Financial Times

HNB pre-tax profits up 71% in 6-mth period

Hatton National Bank (HNB), Sri Lanka’s main private sector commercial bank, continues its impressive performance recording a 71 percent rise in pre-tax profits to Rs 1.14 billion for the six months to June, a Bank statement said.

HNB’s Managing Director/CEO Rajendra Theagarajah said relentless focus on profitability, managing costs, and enhanced asset quality contributed towards these results.

Net interest generated from interest sensitive assets rose by 29 percent while the six months also saw the entire operating expense bill of Rs 3.36 billion been met by net interest income from core banking activity. HNB maintained good control over expenses with operating costs increasing by 18 percent.

The 32 percent rise in post tax profits to Rs 772 million was achieved with a growth in assets of just 7 percent during the 6 months to Rs 178 billion, the Bank said noting that the focus on “profitable Balance sheet growth” contributed towards improved return and productivity of the bank’s asset base.

Return on Assets on an annualised basis reached 1.3 percent which was a remarkable improvement from 0.68 percent in December 2004.

“The Bank continues its quest to improve asset quality. The loan quality has shown steady improvement with two key performance indicators namely NPA% and NPA cover having improved to 7.7 percent and 66 percent respectively as at June 2006.

Provisioning for bad and doubtful debts saw a remarkable 56 percent drop over the comparable period in 2005. Bad debt provisions accounted for just 19 percent of the Pre provision-pre tax profit against a massive 83 percent in 2005,” it said.

Financial Services VAT and Income Tax collectively accounted for Rs 839.5 million increasing the effective rate of taxation to 32 percent (from 12percent in 2005). This trend will continue to pose a significant challenge, it said.

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