National Development Bank gets 'worst' rating

By MALUM NALU

The Asian Development Bank (ADB) says the performance of the National Development Bank, when compared with other development banks, “is one of the worst in the Pacific”, The National reports.

In its Finding Balance: Benchmarking the Performance of State-Owned Enterprises in Papua New Guinea report released last Thursday, the ADB highlighted that NDB generated losses of K70.6 million over the FY (financial year) 2002-2010 period, while receiving a total of K111 million in government grants to onlend to selected beneficiaries.

The NDB last February announced a record profit for the bank of K9.4 million in 2011, a dramatic turnaround after a decade of consistent losses, but did not elaborate on the key drivers of this turnaround.

NDB board chairman William Lamur (right) and former managing director Richard Maru, now Yangoru-Saussia MP and Minister for Trade, Commerce and Industry,  celebrating the K9.4 million profit at Crowne Plaza last February. ADB says the financial statement did not elaborate on the key drivers of this turnaround

“It appears that most of these funds have not been recovered, and more funds are beingchanelled every year with similar results,” the report said.

“The 2012 national budget has allocated a further K130 million for NDB to onlend to various beneficiaries, of which K100 million is earmarked for the agriculture sector.

“NDB’s continued role as the preferred channel for the government’s subsidised credit programmes  is difficult to justify, based on its past performance.

“In FY2009, NDB reported K109 million (US$52.8 million) in accumulated losses.

“NDB’s performance, when compared with other development banks, is one of the worst in the Pacific and indeed is far inferior to the Tonga Development Bank (TDB) and the Development Bank of Samoa (DBS), which returned an average return of equity (ROE) of 11% and -0.8%, respectively, during the FY2002-FY2009 period compared with NDB’s -38%.

“In the benchmarking sample of development banks, NDB only outperformed one bank, the Development Bank of Solomon Islands (DBSI), which was closed in 2007.

“While the financial statements of NDB for FY2011 were not available for this study, NDB’s chair announced a record profit for the bank of K9.4 million in 2011, a dramatic turnaround after the bank’s decade of consistent losses.

“The statement did not elaborate on the key drivers of this turnaround.”

The ADB says a thorough review of the NDB is needed to shore up ongoing losses, reduce the government’s fiscal risks, and assess its effectiveness in delivering mandated lending programmes.

The ADB stressed it was critical to bring NDB’s governance structure and reporting mechanisms in line with those of the other state-owned enterprises (SOEs), so that Independent Public Business Corporation (IPBC) could effectively execute its role of SOE monitor and shareholder representative.