HNB Group posts Rs 5.8 b profit in first nine months

Hatton National Bank PLC continued to post strong growth with pre-tax profit increasing by 22% to Rs 5.4 bn and post tax profit increasing by 31% to Rs 3.6 bn during the first nine months of 2011.

The HNB Group comprising mainly of the insurance subsidiary, HNB Assurance PLC, the investment banking joint venture Acuity Partners and property development subsidiary Sithma Development contributed to achieve a pre-tax profit of Rs 5.8 bn for the first nine months of 2011 recording a 23% growth and a post tax profit of Rs 3.9 bn for the first nine months of 2011 recording 33% increase over the corresponding period of 2010.

During the first nine months of 2011, the Bank recorded an impressive credit growth of 24% increasing the total loan book to Rs 259 bn by Rs 50 bn.

This is an outstanding 36% increase yoy driven by contributions from all segments.

As a result, interest income from loans and advances increased by 16% during the first nine months despite the lower yields.

Total deposits increased by Rs 32 bn recording a 13% growth during the first nine months of 2011 to Rs 272 bn while maintaining CASA (Current & savings accounts as a percentage of total deposits) at 50%.

The Bank managed to curtail the increase in interest expense on deposits to 1% during the first nine months of 2011, backed by the low cost deposit base and the prevailing low interest rates.

However, the interest expense on other interest bearing liabilities increased by Rs 675 m as a result of increased other borrowings to support the expansion in credit. Overall the net interest income of the Bank improved by 6% to Rs 12 bn during the first nine months of 2011 compared to the corresponding period last year.

The fee and commission income recorded a 34% growth during first nine months of 2011 compared to the corresponding period of 2010. Nevertheless the investment income saw a decline of Rs 624 mn ie. by 63%, over first nine months of 2010, due to the capital gains made in 2010 on account of sale of shares in Commercial Bank of Ceylon PLC, Distilleries Company of Sri Lanka PLC, Lanka Ventures PLC and Acuity Securities Ltd not being present in 2011, as well as the mark to market losses during 2011 in investments in equity and government securities as a result of adverse market conditions.

Foreign exchange income witnessed a marginal growth of 3% during the period. Thus, the total non-interest income improved by 3% to Rs 3.9 bn.

The Bank was successful in managing its costs with only 5% increase in staff cost, despite the expansion in the distribution network by 27 customer centres during the 12 month period up to end September 2011.