HNB Group records post tax profit of Rs. 2.9 b in first nine months of 2010

HNB Group posted a pre-tax profit of Rs. 4.7 billion and a post tax profit of 2.9 billion for the nine months ended September 2010, up by 10% compared to first nine months of 2009, with HNB PLC recording a pre-tax profit of Rs. 4.4 billion and a post tax profit of Rs. 2.7 billion during the period under review amidst pressures on margins and acceleration in demand for credit mainly during the third quarter of 2010.

Interest income dropped by 15% during the nine months ended September 2010 to Rs. 17.6 billion despite loan growth due to re-pricing of assets during the year and prevailing low interest rates. Nevertheless, due to prudent asset and liability management the Bank was successful in recording a 5% growth in net interest income during the period.

The non interest income increased by 22% year on year mainly on account of capital gains and marked to market gains on the trading portfolio while the foreign exchange income witnessed a marginal growth. During the third quarter of 2010, the Bank divested the direct stake of 49.99% held in Acuity Securities (Pvt) Ltd. to Acuity Partners (Pvt) Ltd., the joint venture Investment Bank with DFCC Bank as part of the Bank’s long term strategy.

Commenting on the growth the Senior DGM – Strategy Nihal Kekulawala stated that with the economic resurgence, the industry witnessed a growth in demand for credit while the Bank recorded an increase of Rs. 14.2 billion in gross loans and advances to Rs. 190.9 billion during the nine months.  The performing loans increased to Rs. 177.8 billion by 8% compared to end 2009 while the gross and net NPA ratios improved to 5.9% and 3.1% respectively as at end of September 2010 due to prudent lending policies and concerted recovery effort by the Bank. Further the bank maintained a provision cover of 48% as at end of the third quarter of 2010.  Despite downward revisions in interest rates, the Bank was successful in increasing the deposit base by Rs.7.4 billion to Rs.221.4 billion as at end of September 2010. Furthermore a shift in deposit mix was observed towards low cost deposits, improving the low cost deposit base as a percentage of total deposits to over 51% as at end of the period under review.

 The tier I and total capital adequacy ratios continue to be well above the regulatory minimum and stood at 10.49% and 12.25% respectively as at end of September 2010.

As at end of the nine months under review HNB voting as well as non-voting shares recorded over 100% gains with the closing voting share price as at 30th September 2010 increasing by 127% to Rs. 386.10 from Rs. 170.25 as at end of December 2009 and the non voting share recording a gain of 129% from Rs. 104.75 to Rs. 239.90 as at 30th September 2010.

Recognised as ‘The Strongest Bank in Sri Lanka 2010’ by The Asian Banker, HNB continuously focuses on enhancing value to all its stakeholders. As such, with a view to expand  the reach and to better serve the latent SME and microfinance segments in order to move towards  economic prosperity, the Bank has expanded the distribution network by 14 customer centers during the year and now serves through 200 dedicated customer centers. The Bank plans to open 5 more customer centers during November and December 2010. In October 2010, Fitch Ratings Lanka affirmed HNB’s National Long-term rating at ‘AA-(lka) with a stable outlook reflecting HNB’s sound financial profile supported by good profitability, asset quality and capitalisation among local commercial banks.

Recently HNB was ranked no.2 by the Business Today Magazine and was recognised as the Overall 1st Runner-up and the Winner of the Employee Relations category at the Best Corporate Citizens Awards 2010 organised by the Ceylon Chamber of Commerce.