the year 2025 to improve our credit quality and our credit cost has come down to LKR 5.9 billion, and this is an area that we have been very keen to improve, and we will continue those efforts. But in total, summing up everything together, we reported a PAT of LKR 11 billion for the year. On NII and NIMs, as I shared previously, in a low interest rate environment, always the top line gets some amount of pressure. However, with deposit repricing strategy, we have been able to protect our margins, that's point number 1 to note. And on the bottom half of the presentation, you can see despite the pressure on income, we have been able to maintain a NIM at a very healthy level of 4.2 and this is with the adjustment that I said previously that we have done for netting off on our notional pooling portfolio. The other point to note here is when you look at the performance, actually, we look at our performance in 2 halves, the first half was relatively muted in terms of the loan growth, whereas the real pickup was in the second half of the year, and that can be seen in the interest income that is shown in the right-hand top corner of the presentation, where we have reported income increase of -- from LKR 42.3 billion to LKR 44.4 billion. But most notably, the net interest income has increased by LKR 1 billion in the second half compared to the first half. On non-fund-based income, first point to note here is that on a reported basis, 2024 numbers, actually, it includes one-off ISB income that we got in terms of commission. So without the ISB commission on a like-to-like comparison, the growth in non-fund-based income or fee income is 14% for the year. The other notable point to note here is that, again, as I said in my previous slide, the performance really picked up in the second quarter. When you look at our second -- the second half. So when we compare first half versus second half, the second half growth in fee income is almost 19.3%. So why this is really important is that when we look at our sales, preparing and positioning the income for the future, this kind of gives us the baseline. So we are really keen to continue this momentum, and we'll see that when we release our first quarter numbers. On cost, broadly, the cost has been managed within our expectations, ended the year with a cost-to-income ratio of 41%. Broadly speaking, we are targeting in the mid- to long-term cost-to-income ratio of 30% to 40%. But what is important to note is that we are also driving a significantly large transformation program. So some of the costs associated with the transformation program is already embedded in our 2025 financials. So while we may have slightly exceeded that 40% cost-to-income ratio, these investments that we are making now will accrue benefits in the future and then helping us to give that glide path to get to our cost-to-income ratio to less than 40%, that is as a broad benchmark. The other point here is on personnel expenses. It has increased by 9.3%. This is the investment that we are making in people and also making the adjustments to reflect the inflationary environment and also to make sure that we make the necessary investment in people and have the right folks in the organization to drive some of the transformation projects as well as have an organization that is going to be fit for the future. On the balance sheet, again, just to further highlight what I said maybe a couple of slides ago on the right-hand side, as you know, 2024 was a year that we had to take certain corrective measures. So the growth in the balance sheet was fairly muted; whereas in 2025, having done some of the fixes of fixing the foundation, so to speak, we were feeling fairly confident about our -- the operating rhythm and the controls in place. So we were really able to accelerate growth, and that's what's -- what can be seen on the right-hand side of the chart, with LKR 123 billion growth in net loan book. And as I said again, previously, one of the key achievements among many is the growth in our SME book where the book exceeded LKR 100 billion or 25% growth year-on-year. So this is an area that we will continue to focus on for so many reasons, including SME sector being the growth engine of economy as well as these are the sectors that will really be poised for growth. Of course, towards the end of the presentation, we'll look at how the current economic -- rather the broader geopolitical situation is going to play out. But notwithstanding that, I believe we have the right -- the guardrails, the policies, the procedures to really support this segment in 2026. On the composition of the balance sheet, so we as the bank has a very strong deposit franchise and that is also reflected in our foreign currency deposit base. So the loan book is positioned to really reflect that based on 2024 to 2025 the change. FCY, our foreign currency loan book has grown from 23.4% to 26.4%. And again, that is a true reflection of the strength of our deposit franchise, predominantly coming from the retail banking segment. On the loan book repricing profile, remains fairly similar to previous year with 65%-ish on the variable side, and about 34% or 35% on the fixed assets giving a fairly good mix in terms of the repricing that we are able to effect on the loan book. On credit quality, again, chart itself is fairly self-explanatory. When you look at the position in 2023, impaired Stage 3 ratios at 8.6%. And over the last 2 years, thanks to the hard work of the management team of the TLT and everyone who is involved in the business, we have been able to bring that to 3.8%, which is better than the industry. And on the credit quality improvement side, i.e., building impairments on our loan book. So this again is a concerted effort that we made over the last couple of years, and we ended the year with an impairment cover of almost 60%. This action has to be read in conjunction with the profit after tax or the PAT that we have reported. So on one side, the bank reported the highest PAT of LKR 11 billion for the year and on the other side, we have covered our downside risk up to 60% on the Stage 3 book. So what it says is that the franchise is profitable, the downside risk is fairly well managed, so the future really looks safe as far as credit quality is concerned. In terms of the deposits, again, a good year. We had both local currency and foreign currency deposits have grown, again, coming from the retail segment of the network, which continues to be our strongest franchise on the deposits. And when you look at the deposit mix, it's broadly in the same range that it was there in 2024, 72% on the local currency side and about 28% on the foreign currency side. So when we overlay this against the asset currency mix that is broadly about the same, giving a good hedge for our local currency and foreign currency lending book. Another important slide to show the growth on the deposit base and where the deposits are coming from. Just to highlight a couple of key points. So CASA drive remains a key strategy for the organization. And it's a strategy that takes a long time to get to the level that we want to and that's what we are really working hard on. Adjusted for the notional pooling, we have grown our CASA base by about 140 basis points, which is what can be seen, the increase from 22.5% to 23.9%. The other key point to note here is that when you look at the CASA total, the growth in the CASA total adjusted for notional pooling is 17.5%. So this is, again, a good achievement, and we will continue to work on this to bring low-cost deposits and also to help improvement in NIMs. On capital side, again, a very strong story. Tier 1 is at 12.4%, some 530 basis points versus 7% of the regulatory minimum. Tier 1 is also almost