HNB reports resilient first quarter results

The first quarter results of Hatton National Bank (HNB) showed an impressive performance by the Bank recording an income of Rs 9.68 Bn., a growth of 14 percent compared to the corresponding period last year. This is ample testimony for the Bank’s resilience on the face of adversity.

Despite unfavourable global as well as local economic conditions the Bank continued to perform well in the first quarter of 2009. HNB’s operating profit from ordinary activities before tax and financial VAT surpassed Rs 1.7 Bn mark, recording a growth of 10 percent over 2008.

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Operating Profit after tax for the period is Rs 763.1 Mn, a 2 percent growth from Rs.751.3 Mn in 2008. The Banks’ provision for the Financial VAT and Income tax for the first quarter was Rs. 937 Mn. High taxation on financial services continues to be a major obstacle for the growth in the industry. Net interest income grew from Rs. 3.0 Bn. in first quarter 2008 to Rs. 3.4 Bn. in the first quarter 2009 recording a growth of 15 percent.

This was primarily facilitated by the growth in the interest earning assets and the effective management of the net interest margins.

The operating expenses of the Bank for the first quarter recorded an increase of 15 percent; the Bank will continue to focus on expenditure management during rest of the year. Due to contraction in the loan book during the first quarter of 2009 there was a reversal of Rs. 47.6 Mn. in the general provision after meeting the statutory general provision requirement of 1 percent stipulated by the Central Bank of Sri Lanka.

However, the specific provision saw an increase of Rs. 49.0 Mn. or 34 percent during the same period.

This includes certain prudential provisions made on exposures over and above the provisional guidelines of the Central Bank of Sri Lanka.

In the wake of slow down in the local banking industry and stringent credit policy being adopted due to unfavourable market conditions with focus on asset quality and risk management, the loans and advances contracted by 5 percent from Rs. 170.8 Bn. to Rs. 162.2 Bn. in first quarter of 2009. The net NPA ratio recorded a marginal increase from 2.3 percent as at December 2008 to 3.5 percent as at end March 2009.

However, the increase in the NPL ratio is relatively lower than the industry averages and the Bank has a very healthy NPA cover of 57.4.

During the first quarter the Bank’s deposit base grew by an impressive Rs. 5.0 Bn, demonstrating the confidence the public has placed on HNB during times of uncertainty in the financial sector. The asset base which stands at Rs. 261.0 Bn. too recorded an increase of Rs. 5.7 Bn. during the same period.

HNB Group income too has increased by 13 percent to Rs 10.1 Bn. with post tax profits marginally decreasing by 4 percent to Rs 711.8 Mn due to the adverse market conditions affecting the performances of Bank’s subsidiaries which are into stock brokering and investment banking activities.