By Our Financial Analyst
COLOMBO – National Development Bank PLC (NDB) has posted a third-quarter post-tax profit of Rs. 2.9 billion, a sign that earnings have stabilised since the bank disclosed an internal fraud in April.
The result, released to the Colombo Stock Exchange this week, compares with Rs. 3.0 billion in the second quarter and Rs. 1.8 billion in the first. Post-tax profit for the nine months to 30 September was Rs. 7.7 billion, against a restated Rs. 5.1 billion a year earlier. Operating profit before taxes on financial services was Rs. 15.1 billion, against a restated Rs. 10.1 billion.
Why the growth looks so strong
The headline rise of roughly 51% in post-tax profit is flattered by the restatement. The fraud impact applicable to the 2025 comparison period is Rs. 4.5 billion, against Rs. 2.6 billion for 2026. With more of the loss assigned to 2025, last year’s base is lower.
The bank’s own figures excluding the fraud give a cleaner picture. Post-tax profit would have been Rs. 9.1 billion for the nine months, against Rs. 7.5 billion a year earlier, a rise of about 21% by our calculation. That is a better guide to how the core business is performing.
Core operations
Net banking revenue rose 14.8% to Rs. 32.6 billion and total revenue rose 10.6% to Rs. 80.6 billion, both before any fraud impact, according to the bank. NDB says asset quality improved further. In a letter to customers, it reported total assets of Rs. 975.4 billion, deposits of Rs. 717.5 billion, net loans of Rs. 599.7 billion and a net Stage 3 loan ratio of 3.0%, and said capital and liquidity ratios remain comfortably above regulatory minimums.
The final loss
A final forensic report, disclosed on 29 September, confirmed the fraud at about Rs. 13.64 billion, against about Rs. 13.58 billion in the interim disclosure of 26 June. The bank’s first internal estimate in April was Rs. 13.20 billion. NDB says the extra amount has been recognised in line with applicable accounting standards but does not say in which period.
The gross impact applicable to the nine months of 2026 is Rs. 2.6 billion, which the bank says relates entirely to the first quarter. That means the second and third quarters carried no fraud charge. In its half-year results, the bank allocated the earlier Rs. 13.58 billion as Rs. 1.42 billion to periods before 2025, Rs. 9.62 billion to 2025 and Rs. 2.55 billion to the first quarter of 2026. That puts roughly 70% of the loss in 2025. The bank’s 2025 profit, originally reported as Rs. 11.04 billion, was restated to Rs. 5.90 billion at the first-quarter stage.
Oversight
Deloitte Touche Tohmatsu India’s final report went directly to the Central Bank of Sri Lanka, with a copy to NDB. NDB has said no customer suffered financial loss and that account balances remain intact. The bank also told customers that the Commercial High Court has refused permission for a minority shareholder’s case against the bank, its directors and its external auditors to proceed.
What remains unanswered
The bank has not published an estimate of how much it expects to recover, though it says it is working with a foreign agency that specialises in tracing stolen money and digital assets. It has not said how many people face action over the control lapses or whether criminal proceedings have begun. It has not detailed which controls failed or how long the fraud went undetected. The letter does not say whether the court ruling can be appealed.
Fitch Ratings cut NDB’s national long-term rating to A-(lka) with a negative outlook on 10 April. The share price was Rs. 112.50 at the end of June, down from Rs. 141.25 at the end of 2025.
Outlook
On the evidence so far, the earnings damage is mostly behind NDB, since the loss has been booked and recent quarters are steady. Reputation and accountability are not, and recoveries, any criminal cases and the rating outlook are what to watch.
Editor’s Note: The 51% and 21% growth rates and the “roughly 70%” share are the author’s calculations from the stated figures. Third-quarter, nine-month and “excluding fraud” figures are from NDB’s results as released to the CSE, and the customer letter. Other figures are from NDB’s earlier disclosures and published reports.
Image: NDB Bank Headquarters, Colombo. Source: Wikipedia