close to 400 basis points above regulatory minimum and total CAR about 340 basis points against a regulatory minimum of 12.5%. This will further improve once we take into account GSS bond that was fully subscribed only a couple of weeks ago. On the liquidity front, again, that story is the same, very strong buffers on top of in excess of the minimum regulatory mandated limits. So what really brings here is that everything comes together in terms of our performance other than the bottom line. Obviously, market has got adjusted because of the current uncertainty in the geopolitical sphere. When we close the books, our stock price was at LKR 141 but today, I think it would have closed at around LKR 129 a bit of change. But what is really important is the trajectory -- so there are 4 key messages here. So price to book as far as the closing of the books is concerned, then it has got adjusted. We are delivering strong ROEs, and this can be seen on the chart. Quarter-on-quarter, how ROE has improved from -- starting from 10% to in the fourth quarter alone on quarter-by-quarter, it has -- it settled down at 16.8%. And along with that, our return on assets at the beginning of the year was 1.9% and it has now moved to -- sorry, 1.9% to 3%. On an annualized basis, our earnings per share has also picked up in line with the performance of the franchise and ended the year at LKR 25.90. So this brings me to our long term of 30 by 30 strategy, which Azzam mentioned a few minutes ago. So this is crafted to drive a few things, and it is centered on strengthen, simplify and scale up, to put simply to make certain investments and drive the organization in the right direction to make it fit for the future. So we have a strategy in place, which has a financial outcome. We have put in place a strategy that is executed via our PMO team, which is headed by Nadika. That basically gives us the pathway how to get there. And in that, we are making significant amount of tech investments to drive the transformation strategy, both from a customer-facing standpoint as well as credit underwriting and improving governance. On a day-to-day basis, what actually happens is the transformation team, along with the senior management, is painstakingly going through each and every item, which runs into hundreds and hundreds of little items overseen by the senior management. Vinoj holds that piece together with the sponsorship from myself and the Board and we are presenting progress reports to Board on a monthly basis with a full deep dive on a quarter basis. So that's the level of rigor that we are executing this at. And we hope and we are really confident that the transformation program will come to fruition by the end of this year. But in between, there are certain milestones for certain streams that we have committed to the Board and those will be delivered. So this is to give a snapshot of what we are trying to achieve. So in summary, the overarching message here is that how are we positioning the bank to unlock the maximum value? So within that, the improvements that we are doing on customer experiences, profitability and the collections. So if I were to pick on the customer experience really -- what we want to achieve is giving a very seamless or a frictionless customer experience, our own disbursement, the customer acquisition and thereby improving our turnaround time by about 20% to 25%. Having the right systems, the solutions, we want to increase our productivity and on a ballpark, the productive increase that we are envisaging is about 15% to 20%. Investments are also being made on state-of-the-art collection system. A lot of work has been done on that particular front. And that will come into effect very soon resulting in a reduction of flow rates by about 4%. We're also working on enhancing credit underwriting based on AI models, getting a state-of-the-art or next-gen tech stack to support that and also have a very agile operating model to serve customers better, to drive efficiencies and deliver sustainable returns for a long period of time. So to create an organization that is future-ready and geared for growth. So that's the overarching message. And some of these are already gone live and some other initiatives are due to go on live this year. So moving away from the performance. And I think one of the key concerning factors now is the retention or the current geopolitical tension that we are facing. The IEA has actually coined this as the largest disruption to oil supply, something that is even greater than the oil disruption that took place in 1970s. So fair to say that the situation is fluid and uncertain and difficult to make predictions. So the outcomes are particularly as far as the market statistics are concerned, oil has breached the $100 barrel mark. We are seeing a reduction in oil supplies. Obviously, freight and insurance cost is going to go up because of the uncertainties. There will be supply shortages and there will be other second order impact predominantly coming from petroleum-related products as well as the economies that are much more closely linked with the energy supplies. And again, there could be impact on inflation. The interest rate trajectory is going to be uncertain, particularly on the -- maybe on the dollar side. And there will be some intermittent bridges or spikes in yields on government securities. So that is the -- those are the uncertainties that we are dealing with, which is very difficult to predict. But what is really more important is how is NDB positioning itself to weather some of the storms and make sure that we have the right guardrails in place. When we look at the balance sheet position on the bank, we are solvent and highly capitalized, so immediate shocks can be withstood. And again, that has to be looked at in the consumption of the impairment buffers that we have built and anything that we may have built will be marginally in that sense. We are positive on the FX front. Of course, there's a lot of market liquidity as well. So not something that is awfully concerning at this point. And from a more macro point of view, there are sufficient reserves from a country standpoint. And for us, we also have sufficient reserves in our FCBUs. Again, as I said previously, we have a strong FCY franchise, and that continues to -- those deposits continue to be with us with high rollover rate, indicating strong stickiness and customer loyalty. The [indiscernible] and the interest rate outlook remain rather flat, of course, save for some of the immediate blips that you will see as a result of the uncertainties, but we have a strong house as how that might play out. And then we anchor all our decisions based on those hypotheses. As far as risk management actions are concerned, we are very close to our clients. We have been discussing with them the challenges that they are facing, the support that they would require, have put in the necessary risk guardrails to make sure that any risks in the horizon are identified early and actions are taken, so that we make sure that any additional risks are well managed. But then I think it is fair to say that it's difficult to predict as to how things are going to unfold. But as with everything, we hope that the humanitarian crisis will come to an end pretty soon. And hopefully, there will be some level of resolution and bring in markets back to where they were before, so that there will be least amount of impact to the economy and not only in Sri Lanka, but in other geographies as well. So that brings us to the end of the prepared presentation. I will now hand over the Q&A session to Azzam, who will moderate it. So thank you. Thank you for listening to the presentation, and I look forward to your questions. Azzam, over to you.

