HNB profits rise to Rs 741 million in 1Q

Hatton National Bank (HNB) Sri Lanka's premier private sector commercial bank, continues its robust performance by recording a 118% rise in pre-tax profits to Rs 1,172 million in the three months to March.

HNB's Chief Financial Officer Nihal Kekulawela said "they are extremely pleased with such consistent performance which has been sustained during the past thirteen successive quarters. "Our team's focus on balancing business growth with profitability, improving productivity, managing costs, and enhancing asset quality has contributed towards this performance", he said.

Net interest generated from interest bearing assets has increased by 37% while non interest income showed a growth of 16%. The three months have also seen the entire operating expense bill of Rs 2.19 bn being comfortably met by net interest income from core banking activity.

Net Income including foreign exchange, commission income and investment income grew by 21% during this 3 months period.

HNB has maintained excellent control on expenses with operating costs increasing by a mere 11% despite inflation reaching out towards the 30% levels. While recognising the impact of domestic inflation on expenses, Kekulawela stressed the need for increased focus on managing cost through better internal efficiencies.

Provisioning for Bad and Doubtful Advances has shown a sharp decline of 59% to Rs 177 mn. Of this, Rs 92 mn (decline of 51% over 2007) related to General Provision mainly on account of the new regulatory directions issued by the Central Bank of Sri Lanka.

Kekulawela expressed satisfaction on the efforts taken by HNB to improve its Portfolio Quality during the past three years and was pleased to note that the results of such quality improvements have started contributing towards the bottom line from 2006 onwards. Post tax profit of the Bank was Rs 751 mn which is a 138% growth compared to the same period in 2007.

Taxation in the form of financial services VAT has increased by 23% to Rs 377 mn due to a combination of increase in taxable profits and increase in staff emoluments which are added back (excluding retirement benefits).

Income Tax too increased by 90% to Rs 421 mn. Taxation will continue to pose a significant challenge to defending future profit targets, Kekulawela said.

The replenishment of the bank's long term debenture program in July 2008 is expected to take this ratio to comfortable levels in excess of 11%, Kekulawela said.