#1ANNUAL BEST 25th KAWARD BANK A 2018 GORANCE Best Bank in Sri Lanka 2018 GLOBAL FINANCE ☑ NDB bank Our Commitment. Your Success. closer look INVESTOR WEBINAR Q3 2018 National Development Bank PLC [CSE Stock Code - NDB.N0000] 01 November 2018: 1000 HRS (UTC +0530) Colombo: Sri Lanka#2Forward Looking Statements NDB bank Forward Looking Statements This document has been prepared by National Development Bank PLC ("NDB", "Bank" or the "Group") solely for use at its presentation to potential & current investors. By accepting this document, you agree to maintain absolute confidentiality regarding the information disclosed in this document. The information contained in this document should be considered in the context of the circumstances prevailing at the time and has not been, and will not be, updated to reflect material developments which may occur after the date of the presentation. Not the Bank nor any of its respective affiliates, advisers or representatives shall have any liability whatsoever (in negligence or otherwise) for any loss howsoever arising from any use of this document or its contents or otherwise arising in connection with this document. This document contains proprietary information and no part of it may be reproduced, redistributed or passed on, directly or indirectly, to any other person (whether within or outside your organization/firm) or published, in whole or in part, for any purpose. This presentation and subsequent discussion may contain certain forward-looking statements with respect to the financial condition, results of operations, capital position and business of the Group. These forward-looking statements represent the Group's expectations or beliefs concerning future events and involve known and unknown risks and uncertainties that could cause actual results, performance or events to differ materially from those expressed or implied in such statements. Forward-looking statements speak only as of the date they are made. The Group makes no commitment to revise or update any forward- looking statements to reflect events or circumstances occurring or existing after the date of any forward-looking statements. closer look Presentation theme and iconology: This presentation is based on the 2017 NDB Annual Report theme; Take a closer look. The icon of a microscope is used where more details are available on the analysis. Sources: Internal analysis, CBSL publications 2#3Corporate Participants Presented by Dimantha Seneviratne Director/ Group Chief Executive Officer Panelists Finance & Planning Lalith T Fernando - Group Chief Financial Officer Suvendrini Muthukumarana - AVP-Finance & Planning Heads of Business Buwaneka Perera - VP-Corporate Banking Niran Mahawatte - VP-Treasury Indika Ranaweera - VP - SME, Middle Market and Business Banking KV Vinoj - AVP - Network Management, Product Development & Institutional Banking Visit our 2017 Annual Report for the profiles of the Corporate Participants. NDB bank 3#4Agenda Part I - Business Overview Part II - Financial Performance Part III - Q&A Forum NDB bank 4#5Agenda Part I - Business Overview Part II - Financial Performance Part III - Q&A Forum NDB bank 5#6Business Overview NDB bank ☐ ☐ Incorporated in 1979 as a Development Financing Institution under and by virtue of National Development Bank of Sri Lanka Act No. 2 of 1979 Converted in to a fully fledged commercial bank in 2005 ■ A network of 108 branches and 129 ATMs [including 12 Cash Recycling Machines] spread across the country ■ A full suite of banking solutions on offer for retail masses, retail high net worth clients, SMEs, middle market and corporate customers ■ A strong digital banking proposition on offer Extended services in capital market activities through the robust group companies cluster Unique business proposition of “one-stop-shop" for banking and capital market solutions offered under the NDB brand Strong brand equity as the Best Bank in Sri Lanka [as adjudged by the Global Finance