Thank you, Now the forum is open for questions. [Operator Instructions]. So thank you very much. We have our first question. It's a macro one. So I'm going to route this to you. Have you assessed the potential economic impact and consequently, the effects on credit demand and market interest rates, if geopolitical tensions persist longer than expected?

Yes. So thank you for the question. And it's a relevant one. And as I said previously, it is really difficult to predict beyond a certain point. So have we looked at the potential impact that might have on the bank? Yes, we have. So we have looked at client level, we have looked at the sector level, we are looking at where the supply chain might get disrupted or whether the moneys may not come as a result of the challenges that persist at the moment. So that's how we are looking at it. And for the moment, we don't foresee that to be a significant issue. But of course, that is based on 3 weeks or 3 to 4 weeks of disruption. If the disruption persists, I think there will obviously be bigger challenges. And I think we have to take it as they come. But for the moment, this is our assessment.

Thank you, CEO. Question #2. I will take this. What are your expectations for NIM and interest rate movements in the coming quarters? With regard to NIMs, CEO Slide #9, articulated our NIMs since 2022 and if anything, it gives you some flavors to the level of emphasis and the awareness and almost daily deliberation in terms of maintaining margins at where it's at. Even in our prior webinars, we've sort of showcased our commitment to maintaining sort of NIM margins on a best-effort basis and those results, you would have seen in our ability to maintain NIMs at 4.2% on a normalized basis at the end of the year 2025, notwithstanding pressures on account of interest rates. And one that ultimately helps us do that is the fact that not only 70% of our loan book is on a floating basis, but also from a funding standpoint, our deposit base to 70% is floating. So that means that sort of that connect does help us maintain margins. And that said, not to say that pressures don't exist, but every effort is being made to maintain margins at 4% as you have seen since 2022. With regard to the second part of the question with regard to interest rates, everything points so far, taking account everything we know so far and the discussion of conversations that we've had with parties who are, including the Central Bank, is that interest rates more or less, it's fair to say will remain at these levels, at least in the near term. So that's to your questions. So thank you very much for the question. Question number 3, thank you. Also NIM related. What specific asset repricing dynamics drove the NIM compression? And what rate level do you see NIMs stabilize? I just wanted to draw some flavor in terms of what you would see in the industry in terms of NIMs. So NIMs in the industry too was 4.5% in 2024, it's dipped to 4.4% in '25. And then if you look at our 7 largest peers as well, most of them have seen albeit on a higher base, NIM margins come off. The pressure exists. It's no different for us. What happens is typically when interest rates move down, your loan book reprices slightly faster than your deposit base, hence margin pressures exist. But our goal is -- and has been and will continue to be to maintain margins at 4% on a best effort basis going forward. Again, as you have seen since 2022 in one of the most difficult years in terms of interest rate volatility. So thank you for that question. Question #4. I'm going to route this. So this is from your presentation. I'm going to bring you in. So can we just put your Slide #6 on screen, please, and then bring VP Treasury as well. Can you explain the USD lending borrowing aspect in Slide 6 again. Please use simple terms.

