HNB PLC (HNB) continued its sustainable growth momentum backed by solid core banking operations posting a 19% growth in pre-tax profit to Rs. 3.4 bn. and a 29% growth in post tax profit to Rs. 2.3 bn. during first half 2011 amidst pressure on interest margins.Chairperson Dr. (Ms.) Ranee Jayamaha said: “with a 10% increase in Bank’s total assets, HNB profiled its systemic importance in the banking sector”.
The Bank’s loan book recorded a 19% growth to reach Rs. 248.5 bn. during the six months ended June 30, 2011; driven by growth from all segments; nevertheless due to lower yields, interest income grew by only 2%.
Despite the low interest rate regime, the Bank was successful in recording a 8% growth in total deposits during the review period whilst maintaining CASA (current and savings accounts) at 51%. Backed by the Bank’s well established low cost deposit brands, deposits’ interest expense decreased by 5% during the six months ended June 2011 year on year (YoY). Thus the Bank managed to record a 6% increase in net interest income.
Non interest income increased by 8% during the period with foreign exchange income improving by 25% YoY. As a result of the strategic focus in improving fee based income, commission income improved significantly contributing to other income despite a negative growth in investment income on account of the bearish sentiment that prevailed in the local equity market.
Provisions for bad and doubtful debts decreased mainly on account of the Central Bank direction to reduce general provisioning from 1% to 0.5% gradually. Further due to the Bank’s concerted recovery efforts, NPA recoveries increased by 30% during 1H 2011 compared to 2010. Gross NPA ratio and net NPA ratio stood at 4.74% and 2.68% respectively as at end June 2011 against industry averages of 4.9% and 2.9% respectively for the period.
Tier I capital adequacy ratio as at end June 2011 stood at 9.13% while total capital adequacy ratio was at 10.30% without taking in to account profits for the six months ended June 2011. HNB Managing Director/CEO Rajendra Theagarajah said, “Wth the capital augmentation plan in progress to support the increase in credit demand, the position is expected to improve significantly by next quarter. Group performance improved during the period with pre-tax profit increasing by 22% to Rs. 3.7 bn. and post tax profit increasing by 34% to Rs. 2.5 bn. HNB Assurance PLC the insurance subsidiary, Acuity Partners (Pvt) Ltd the joint venture investment banking arm and Sithma Development the property development company contributed towards group performance growth.
With a view to capturing Sri Lanka’s growth opportunities, HNB expanded its domestic reach by adding 12 customer centres since January 2011 increasing the network to 217 customer centres. The expansion was mainly focused outside the Western province (WP),considering the economic development in rural Sri Lanka and accordingly 10 customer centres have been opened outside the WP during the year to date. HNB plans to further expand its delivery channels by opening 20 more customer centres during the year’s latter part.
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