Magazine of USA for 2018] ■ Staff strength of over 2,300 NDBers strengthened by gender diversity ■ A group asset base exceeding LKR 460 billion ■ National Long Term Rating of A+ (lka) by Fitch Ratings Lanka Limited NDB EDB TOWER HA NDB bart 6#7Business Overview Awards 2018 [Bank] - Global Finance Magazine USA Best Bank in Sri Lanka - 2018 Global Banking & Finance & Review - UK Best Project Finance Bank Sri Lanka Best SME Bank Sri Lanka Best Bank for Credit Cards Sri Lanka ANNUAL BEST 25th AWARD BANK AU 2018 GLOBAL FINANCE Best Retail Banking Product - (Personal Loan Product - Dream Maker Loans) Sri Lanka Best Financial Group of the Year Sri Lanka Asian Banking & Finance - Singapore Under Retail Banking Awards Category Best Domestic Retail Bank of the Year [for the sixth consecutive year] Best SME Bank of the Year [For the sixth consecutive year] Best Financial Inclusion Initiative of the Year Under Wholesale Banking Awards Category Best Domestic Project Finance Bank of the Year [for the fourth consecutive year] Under Corporate & Investment Banking Awards Category Best Debt Deal of the Year Best Corporate Client Initiative of the Year Best Syndicated Loan of the Year 7th Global Customer Engagement Awards Asian Customer Engagement Forum (ACEF) - Mumbai Silver Award for Best Celebrity Endorsement for NDB Araliya Women's Savings product Gold Social Impact Award for "Best Education Program CFA Sri Lanka Capital Market Awards 2018 Gold award for Best Investor Relations [For the third consecutive time] NDB bank LankaPay Technnovation Awards 2018 Best Bank of the Year for Excellence in Customer Convenience - Category C-Winner Best Common ATM Acquirer of the Year - Category B - Merit Award Bank of the Year for Financial Inclusivity - Category B - Merit Award USD STP Excellence Awards of Deutsche Bank, New York Award for exceptional quality of payment messages Awards 2018 [Group companies] - NDB Investment Bank Limited Euromoney Magazine Awards for Excellence Sri Lanka's Best Investment Bank [For the seventh consecutive year] FinanceAsia's Annual Country Awards Best Investment Bank in Sri Lanka [For the second consecutive year] Global Brands Magazine Most Trusted Investment Banking Brand, Sri Lanka [For the fourth year] Asiamoney Banking Awards - 2018 Best Corporate and Investment Bank, Sri Lanka [For the second consecutive year] NDB Securities [Pvt] Ltd CFA Sri Lanka Capital Market Awards 2018 Bronze award for Best Equity Research Report 7#8Business Overview - Strategic Focus - Update NDB bank • • • "Transformation 2020" - The Bank's strategic framework spanning up to year 2020 Goal To transform the Bank to a large, systemically important bank from its current mid sized status by end 2020 Involves a wide span of changes including the business focus, business processes, organizational structure, employee mindset and culture Majority of the strategic initiatives are now implemented • Results are reflected in the financial numbers recorded for Q3 2018 • • • Greater results to be derived in the near future Clear indication that the goal will be met well ahead of the set deadline of 2020 Already strategized the way forward beyond 2020 as a systemically important bank T20 TRANSFORMATION 2020 ONE NDB 8#9Agenda Part I - Business Overview Part II - Financial Performance Part III - Q&A Forum NDB bank 9#10Q3 2018 - Key Performance Indicators [Bank] NDB bank Profitability Indicators [Vs. Q3 2018] Pre-tax core banking profits up by 43% - LKR 6.4 bn NII up by 39% - LKR 10.6 bn Net fee & comm income up by 25% - LKR 2.3 bn Total op. income up by 30% - LKR 15.6 bn Total op. expenses increase 13% - LKR 6.2 bn PAT growth of 22% - LKR 4.0 bn Group PAS up by 42% - LKR 3.6 bn Balance Sheet Indicators [Vs. FY 2017] - Total assets of LKR 458 bn impressive 20% growth Net loans to customers of LKR 328 bn - growth of 20% Customer deposits of LKR 329 bn - growth of 20% Total assets [Group] - LKR 463 bn Efficiency & Return Ratios [Vs. FY 2017] Cost to Income