You want me to take that? So yes, I mean this is similar to what we have been reporting in the previous quarters as well. So this is known as notional pooling. And in simple terms, what it means is a customer has dollar deposit or dollar liquidity on one side and avails rupee debt on the other side. So theoretically speaking, it's a borrowing against a deposit. And the way we look at this is it's not necessarily a loan sort of thing. It is notional pooling as in if the interest actually gets set off based on the arrangement. So what can typically happen is that if the balance sheet grows as a consequence of larger deposit and a larger borrowing, it kind of artificially inflates. And as a result of that, both the asset side and the balance sheet kind of gets [indiscernible]. So we have been having this product for some time in our books, but there was a pickup, I think, around first quarter 2025. So we wanted to make that disclosure of one for sake of transparency. And the other reason is that when the balance sheet gets increased and then there are interest-bearing assets on this particular arrangement, the NIM actually gets depressed. That is why we make that particular disclosure also to give a bit more context around the NIMs because on a reported basis, our NIM is 4%. But once you do the adjustment, once the adjustment is done for notional pooling, it is 4.2%. So what could really happen is that if the customer feels that this arrangement is no longer required because -- either because of funding requirements or the way they manage their central treasury, both sides of the balance sheet can go down without any impact on the top line revenue because this is not interest-bearing arrangement. And as a result of that, because of the shrinkage of the balance sheet on the asset side, the NIM will come to the adjusted level. So that is why this disclosure is made so that if there are analysts who are looking at the numbers more in detail, can understand the balance sheet better and understand the drivers of our NIMs better.

Thank you, CEO. I will move to question number -- the next question, 6. I'm going to route this to our VP, Treasury. What is the short-term outlook for ForEx and interest rates?

The country recorded a balance of surplus despite having a trade deficit. So we don't see any particular reason for a steep depreciation of the rupee based on those indicators. But however, saying that depending on the severity of the war, I mean, sometimes it can work against this forecast. So right now, we are not in a position to quantify the impact of the war on the exchange rate. And on the interest rates, I would say, with the prevailing excess liquidity and the fiscal management and having the benefit of the primary account surplus, again, we don't see any interest -- I mean, pressure on the interest rate for the remainder of the year. So basically, it will hover around the current levels.

Thank you, Damitha. Question #7. It's on impairment costs. I'm going to take this. Impairment costs fell by 98% quarter-on-quarter to LKR 29 million in Q4 2025. Can you explain the reason for this? Do we expect the impairment to fall further? Or is this a one-off due to prior provisioning? In short, it is due to prior provisioning. Just to give some flavor, we've taken approximately LKR 5.9 billion impairment charges for the full year, LKR 4.2 billion approximately in the first half and the balance LKR 1.7 billion in the second half. It gives you some sense in terms of the improvements that CEO cited in terms of credit underwriting. And if you look at, in particular, successes on account of our collection and recoveries as well. By way of example, our Stage 2 loan stock at the end of 2024 was approximately 16.6% of our total gross loans, which reduced to 7.9% at the end of 2025. And our Stage 3 stock was 14% of gross loans at the end of 2024, reduced to 10.8% at the end of 2025. So the improved collection and recovery efforts that we've also witnessed, much of which in the second half, ultimately led to a reduced incremental impairment charge. And what typically happens in the first few quarters is you make provisions on a conservative best case basis, which gets recalibrated based on best available information at the year-end. So that's also in part, which gave rise to the marginal reversal in Q4. And in terms of looking ahead, if you look at our second half impairment charge, we reasonably expect those levels to at least be maintained in the quarters -- in the coming quarters. So that's something that we expect in terms of impairment charges. So thank you for that. Next question #8. I'm going to route this to our VP Risk, Alex. How concerned is the bank about cyber risk and the threat it poses? And does it have any -- have plans in place to be better prepared for potential future attacks?

