Hatton National Bank (HNB) Sri Lanka’s premier private sector commercial Bank continues its robust performance by recording a 118% rise in pre-tax profits to Rs 1,172 million in the three months to March 2008.
Commenting on the performance, HNB’s Chief Financial Officer Nihal Kekulawela said, “We are extremely pleased with such consistent performance which has been sustained during the past thirteen successive quarters. (Our team’s focus on balancing business growth with profitability, improving productivity, managing costs, and enhancing asset quality has contributed towards this performance”.
Net interest generated from interest bearing assets has increased by 37% while Non interest income showed a growth of 16%. The three months have also seen the entire operating expense bill of Rs 2.19 bn being comfortably met by Net interest income from core banking activity. Net Income including foreign exchange, commission income and investment income grew by 21% during this 3 months period.
HNB has maintained excellent control on expenses with operating costs increasing by a mere 11% despite inflation reaching out towards the 30% levels. While recognising the impact of domestic inflation on expenses, Kekulawela stressed the need for increased focus on managing cost through better internal efficiencies. Provisioning for Bad and Doubtful Advances has shown a sharp decline of 59% to Rs 177 mn. Of this, Rs 92 mn (decline of 51% over 2007) related to General Provision mainly on account of the new regulatory directions issued by the Central Bank of Sri Lanka. Kekulawela expressed satisfaction on the efforts taken by HNB to improve its Portfolio Quality during the past three years and was pleased to note that the results of such quality improvements have started contributing towards the bottom line from 2006 onwards.
Post Tax profit of the Bank was Rs 751 Mn, which is a 138% growth, compared to the same period in 2007. Taxation in the form of financial services VAT has increased by 23% to Rs 377 mn due to a combination of increase in taxable profits and increase in staff emoluments which are added back (excluding retirement benefits). Income Tax too increased by 90% to Rs 421 mn. Taxation will continue to pose a significant challenge to defending future profit targets Kekulawela said.
Total Assets remained flat at Rs 232 Bn for the 3-month period. The Deposit base of the Bank has marginally decreased by 1% during the quarter reaching Rs 176 Bn. Total loans and advances increased by 1% to Rs 165 Bn. According to Kekulawela, the results demonstrate HNBs clear focus on balancing profit and income growth with preserving the quality of its asset base. The past three months have seen volatility in domestic interest rates coupled with double-digit inflation nearing the 30% level. This has posed a challenge to defend interest margins and also will continue to threaten the quality of retail credit. HNB’s core capital ratios (Tier 1) under Basel II which includes operational risks, in addition to credit & market risks, based on the total revenue of the Bank stood at 8.03 % well above the regulatory minimum of 5 %. The total capital ratio, Tier I + Tier II (reflecting the combined permanent equity and debt capital contribution) stood at 10.4 % above the regulatory minimum of 10 %. The replenishment of the bank’s long-term debenture program in July 2008 is expected to take this ratio to comfortable levels in excess of 11 %, said Kekulawela.
The Group too has delivered exceptional results with the After- Tax profits recording a 115% increase to Rs 741 mn.
Established in 1970, the Hatton National Bank today stands as Sri Lanka’s premier private sector Bank. Acknowledged as the Bank of the Year 2006 by the prestigious Banker Magazine and The Best Retail Bank in Sri Lanka 2008 by the Asian Banker, the three robust letters of ‘HNB’ captures the spirit behind every smile in Sri Lanka and the portfolio of offerings that HNB has to offer to every Sri Lankan or global customer who singles our HNB as their partner in progress.
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