Ratio improved to 39.4% from 45.5% Net Interest Margin improved to 3.36% from 3.0% Return on Average Equity improved to 16.95% from 16.27% Return on average assets improved to 1.23% from 1.21% Business Capacity Ratios [Vs. FY 2017] Loans to Deposits Ratio of 102% Tier I Capital and Total Capital Adequacy ratios well above the statutory minimum requirements applicable for 2018 (Tier I - 8.37%; Tier II - 12.13%) Liquidity Coverage Ratios [Rupee & All currency] well above the statutory minimum requirements 10 10#11Income Statement [Bank] NDB bank LKR Mn Gross Income Q3-2018 Q3-2017 Variance % 36,797 31,650 5,148 16 Net Interest Income 39 10,628 7,656 2,972 Net Fee and Commission Income 25 2,272 1,813 459 Total Operating Income 30 15,634 12,023 3,612 Impairment charges for loans and other losses 171 2,365 872 1,493 Net operating income 19 13,269 11,151 2,118 Total operating expenses 6,162 5,472 690 13 Operating Profit Taxes 25 7,107 5,679 1,428 3,078 2,369 709 30 PAT Group PAS 22 4,029 3,310 719 3,573 42 2,520 1,053 اله ☐ Net operating income from core banking operations [excluding equity income] increased by 43% Increase in taxes by 30% Bank PAT crosses LKR 4 bn, an impressive feat for nine months performance 11#12LKR Mn Revenue Analysis - Fund Based Income LK Mn Q3 2018 Q3 2017 % growth Interest income 31,790 27,283 17 Interest expenses 21,163 19,627 8 NII 10,628 7,656 39 NIM (%) 3.36 2.9 I 35,000 30,000 25,000 20,000 2.90% 15,000 10,000 5,000 Fund based income 3.40% 4.00% Interest income Interest expenses 3.00% 2.00% Q3 2017 Q3 2018 NDB bank Impressive NII growth due to sound balance sheet management and ALCO strategies. *Loan book enhanced by LKR 69 bn YoY, supporting the interest income growth *The loans to deposits ratio improved to 102% helping maintain the increase in interest expenses at 8% 12#13Revenue Analysis - Other Income NDB bank LKR Mn Q3 2018 Q3 2017 % growth Net Fee and Commission Income 2,272 1,813 25 Net gain from trading 861 793 9 Net gain from financial investments 455 545 -17 Other operating income [excluding 857 160 436 equity income] Total non-interest income from core 4,445 3,311 34 banking operations [excluding equity income] Other operating income from equity investments 562 1,056 -47 Total non-interest income 5,007 4,367 15 Continued Net fee and commission income growth due to; aggressive drive in retail products including credit card business, mobile banking on- boarding, trade services and other fee generating services overall loan portfolio growth 13#14Operating Expenses [Bank] LKR Mn Q3 Q3 % • 2018 2017 growth . Personnel expenses 3,267 2,645 24 Depreciation & amortization 319 312 2 Other expenses 2,576 2,514 2 Total operating expenses 6,162 5,472 13 Cost to Income Ratio well managed at 39.4% - One of the lowest in the industry Cost to Income Ratio 50 45.5 39.4 40 30 Q3 2018 Q3 2017 Q3 2018 Q3 2017 NDB BANK2U NDB bank Operating expenses increase of 13% Incurred capital expenditure to support business expansion and enhanced customer experience Network expansion [New branch opened in Katugasthota] • 12 Cash Recycle Machines [CRMS] Official launch of branchless banking - Bank2U – Our newest digital solution to individuals and SMEs 5 new NDB Privilege Banking Centers 4 branch relocations to new spacious locations Dedicated Business Banking Unit at the NDB Head Office premises Easier than before, closer than ever Experience the service of BANK2U H2STE 14#15Balance Sheet [Bank] NDB bank LKR Bn Q3 2018 FY 2017 YTD Quantum percentage growth YTD Q3 2017 growth YOY Quantum growth YOY percentage growth Total assets 458 383 75 20 371 87 23 Net loans and 328 274 54 20 259 69 27 receivables from customers Total deposits from 329 273 56 56 20 255 74 29 customers Total equity 32 29 3 12 28 4 14 • . Exceptional growth in total assets, loans and receivables and customer deposits at 20% YTD YoY growth rates in excess of 20% Total Assets Group LKR Bn Total assets Q3 2018 FY 2017 463 389 % YTD growth 19 