Thank you for that question. I think that's a very timely topic that we have been deliberating -- given cyber risk, the nature of cyber risk is the unknown factor. So the bank currently has implemented a number of controls across multiple layers of defense, preventing it against known attacks. However, the dynamic nature of cyber risk, especially the ever-evolving nature and also the advances on the part of the cyber criminals makes it much more fluid and much more difficult to guard against. So it's always a battle between the cyber criminals and the defenders. And from a bank's perspective, we always monitor this as moderately high-risk level. We also are looking at possible ways of ensuring the bank's exposure to this threat. However, specifically during this time of -- this kind of turbulent times where we will see BCP, contingency measures that have been taken place, where we will have remote working connectivity. So the bank is much better prepared compared to how we did the last time because there were a lot of learnings on securing ourselves in a remote working environment. So we've brought in a lot of defenses in the form of multi-factor authentication and securing some of the perimeter defenses, especially when it comes to allowing workforce working from remote locations. So I think as of now, there is a large amount of preparedness guardrails that have been placed. However, given the nature of cyber risk, the dynamic nature of cyber risk, it is an ever-evolving threat landscape that we will continuously try to defend ourselves against. Thank you.

Thank you, Alex. Question #9, please. Two parts to this question. I'm going to take the first part and the second to our Deputy Chief Executive Officer, Mr. K. Vinoj. Despite credit growth, there was a LKR 1.1 billion reversal in Stage 1 loan impairment. Any particular reason why? Also, what is your expectation on credit growth? -- first part, Vinoj, allow me just to take that. With regard to the impairment reversal, as you know, the expected credit loss models in banks are based on loss data, historical loss data. And when macroeconomic circumstances improve, actually loss data, whether it's probability of default data or loss given default data improves. So if you look at the industry, industry had approximately on Stage 1 provision cover, approximately LKR 0.12 to every rupee, which reduced about LKR 0.01 to every rupee, reflecting this improved macro circumstances and improved loss data. It was no different to NBB as well. Our Stage 1 provision cover improved from 1.3% to 1.1%, reflecting the improved loss data that's ultimately derived by the model based on the bank's prior experience with similar customer. So that's the first part. Vinoj, do you want to take?

Thanks, Azzam. I think when we started the year, probably we expected maybe a double-digit growth. And we still expect the same momentum to continue. But in the last 3 weeks, the things that have happened like in the economy and in the wider world, probably will have a small dip in the near term. But hopefully, this will not persist too long. And if things settle down, I think definitely a similar expectation to last year, double-digit growth and a strong growth coming from both our retail and SME side.

Thank you, Vinoj. Question #10 is for you as well on the same lines. What is the projected credit demand over the next 3 months?

So like I said, I think the credit demand has been very strong. I think -- I mean the last -- I mean, if you have anything to go by, I mean, you will probably see it in the first quarter -- end of first quarter. I think these are the pipelines that we have built maybe last quarter of 2025, which has been now being converted into real growth. We expect maybe a slight loss in demand maybe in the near term. But we expect maybe in the next quarter also like a similar growth as to the first quarter.

Thank you, Vinoj. Question #11. Alex, this is for you. Can we expect an increase in credit risk due to the current fuel crisis given the bank's exposure to SME lending increased by 25% this year?

Thank you for that question. So maybe I'll break it down into how we are looking at it. So there are multiple risk drivers. One is the fuel prices, then the transportation costs and the insurance costs. All of these will propagate into the EBITDA of the SME portfolio. So what kind of shock can an SME client can absorb on their margins and for how long is kind of the base case. So we are looking at it in multiple cases. If the issue prevails in the short term only within a month, then the shock level would be shorter term. However, in our worst-case scenario, I mean, it could be even like a few months. So in that kind of scenario, the propagation would be much severe. So we are closely monitoring these different scenarios, and we are also being cautious depending on how much this situation would be prolonged. So the main factor is going to be the length of the crisis period because that will have a knock-on effect and that will directly trickle into the balance sheet of the SMEs. So that's how we are looking at it.

Thank you, Alex. Question #12, Vinoj, I'll bring you in. Are the strong year-on-year growth figures in Islamic banking facilities driven primarily by your strategy? Or do they reflect broad industry expansion? Additionally, what is your current market share?

