HNB continues impressive performance in first nine months

Hatton National Bank continued its growth momentum in the third quarter ended September 2008 by exceeding Rs. 5 bn in operating profit before taxes while post tax profits increased to Rs. 2.56 bn, which reflects a growth of 47 per cent in post tax profits over the same period in 2007.

Income for the period increased by 27 per cent to 27 bn. with net interest income increasing by 12 per cent to Rs. 9 bn. Effect of high interest rates were reflected in the interest income and expenses which grew by 25 per cent and 34 per cent respectively despite moderate growth in the loan book and deposits.

Non interest income improved by 43 per cent during the period mainly from the increase in other income by approximately Rs. 1.0 bn. significant contribution of the other income was capital gains derived from the sale of two fully owned subsidiaries HNB Securities (Pvt) Ltd, and HNB Stock Brokers (Pvt) Ltd., to the newly formed Acuity Partners (Pvt) Ltd., which is a joint venture with DFCC Bank. Additionally the Bank was in receipt of Dividend income of over Rs. 500 mn.

Efficient cost management enabled the Bank to maintain the non interest expenses at mere 8 per cent increase, a remarkable achievement considering the high inflationary conditions prevailed during the period. Banks pre tax and VAT cost to income ratio improved to 53.70 per cent from 59.3 per cent for the period and the pre tax return on average assets to 2.07 per cent from 1.99 per cent in December 2007.

Financial VAT and Corporate taxes increased to Rs. 1.32 bn and 1.13 bn an increase of 44 per cent and 21 per cent respectively in comparison with the corresponding period in 2007.

Provision for Bad and Doubtful loans reduced by 21 per cent to Rs. 580 mn. compared to Rs. 733 mn, in the corresponding period of 2007 mainly due to the banks decision in 2007 to accelerate the regulatory requirement of 1 per cent general provision of the loan portfolio.

The bank is in line to meet the Central Bank regulatory requirement by end 2008 ahead of the dead line first quarter 2009. However the gross non performing loans ratio increased to 7.13 per cent from 5.91 per cent in December 2007 due to the redefinition of classification of non performing advances as per the Central Bank guidelines and the prevailing economic conditions.