15#16• Loans & Receivables [Bank] LKR Bn Total gross loans growth 400 350 258 300 250 210 197 180 200 160 150 136 108 100 50 76 68 67 55 54 45 33 0 2013 2014 2015 2016 2017 Q3 2017 Q3 2018 LCY FCY NDB bank Considerable improvement in the currency mix of the loan book with 77% of LCY loans in Q3 2018 [Q3 2017 -75%] Accelerated performance demonstrated in all key segments, with notable growth recorded in Business Banking 16#17Asset Quality Impairment analysis LKR mn Q3 2018 Q3 2017 Individual impairment 1,479 365 Collective impairment 934 439 • Other provision - [47] 68 charge/[release] Total 2,365 872 • NPL ratio analysis Bank FY 2017 Bank Q3 2018 Industry As of Aug 2018 1.83% 2.57% 3.6% NDB bank The increase in the Bank NPL ratio reflects the industry-wide trend for NPLs resulting from slowing economic growth and other market challenges Collective impairment increase due to the rapid growth in the loan book [YTD – LKR 55 mn, YoY 69 mn] Individual impairment increase due to precautionary provisions which the Bank made for a selective individually significant facilities, on a prudent basis. Strengths of the Bank, which would improve the impairment and NPL position of the Bank's robust and focused recoveries mechanism - dedicated unit and resources • prudent risk management strategies well diversified loan portfolio with minimized concentration risk 17#18LKR Bn Customer Deposits 350 300 250 Customer deposits NDB bank Re-launched Ithuru Karana Maga - NDB's iconic proposition for savings as a life's habit 200 256 NDB 221 150 203 134 159 100 115 100 50 73 51 30 37 45 53 52 2013 2014 2015 2016 2017 Q3 2017 Q3 2018 FCY LCY . Quantum increase in deposits . YTD LKR 56 bn • YoY LKR 74 bn • Increase in CASA base - LKR 12 bn • the nine months period. Q3 2018- 21.4% CASA Ratio well maintained throughout Ithuru Karana Maga Learn the skill of SAVING SAVING ඉතුරු and excel in life Saving is a must-have skill if you want to excel in life. Truly mastering this skill means learning, practicing and applying it in every day life. NDB Ithuru Karana Maga will ensure you receive a step-by-step guide to mastering the skill of saving. Join the NDB Ithuru Karana Maga movement. 18#19Capital Management Equity capital NDB bank BASEL III-Q3 2018 Bank Group Common Equity Tier 1 Capital Ratio % (Minimum Requirement -6.375%) 8.37 9.62 Tier 1 Capital Ratio % (Minimum Requirement - 7.875%) 8.37 9.62 Total Capital Ratio % (Minimum Requirement - 11.875%) 12.13 13.12 ■ Rights Issue announced at the ratio on 1 share per 3 shares held Achieved a subscription rate of 60% The Bank has announced that it will explore opportunities with strategic investors for the subscription of remaining Rights 19#20Investor Ratios Investor Ratios NDB bank Bank Group Q3 2018 FY 2017 Q3 2018 FY 2017 Closing price per share (LKR) 104/- 136.40 NA NA EPS (LKR) (Annualized) 29.09 24.52 26.69 19.66 ROE (%) 16.95 16.27 13.27 11.09 ROA (%) 1.23 1.21 1.11 0.96 Book value per Share (LKR) 181.27 167.58 203.15 192.51 P/E (times) 3.58 5.56 NA NA Price to Book value (times) 0.57 0.81 NA NA Share price traded in the range of a low of LKR 102/20 and a high of LKR 116/- during Q3 NDB share continues to be a attractive BUY at a PB < 1 20 20#21Agenda Part I - Business Overview Part II - Financial Performance Part III - Q&A Forum NDB bank 21 221#22NDB Investor Relations ☑ NDB bank Our Commitment. Your Success. closer look NDB's Investor Relations is the recipient of the Gold Award for Best Investor Relations at the coveted CFA Sri Lanka Capital Market Awards, for three consecutive years in 2018, 2017 & 2016. Investor Analysts Support ✓ Clearly defined Quarterly Results Calendar released at the end of each quarter Webinar transcripts hosted to the NDB Corporate website/ IR page in playback video and written transcript forms Dedicated communication channels made available for any queries and clarifications Reach us; [email protected] T: +94 112 448 448 Extn: 35317/35301 www.ndbbank.com/Investor Relations