So I think we have a very strong Islamic banking franchise. I think that's been built over a period of maybe more than 10 years. This is an area that we really want to focus and grow, not only under corporate banking, but we also want to take this to the branches and the regional. So that's where you see the growth. In terms of market share, probably I don't have a number, but I would say we are one of the stronger banks when it comes to Islamic banking, looking at the book itself. But like I said, this is a strong franchise built over a period of maybe more than 10 years, and that's what's showing results now, and this is an area that we definitely want to concentrate also.

Thank you Vinoj, question #13, fees, I'm going to take this. What were the main drivers behind the growth in fee and commission income, I presume, this year compared to last year. So our fees on a normalized basis, CEO touched on this, was LKR 8.1 billion for the full year 2025 compared to a normalized LKR 7.1 billion for the year 2024, a LKR 1 billion increase. This increase evenly came from trade finance, card -- credit cards, banks operations, including digital as well as growth in credit. So evenly across all aspects of operations, as also CEO mentioned in his press announcement, when we discussed -- we announced our financial results for 2025. So thank you for the question. Question 14, CEO, I'm going to bring you in. What specific initiatives underpin the 2030 CASA target? And what guidance can you give us on an explicit target?

Thank you. Thanks for the question. So in terms of the trajectory, we want to get to about 30%. How we are driving that is increasing transactions through the accounts and bringing more digital features. So that's the expectation. However, as you know, developing CASA is particularly coming through the network, but it takes time because these are very small numbers, and it's also a bit of a painstaking exercise. As you saw from our -- the percentages, over 1 year, we have increased it by 140 basis points. So with some of the tech initiatives that we are bringing in and the focus that we have on certain segments of the client, we believe this can be further enhanced. So from a trajectory point of view, to get to 30%.

Thank you, CEO. Question 15, I will take this. Is NDB looking at increasing its Stage 3 provision coverage ratio? Simply put, if you look at the industry, the industry provision coverage ratio is close to 56%, and we are a little shy of 60%, 59%. And it is our view, ultimately, that's a healthy level of provision cover for the institution. And as you would see, historically, these provision coverage levels have been consistently built over the years since 2023, and we're at a very sound level at '25. So our house view is that's more than sufficient to cover Stage 3s and it's above industry, which tells you the level of adequacy. It must be also said if those levels are higher, then it would typically be other questions. So we are more than happy with the provision cover where it's at. We reasonably expect to maintain these levels going forward. Thank you. Question 16, Our Deputy CEO touched on this, but allow me to bring you in again. What are the bank's expectation on loan growth for 2026?

I think very similar to -- I think we had a very robust 2025. So we want to continue the momentum. So there's no 2 words about it. And that is the expectation of the Board and as well as the management also. So that momentum definitely will continue. But I mean, the last 3 weeks, if anything to go by, we will also -- we will be very cautious in terms of the risk that we take. But I personally believe it's a very short-term and near-term thing, and that should come to an end maybe in the next couple of weeks. If that happens, I mean, there's nothing to stop us from growing like we did in 2025.

Thank you, Vinoj. Question 17, in Q4, there was a write-off in Stage 3 loans and the Stage 3 provision coverage ratio increased from 54% to 59%. Based on this, how should we think about potential write-offs in the next quarter? Allow me to take this. If you look at 2024, our write-off amount was higher than the write-off amount in the '25. And as per the bank's policy, which is highly prudent, if there are customer defaults exceed a certain threshold, like most other banks, the bank undertakes the measure to write them down. It doesn't mean the process of recovery takes a backseat, but the write-off is initiated as a measure of prudence. And notwithstanding, typically, if you write-off books, the write-offs are -- by the time a contract comes to a point of write-off, it's already fully provided and the bank's approach to doing that is very conservative. So by the time the write-off is initiated, the said exposure is fully provided. So if you eliminate the 100% provision cover from your loan book, it typically reduces pressure on the provision cover. But notwithstanding if the banks increase the provision cover, it means the prudence demonstrated by the bank to take provisions on its Stage 3 loans. In terms of potential write-offs in the next quarter, we reasonably don't expect significant write-offs because the emphasis focus is on recovery. And as you can see, the reduction from a '24 to '25 -- the reduction in write-offs from 2024 to 2025 should give you some insight as to the bigger that we maintain in terms of collection and recovery efforts. So thank you for that question. Question 19. Thank you for your question. I'll take this tax. I just want to -- please allow me to read the question. Could you elaborate more on the significant reduction of income tax expense by 46% from LKR 9.7 billion to LKR 5.2 billion, reducing the tax charge from approximately 52% to 32% of PBT. This has contributed towards improved net profit after tax. Please comment how sustainable this reduced tax level. Foremost -- thank you for the question. Foremost tax rates in Sri Lanka at the end of 2024 -- during 2024 and 2025 has remained the same, whether it's Finance Services at 8% or SSE at 2.5% or corporate income tax at 30%. So nothing has changed between '24 and '25. But when you're comparing the '24 number, you have to be cognizant of that we had an ISB restructuring that took place on the 20th of December 2024. And the tax treatment was different. Those losses were disallowed for tax purposes. So it's not an apples-to-apples comparison. Our tax rates -- effective tax rates are broadly the same if you -- on a normalized basis, 24% versus 25%. On a normalized basis is broadly the same, plus or minus close to maybe 1.5% to 2%. So the adjustment that needs to be made to make a like-for-like comparison is to eliminate the ISB effect in the 2024 results. Thank you for that. Question #20, CEO. Can local exporting firms use this notional pooling mechanism in relation to conversion directives by the Department of Foreign Exchange?

