HNB records robust results; 9-month pre-tax profit up 24% to 7.15 b

HNB PLC has continued its growth momentum despite the challenging environment demonstrating resilience, posting a robust growth of 24% in pre-tax profit to Rs. 6.71 b during the first nine months of 2012, while post tax profit also increased by 28% to Rs. 4.61 b over the corresponding period in 2011.

Commenting on the performance, HNB Chairperson Dr. Ranee Jayamaha said: “HNB’s success in recording sustainable growth, withstanding adverse market conditions, is attributable to the solid business model, focus, prudence and commitment as well as the trust our valuable customers have placed in us over the years.”

The bank posted gross income of Rs. 37.9 billion for the nine months to 30 September 2012, which was an increase of 40% over the previous 12 months. The interest income from loans and advances too recorded a growth of 41% during the first nine months of 2012, compared to 2011 on account of the growth in loans and advances and rising interest rates.

In line with the direction issued by the Central Bank to limit the growth in credit, the bank cautiously expanded its loan book through quality credit, with gross loans and advances increasing by 14%, recording a growth of Rs. 37.2 b to reach Rs. 300.9 b as at end of September 2012.

Interest expenses also increased by 56% to Rs. 18.7 b due to the growth in deposits and re-pricing of liabilities at higher interest rates amidst heavy peer competition. The deposit base of the bank grew by Rs. 35.7 b during the period under review posting a 12% growth to reach Rs. 323.7 b as at end of September 2012 while the deposit mix witnessed a shift towards high yielding time deposits due to the prevailing market conditions. Nevertheless, as a result of prudent asset and liability management, the bank recorded a 26% growth in net interest income during the period.

The non interest income of the bank also increased to Rs. 4.1 b, recording a growth of 30% during the first nine months of 2012, driven by both forex income and other income. Increase of 22% in other income was mainly on account of higher commission income while exchange income too recorded a 55% growth during the first nine months of 2012.

During the period under review, the bank was successful in reducing its cost to income ratio to 52.4%, which is a remarkable improvement in comparison to 57.7% as at end of December 2011(59.7% in September 2011) despite the expansion in the delivery network by 21 new customer centres during the 12 months up to 30 September 2012.

Managing Director/CEO of HNB RajendraTheagarajah commented: “In 2012 one of our key objectives has been cost optimisation and the measures taken by the bank in this regard have yielded expected results. We will continue to focus on maximising efficiency through process improvements and deployment of new technology.”

The asset quality improved over the previous quarter of 2012, with Gross NPA ratio reducing to 4.05% from 4.58% and Net NPA ratio from 2.85%to 2.25%, due to prudent credit and risk management policies. HNB’s provision cover too witnessed an improvement over previous quarter to 44.35%, from 37.78%.

The bank’s core capital and total capital adequacy ratio improved further to 12.72% and 15.54% respectively as at 30 September 2012, as against the statutory minimum of 5% and 10%.

HNB Group recorded a pre-tax profit of Rs. 7.15 b for the nine months ended 30 September 2012, up by 24% from Rs. 5.78 b in 2011 and a post-tax profit attributable to the Group of Rs. 4.92 b up by 26% from Rs. 3.89 b made during the corresponding period last year.

The performance of the insurance subsidiary HNB Assurance PLC as well as the property development subsidiary Sithma Development (Pvt) Ltd. made noteworthy contributions towards the growth.