Hatton National Bank PLC (HNB) recorded a pre tax profit of Rs. 2.89 billion in first half (1H) 2010 in comparison to Rs. 2.72 billion in the corresponding period 2009 despite pressures on interest margins, while Bank’s post tax profit improved to Rs. 1.79 billion during the six months under review, from Rs. 1.77 billion in the first six months of 2009.
Commenting on the key contributors to growth, HNB Chief Financial Officer Ajantha de Vas Gunasekara said, “With assets and liabilities repricing, interest income fell by 15% to Rs.15.06 billion during the first six months of 2010, while a sharper 29% decline was witnessed in interest expense. This resulted in net interest income improving by 5% during the period and due to asset liability management, the Bank was successful in achieving a 6.2% net interest margin in the review period.”
Non interest income recorded a 20% increase to Rs. 2.43 billion on account of capital gains on investments held in Commercial Bank of Ceylon PLC and Distilleries Company of Sri Lanka PLC although foreign exchange income dropped by 13% to Rs. 415.8 million. Non interest expenses during the period increased by 14% largely due to salary revisions last year (2009).
HNB Group posted a Rs. 3.04 billion pre tax profit in 1H 2010, up by 13% year on year (YoY), while Group post tax profit increased to Rs. 1.89 billion from Rs.1.72 billion in June 2009 supported by positive Group company performance viz. HNB Assurance PLC, Sithma Development (Pvt.) Ltd and Acuity Partners (Pvt.) Ltd. Group performance in Q2 2010 was outstanding with post tax profit recording a 23% growth quarter on quarter.
Total asset base grew to Rs. 286.2 billion as at end June 2010, from Rs. 280.6 billion as at end December 2009 primarily driven by loan growth. Credit demand improved on the backdrop of low interest rates and more conducive investment climate with gross loans and advances reaching Rs. 180.2 billion as at end 1H 2010, up by Rs.3.6 billion from end December 2009.
Gross non performing advances ratio stood at 6.5% while net non performing ratio was at 3.3% respectively as at end June 2010. The Bank managed to improve the provision cover to 49% as at end 1H 2010.
The deposit base recorded a Rs. 2.6 billion growth to Rs. 216.5 billion over the first six months of 2010 in spite of low deposit rates. A shift in deposit mix towards low cost deposits was witnessed over the period under review backed by the Bank’s strong deposit brands.
Core capital adequacy ratio and total capital adequacy ratio stood at 10.40% and 12.31% respectively as at June 30, 2010.
HNB voting and non-voting shares recorded gains with the closing voting share price increasing by 65% to Rs. 281 from Rs. 170/25 as at end December 2009 and non voting share gaining by 82%, from Rs. 104.75 to Rs. 190.25 as at June 30, 2010.
The Bank is focused on capturing opportunities with the country’s economic resurgence; accordingly HNB is in the process of building capacity and expanding delivery channels to cater to the growth. During 2010 HNB opened five customer centres, increasing total distribution network to 191 and projects to open 15 more customer centres during the latter part of this year.
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