So let me take that. I think if the question is whether notional pooling can be availed as a product, it can be, but it is all subject to complying with regulatory requirements. So subject to complying with the regulatory requirement, if there is any residual that is available, yes, then the notional pooling can be availed. But that doesn't mean the notional pooling as a product will override any regulations that I should -- from the Central Bank on converting of export proceeds or anything in relation to that.

Thank you, CEO. Question #2 on CASA. I'm going to club '21 and '22. Any plans to increase the CASA ratio in the future? CEO, this is to you. Can we just show '22 on slide, please? NDB's CASA ratio is 27%. At the same time, other borrowings due to debt security holders due to banks have increased significantly this quarter by 22% quarter-on-quarter, whilst deposits have only increased by 0.6%. What is your expected funding mix and interest expense expectation going forward? I will route that to Damitha. We'll just go to '21. CEO, do you want to take that?

So CASA remains one of our key focus areas, and that has been the case for some years, and we have made steady progress. Again, that was covered in the slides. Year-on-year, we have increased our CASA base by 140 basis points from '24 to 2025. So that will continue to be the trajectory. I think there was another question maybe a few minutes ago whether -- what is our expectation of the CASA ratio by 2030. And for that, we are looking at to get it to about 30%. And I think that is a good level as a benchmark, both in terms of funding as well as to improve our NIMs. So I think I'll hand over the next question to Damitha.

'22. Damitha, do you want to take the first part and I will step into latter.

Yes. I will take the second part.

So, NDB's CASA ratio is 27% at the same time, other borrowings have increased significantly this quarter by 22% quarter-on-quarter, whilst deposits have only increased by 0.6%. What is your expected funding mix and interest expense expectations going forward?

Start of 2025, actually, we were not a dominant player in the repo market. So we have decided to move into that explore that market as well. And excess liquidity prevailing in that market gave access to the short-term repos at a very reasonable cost. So what we explore was we just funded our debt securities through the short-term borrowings and ran the interest rate mismatch, which helped us in giving positive outcome to our NIMs. So going forward, I mean the [indiscernible].

Interest expense expectation going forward. So as we mentioned, early on in terms of our interest rate view, at least in the near term, all consider we reasonably expect these levels to more or less remain. That's something we'll keep -- we naturally keep a close eye on. So should that be the case, we don't naturally expect an increase in our interest cost as a result of any interest rate increases. But as Vinoj indicated, there is a natural focus to grow our loan book and naturally our deposit base as well. So the interest cost will increase. And one thing must be said, even if you look at the industry CASA levels, it's more or less flat '24 versus '25 -- and NDB has albeit a lower base, been able to increase it by 1.2% to 23.9% -- 1.4% to 23.9% from 22.5% as indicated by CEO before. And that effort will continue going forward. And that will, to some extent, that improvement in CASA that we intend to drive reduce the interest expense pressures somewhat. In terms of funding mix, we are looking at naturally over 80% of all deposit -- all banks funding is from -- by way of deposits, and it's no different for us. We reasonably expect the deposits to continue to drive our loan book growth, which is also our focus. Thank you. Question #23. I will take this. Will the depreciation in the rupee positively impact the foreign exchange gains and other operating income over the next few quarters? Yes, it would. If it depreciates, it would have a positive impact on our P&L because we have a surplus FCBU reserve. Thank you. Question #24. I'm going to route this to Nadika, strategy. What are your plans for the investment bank? Given the number of brokerages in the market, are you facing any pressure or considering acquisitions within the industry?

