Business Times

Fitch upholds HNB’s ‘AA-(lka)’ Stable

International ratings agency Fitch this week upheld an "AA-(lka)" long-term national rating with Stable outlook for Sri Lanka's Hatton National Bank (HNB), adding this reflects "sound financial profile supported by good profitability, asset quality and cpitalisation among local commercial banks".
Further, Fitch's Ratings Action and Commentary (RAC) also suggested a "sustained deterioration in HNB's credit profile relative to 'AA(lka)'-rated peers would add downward pressure to its rating". Additionally, Fitch forecasted "HNB's NPL/loans ratio to operate within the band of 6%-6.5% at end-2010" for this 26% government-owned bank, which was also noted as being the country's fourth largest licenced commercial bank holding 12.4% of all licenced commercial bank assets and "one of six systemically important" local banks.

According to Fitch, as at the end of June 2010, "approximately 40% of HNB's loan book was corporate loans, with retail / consumer loans and small and medium enterprises loans accounting for 35% and 25%, respectively. The bank's pawning loans (classified under consumer loans) accounted for 13% of loans."

Also stated was that "net interest margin was 6.0% in FY09 (FY08: 5.7%) - well above the local licensed commercial banks (LCB) sector average of 5.3%; its pre-tax return on assets (ROA) increased to 3.0% in FY09 (FY08: 2.5%) due to non-recurring items (NRI), which pertain to recoveries from a large NPL, an investment, and value-added tax. After adjusting for these NRI, HNB's adjusted pre-tax ROA was 2.8% in FY09 - still comparatively good in the local context." Meanwhile, Fitch also indicated "HNB's loan book shrank by 5% in FY09 (FY08: 13%) similar to other banks, but has steadily increased in Q310 registering loan growth of 7% YoY as the post-war domestic economy improved (actual GDP growth in H110 was 8.5%, 2009: 3.5%)."

However, it was added that "credit concentrations notably in HNB's corporate book remained high at FYE09, as the five-largest total exposures accounted for 10% of loans and 67% of equity, including related party exposures to the Stassens group at 4% of loans and 29% of equity."

Additionally, Fitch was of the opinion that the bank's "asset quality compared well with its peers", noting "overall NPL / gross loan ratio declined to 5.95% at Q310 (FYE09: 6.25%) largely driven by improvements in the domestic business unit (DBU) side of the loan book" and "DBU NPL/gross loans reduced to 5.2% at Q310 (FY09: 5.6%) largely due to concerted recoveries."

At the same time, Fitch revealed "HNB's foreign currency loan book in 2010 [had] been vulnerable to some credit exposures to Maldivian resort projects." Adding this accounted for "5.7% of equity at Q310", Fitch also noted "HNB's management expects that te cash-flow pressures on these credits should ease for these projects when they are fully constructed and operational in early 2011."

Also added was that HNB's equity to assets ration was maintained at 9.4% at second quarter of 2010, compared to 9.3% during the financial year ending 2009. Ratios that were said to compare well with those of other banks.

Top to the page  |  E-mail  |  views[1]
SocialTwist Tell-a-Friend
 
Other Business Times Articles
Kotelawala, GK depositors meet tomorrow
Selective tax holidays after the budget
French firm ‘open’ mind on Lankan fuel entry
Central Bank scrutinizes Harry J’s claims in HNB sale issue
Shell Gas deal still incomplete
PB Jayasundera to get wide administrative powers
Dust and chaos on the Galle Road
Comment - Working in the Middle East? It’s not worth it!
Feature - Potential for renewable energy in Sri Lanka
Govt. killing entrepreneurship spirit with unfair tax policies
F&G maturity default case fixed for ex-parte trial
Haycarb launches new log in new global re-positioning strategy
Sri Lanka on the map for ‘frontier’ stock markets
SL drawing a lot of foreign investment interest
Central Bank: Only a supervisor not a guarantor of deposits
National level e-waste management programme to be launched soon
Time to kick in fundamentals to the bear market
Colombo Dockyard builds second passenger ship for India
Janashakthi launches unique Sports Insurance Policy
Machinery, equipment exports see August earnings rise sharply
SriLankan launches Air Taxis
Government to formulate plan to list state entities after the budget
ICASL, ICAEW sign MOU
Only 27 of 35 finance companies are CBSL compliant
School accounts better than private sector ones
World’s largest BPO and KPO Certifications enter Sri Lanka
Hayleys launches Farmtrac 4-wheel locally
More and more companies eye the North for investment, business
Heladiv opens 10th and largest tea boutique in Beijing
Sri Lanka to tighten mobile phone regulations
MTI CEO briefs Bangladesh biz community
Fitch upholds HNB’s ‘AA-(lka)’ Stable
Investment Promotion Mission heads to Korea
JKH joins with TDG for freight forwarding
SEC ready with Share Option rules
Farmers using mobile for crop prices make more : Study
FCCISL helps 500 persons in war rehabilitation
Sri Lankan telephone directory goes electronic
CINEC awarded APAC Quality award
Virtusa supports reality TV enterprise competition
Rickmers Marine Agency Lanka gets ISO 9001 certified
One in 12 Lankans uses the Web
Dialog profits grow, cash flows improve and mobile phone subs reach 6.7 mln
Biyagama Hospital gets a facelift through Fonterra
SLT subscribers forced to pay more for telephone calls: Telecom expert
NDB Investment Bank structures largest securitisation in Sri Lanka
LEED project to help micro and small entrepreneurs in Vavuniya
Turning sand and dust into a money-spinner and a work of art
Change of stars at Burson-Marsteller

 

 
Reproduction of articles permitted when used without any alterations to contents and a link to the source page.
© Copyright 2010 | Wijeya Newspapers Ltd.Colombo. Sri Lanka. All Rights Reserved.| Site best viewed in IE ver 6.0 @ 1024 x 768 resolution