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HNB Group records post tax profit of Rs 2.9 b

HNB Group posted a pre-tax profit of Rs. 4.7 billion and a post tax profit of 2.9 billion for the nine months ended September 2010, up by 10 percent compared to first nine months of 2009 with HNB PLC recording a pre-tax profit of Rs 4.4 billion and a post tax profit of Rs 2.7 billion during the period under review amidst pressures on margins and acceleration in demand for credit mainly during third quarter of 2010.

Interest income dropped by 15 percent during the nine months ended September 2010 to Rs 17.6 billion despite loan growth due to re-pricing of assets during the year and prevailing low interest rates. Nevertheless, due to prudent asset and liability management the Bank was successful in recording a 5 percent growth in net interest income during the period.

The non-interest income increased by 22 percent year on year mainly on account of capital gains and marked to market gains on the trading portfolio while the foreign exchange income witnessed a marginal growth. During third quarter of 2010, the bank divested the direct stake of 49.99 percent held in Acuity Securities (Pvt) Ltd to Acuity Partners (Pvt) Ltd., the joint venture investment bank with DFCC Bank as part of the Bank’s long term strategy.

Commenting on the growth the Senior DGM - Strategy Nihal Kekulawala said that with the economic resurgence, the industry witnessed a growth in demand for credit while the bank recorded an increase of Rs 14.2 billion in gross loans and advances to Rs 190.9 billion during the nine months.

The performing loans increased to Rs 177.8 billion by eight percent compared to end 2009 while the gross and net NPA ratios improved to 5.9 percent and 3.1 percent respectively as at end of September 2010 due to prudent lending policies and concerted recovery effort by the Bank. Further the bank maintained a provision cover of 48 percent as at end of third quarter of 2010.

Despite downward revisions in interest rates, the bank was successful in increasing the deposit base by Rs 7.4 billion to Rs 221.4 billion as at end of September 2010.

Furthermore a shift in deposit mix was observed towards low cost deposits, improving the low cost deposit base as a percentage of total deposits to over 51 percent as at end of the period under review.

The tier I and total capital adequacy ratios continue to be well above the regulatory minimum and stood at 10.49 percent and 12.25 percent respectively as at end of September 2010.

As at end of the nine months under review HNB voting as well as non-voting shares recorded over 100 percent gains with the closing voting share price as at September 30 increasing by 127 percent to Rs 386.10 from Rs 170.25 as at end of December 2009 and the non voting share recording a gain of 129 percent from Rs 104.75 to Rs 239.90 as at September 30.

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