So I think NDB is one of the most extensive financial services institutes in the market. So we really want to leverage on that. So we are also currently working on really working together with the capital market entities, which is represented under ICAAP. And in terms of our plans is to really give a full suite of products and services to our clients so that it's a more holistic offering versus working separately because we see there is a lot of synergies in working together. And given that we already have this structure, we really want to leverage on it, and we see most of the other banks also now getting into this market and expanding their presence here. So in terms of that, I think we are very much want to be in this space and that would be kind of the objective in the medium to -- short to medium term.

Thank you, Nadika. Question #25, Damitha. Are there sufficient liquidity levels for the bank to support loan growth? Does the bank have expectation in terms of loan-to-deposit ratio?

Yes, I think currently, overall LDR ratio stands around 95%, that is together with foreign currency and local currency, which I mean it's sufficient liquidity levels to carry out our asset expansion right now.

And in terms of the latter part of the question in terms of loan-to-deposit ratio, the target is to maintain loan-to-deposit at 90%, which is the path the bank is moving forward on. CEO, this is for you. Question #26. From the perspective of the management, would like to hear how NDB is positioned differently to other like-sized peers. Would it be right to assume that SME lending is a key area of focus and differentiation?

Thank you for the question. So part of this actually will be answered with the strategy that we have put in place, strengthen, simplify, scale up. So in that, there are certain tech investments that we are making to make the customer journeys very seamless, decision-making really quick, reduce turnaround times and go to market quickly. So that is how we are looking at the differentiation part of it. On the SME front, yes, that's a good observation. I think we will continue to focus on that area. Again, in a crowded market with products and offerings being by and large, the same and the customer base also being the same, it's the service and the speed to market that can actually make the greatest difference. That's how we look at ourselves. And those are the changes that we want to bring, and you will see some of those coming into fruition in 2026. And along with that, there will be a lot more positive impact on our P&L and the balance sheet.

Thank you, CEO. Question #27, a similar question to rates. I'm just going to take it. Do you expect deposit rates to increase in 2026? Or will the funding mainly be through capital raising? We broadly reasonably expect rates to remain at these levels, all things considered, all things known at present and not through capital raising, predominantly over 80% of our funding is through deposits. Question #28, CEO, notional pooling. Just to clarify based on the response, are there any restrictions or limits on the credits and debits that can flow through these notional pooling accounts? And specifically, would a drawdown from the LKR account be treated as a currency conversion?

So as far as the product is concerned, I think I feel the question is more to do with what is permitted and what is not permitted. So within the product offering, the one that really dictates the term is regulatory compliance, be it export conversions, what can be routed through a specific account. So all that would really determine what can be available. So provided all those regulatory requirements are ticked in terms of the notional pooling, which means that you -- the customer has a deposit on floating balance on one side and floating balance on the other side, all what it does is gives that interest rate benefit. So provided the regulatory requirements are met -- and the accounts are open for specific purposes, say like if it's a account, so on and so forth. So those have certain restrictions. Barring that, the product can be used as is. And then also just to clarify, this is not something that is uncommon in the market. The product has different names. It can be notional pooling, it could be interest set of, it could be known as balance set off. So by and large, these -- the product offerings are the same. And foreign banks are -- they used to offer this in the past as well. So it is not something that is very unique to the local market.

Thank you, CEO. Last question that we have, 29. I will take this. It's on Tier 2 instrument. The recent Tier 2 listed debenture issue will raise the total capital ratio from 16% to approximately 19%. How do you intend to utilize this additional capital buffer? Any plans on raising Tier 1 as well. So you're correct, it will increase our total capital adequacy ratio by close to 3% come end of this quarter when we publish, you will see that. And that is for the purposes, as indicated before by our Deputy CEO in terms of credit growth to support credit expansion. And that, in our view, is more than sufficient for the year 2026. In terms of raising Tier 1, that's something that the bank will consider amongst many other things in its capital augmentation plans. And as and when it is definitive, you will be kept abreast of such effort. As it stands right now, the debenture issuance more or less suffices for our solvency for our Tier 2 purposes and as indicated by CEO early on, our CET1 Tier 1 buffers are sufficient in our view. So thank you for that.

Thank you. I think that brings us to the end of the Q&A session. And I want to again thank everyone who took part in this webinar. Really appreciate it. And I also want to thank the management team and my entire staff for a stellar performance in 2025. This comes as a result of a lot of hard work and being committed to one objective, and that's to make the organization better and to deliver sustainable profits over a period of time. A lot of work is still required from a transformation point of view, and we will continue to give that update as we continue our quarter 1 and quarter 2 webinars in 2026. So with that, I'd like to bring this session to a close and look forward to seeing you again when we have our webinar for 2026 performance. Thank you.