Recently released 3rd quarter group results of Hatton National Bank PLC boasts of an impressive 25% growth in the post tax profit amounting to Rs. 2.65 Bn. from Rs. 2.17 Bn. in the corresponding period of 2008. The growth was driven by the improved performance of banking activities and contributions from HNB Assurance PLC & Sithma Development (Pvt) Ltd. and Acuity Group.

The Bank’s profit after tax during the period recorded an improvement of 5% to Rs. 2.68 Bn. from Rs. 2.56 Bn. in the corresponding period of 2008.

Prudent and timely decisions taken by the Bank has enabled to maintain healthy growth of 17% in net interest income despite volatile interest rates and negative growth in advances. Exchange and commission income declined in the face of reduction in the trade business coupled with the stable exchange rates prevailed during the period.

Non interest expenses grew by 16% mainly due to the increase in staff costs and setting aside of an additional provision in respect of staff retirement benefit from December 2008 due to the Bank adopting  SLAS 16 (revised 2006) on Employee Benefits.

The Bank has also made a substantial investment in a new IT platform and expanded the ATM network by installing 17 new machines during the last nine months to enhance customer convenience and value added services. HNB today has a network of 278 ATMs.

Net Non Performing Asset ratio (NPA) increased to 3.67% from 2.27% in December 2008 a trend we have been observing throughout the industry in the recent past. This trend is expected to reverse with the recent reduction in interest rates and the revival of the economy.

Value added taxes on financial services and Tax on profit on ordinary activities increased by 15% and 35% respectively increasing the effective financial VAT and Corporate Tax rates to 26.6% and 36.2%. Increasing taxes coupled with pressure on interest margins would remain the main challenge for the banking sector in the coming years.  

Although the Bank loan book contracted during the last 9 months, Bank’s total assets grew by 5% mainly from the investment in Governments securities which grew by Rs. 13.7 Bn. (58%). With the recent change in the interest regime analysts predict an increase in demand for credit which would drive loan growth in future.

Significant growth was achieved in both savings and fixed deposits which grew by Rs. 5.9 Bn. (9%) and Rs. 7.7 Bn. (7%) during the first nine months of the year, a good testament to the confidence placed by the public on the Bank.

During the first 9 months this year the Bank opened three customer centres including one in Northern Province and will be looking at opening another 5 Customer Centres in 2009.

The Bank expects Northern and Eastern provinces to be the engine of economic growth in the coming years and the Bank having the first mover advantage is well positioned to benefit from these developments.

Share price of the voting share increased by 66% to Rs. 164.00 from Rs. 99.00 end September 2008 and the non voting by 88% to Rs. 86.00 from Rs. 45.75 during the same period. As of this date HNB is ranked 7th in terms of market capitalisation in the Colombo Stock Exchange.