HNB 1H net profit up 29% to Rs. 2.3 b

HNB PLC continued its sustainable growth momentum backed by solid core banking operations, posting a 19% growth in pre-tax profit to Rs. 3.4 b and a 29% growth in post tax profit to Rs. 2.3 b during the first half of 2011 amidst pressure on interest margins.

Chairperson Dr. Ranee Jayamaha said that “with a 10% increase in total assets of the bank, HNB profiled its systemic importance in the banking sector.”

The bank’s loan book recorded an impressive growth of 19% to reach Rs. 248.5 b during the six months ended 30 June 2011, driven by growth from all segments; nevertheless due to the lower yields interest income grew by only 2%.

Despite the low interest rate regime, the bank was successful in recording 8% growth in total deposits during the period under consideration whilst maintaining the CASA (current and savings accounts) at 51%.

Backed by the well-established low cost deposit brands of the bank, the interest expense on deposits decreased by 5% during the six months ended June 2011 compared to the corresponding period of the previous year. 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% over the first six months of 2010. Further, as a result of the strategic focus on improving fee-based income, the 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 on 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 concerted recovery efforts by the bank, NPA recoveries increased by 30% during the first half of 2011 compared to 2010. The gross NPA ratio and net NPA ratio stood at 4.74% and 2.68% respectively as at end of June 2011 against industry averages of 4.9% and 2.9% respectively for the period.

The Tier I capital adequacy ratio as at end June 2011 stood at 9.13% while the total capital adequacy ratio was at 10.30% without taking in to account the profits for the six months ended June 2011.



HNB Managing Director/CEO Rajendra Theagarajah stated: “With the capital augmentation plan in progress to support the increase in demand for credit, the position is expected to improve significantly by next quarter.”

The Group performance improved during the period with pre-tax profit increasing to Rs. 3.7 b, by 22% and post tax profit increasing to Rs. 2.5 b, by 34%. HNB Assurance PLC (the insurance subsidiary), Acuity Partners Ltd. (the joint venture investment banking arm) and Sithma Development (the property development company) contributed towards the growth in group performance.

With a view to capturing the growth opportunities in Sri Lanka, 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 considering the economic development in rural Sri Lanka and accordingly 10 customer centres have been opened outside the Western province during the year to date.

HNB plans to further expand its delivery channels by opening 20 more customer centres during the latter part of the year.