HNB Group Pre-tax profit grows by 28% to Rs. 4.76Bn in H1 2012
Hatton National Bank continued to record strong results in H1 2012,
driven by growth in core banking operations, amidst increasing interest
rates and restrained credit growth. During the first half of 2012,
pre-tax profit of the Bank improved by 30% to Rs. 4.49Bn, compared to
Rs.3.44Bn during the corresponding period in 2011, while the post-tax
profit improved by 33% to Rs. 3.07Bn.
The Chairperson of HNB,Dr.RaneeJayamaha stated that “the focus on
core banking operations has enabled the Bank to post sustainable growth
despite the challenging business environment”.
Chairperson of HNB
Dr. Ranee Jayamaha |
The interest income from loans and advances recorded a growth of 40%
during the first 6 months of 2012, compared to 2011 on account of the
growth in loans and advances and rising interest rates. In line with the
direction issued by the Central Bank to limit the growth in credit, the
Bank cautiously expanded its loan book through quality credit, with
gross loans and advances increasingby 11%, recording a growth ofRs.
28.8Bnto reachRs. 292.4Bn as at end of June 2012.Interest expenses also
increased by52%, to Rs. 11.6Bn due to the growth in deposits and
re-pricing of liabilities at higher rates of interest amidst heavy peer
competition during the first half of 2012. The deposit base of the Bank
grew by Rs. 26.1Bn during the period under review posting a 9% growth to
reach Rs. 314.1Bn as at end of June 2012 and the base saw a shift
towards high yield ing time deposits due to the prevailing market
conditions. Nevertheless, as a result of prudent asset and liability
management, the Bank recorded a 26% growth in net interest income during
the period.
The non interest income of the Bank also increased to Rs. 2.8bn
recording a growth of 31% during the first half of 2012, driven by
increase in forex income and other income. Increase of 22% in other
income was mainly on account ofhigher commission income while exchange
income too recorded a 60% growth over the corresponding period of 2011.
Despite adding 31 new customer centres to the distribution network of
the Bank during the 12 months up to 30th June 2012, the Bank was
successful in managing its operating expenses during the period.
Although losses on trading securities also increased by Rs. 113.3Mn
during the period under review due to unfavourable market conditions,
the Bank managed to curtail growth in its total operating expenses to
13% thereby improving the cost to income ratio to 52.8% in comparison to
57.7% as at end of December 2011.
Mr.Rajendra Theagarajah Managing Director/CEO of HNB stated that “the
efforts on improving operational efficiency of the Bank has resulted in
recording a drop of approx. 5 percentage points in the cost to income
ratio during the first half of 2012. The Bank is committed towards
streamliningits systems and processes further and is confident of
bringing the cost to income ratio below 50% in the medium term”.
Provisions on bad and doubtful debts increased to Rs. 611.7Mn during
first half of 2012 against a provision reversal of Rs. 152.6Mn during
the corresponding period of 2011.
The provision reversal in 2011 was mainly due to the direction issued
by the Central Bank to reduce general provisioning, while the increase
in 2012 reflects provisioning on account of a large loan and prudent
policies adopted by the Bank with regard to capital provisioning with
effect from Q2 2012. The Bank also recovered Rs. 250.1Mn which have been
categorised as bad and doubtful, due to its concerted recovery efforts.
The gross NPA ratio and the net NPA ratio stood at 4.58% and 2.85%
respectively as at end of June 2012.
The capital position of the Bank remained strong with tier I ratio at
11.57% and total capital adequacy ratio at 14.49% as at 30th June 2012.
Tier II funding of USD 25Mn raised from the German Development Finance
Institution DEG during the 2nd quarter of 2012, further improved the
total capital adequacy ratio of the Bank.
The HNB Group recorded a pre-tax profit of Rs. 4.76Bn for the 6
months ended 30th June 2012, up by 28% from Rs. 3.71Bn during the first
half of 2011 and a post-tax profit of Rs. 3.32Bn up by 31% from Rs.
2.54Bnduring the corresponding period of 2011. The performance of the
insurance subsidiary HNB Assurance PLC as well as the property
development subsidiary Sithma Development (Pvt) Ltd contributed towards
the growth.
HNB was also recognized as the ‘Best Retail Bank in Sri Lanka for the
year 2011’ by the Asian Banker for the fifth consecutive year at the
11th Excellence in Retail Financial Services Awards held in March 2012. |