HNB Group records pre-tax profit Rs. 2.29 b in Q1 2012

HNB continued to post robust results in Q1 of 2012, driven by expansion in core banking operations amidst a challenging business environment with rising interest rates and depreciation of the rupee. HNB’s pre-tax profits grew by 25% to Rs. 2.1 billion while the group pre-tax profit also increased by 25% to Rs. 2.29 billion. Dr. Ranee Jayamaha,Chairperson of HNB PLC said, “Despite the challenging business environment, with tight monetary policy and restrained credit growth, HNB performed commendably during the first quarter of 2012”.

Pressure on liquidity experienced by the banking industry continued in to 2012, however HNB successfully managed to raise over Rs. 21.5 billion in tier I, tier II capital and long term senior debt since mid-2011 with funds totalling to US $ 75 million so far in 2012 from foreign sources.

With demand for credit continuing to be high in Q1 2012, HNB cautiously expanded its loan portfolio recording a growth of 8% during the first 3 months of 2012, to reach Rs. 284 billion as at end of Q1 2012. The loan book grew by Rs. 62 billion during the 12 months up to end of March 2012 leading to a 35% increase in interest income from loans and advances.

The deposit base also saw an increase of 7% during Q1 2012 while a shift towards fixed deposits was observed due to the rising trend in interest rates.

The deposit base saw an increase of Rs. 60 billion during the 12 month period from April 2011 to March 2012 with an increase of 46% in interest expenses in Q1 2012 mainly due to re-pricing of deposits at higher rates of interest. Nevertheless, due to prudent asset and liability management, net interest income improved by 16% during the period under review.

Foreign exchange income recorded an impressive growth of 71% driven by fluctuation in exchange rate while ‘other income’ too recorded an increase of 52% primarily on account of the increase in commission income. Furthermore, the contribution from non-interest income to net income increased to 26% from 21% in March 2011. Despite adding 34 new branches to the distribution network during the one year period up to March 2012, personnel expenses increased by only 5%, while total operating expenses increased by 10%.

Further, the marked to market loss on the equity trading portfolio also increased to Rs.65 million during the period.