HNB resilient amidst tough 2nd quarter
View(s):Hatton National Bank PLC (HNB) continued to demonstrate resilience, reporting a profit before tax of Rs.8.3 billion and a profit after tax (PAT) of Rs.4.8 billion for the first half of 2019. The group PAT for the period was Rs.5.1 billion, the bank said in a media release.
The institution’s robust business model coupled with prudent asset and liability management, enabled HNB to post stable results from its core banking operations despite a slowdown in balance sheet growth. Net interest income (NII) for the first six months of 2019 grew by 17.9 per cent YoY to Rs.25.9 billion. Fee and Commission income which HNB derives from diverse sources complimented NII and at Rs.4.4 billion accounted for nearly 15 per cent of the total operating income of the bank.
“An appreciating Rupee led to translation losses on foreign currency denominated long positions and FCBU earnings; this being the main reason for the bank booking exchange losses of Rs.577.2 million during the first half. In comparison, a substantial exchange gain of Rs.895.5 million was reported for the corresponding period ending June 2018,” it said.
HNB Chairman Dinesh Weerakkody said: “The economy despite the many challenges appears to be recovering sooner than expected post 21/4.
The Central Bank had little choice but to effect lending and deposit rate cuts and has been fortunate that the US Fed did the same shortly after.
Global investor appetite for Lankan sovereign debt appears to be intact, the outlook for equities has improved slightly and tourist arrivals are returning to normalcy. Whether sentiment and indicators eventually translate to growth remains to be seen however, as uncertainty and relatively low business confidence have not abated completely.”
Commenting on the bank’s performance MD/CEO Jonathan Alles noted: “Over the past few quarters the banking sector has been experiencing the effects of multiple challenges. Sluggish GDP growth, high interest rates and stressed operating conditions within the Agriculture and Construction sectors have collectively served to impede collections for banks and led to surging NPA’s across the industry. Pressure on asset quality coincided with banks having to grapple with higher capital requirements imposed by BASEL III while also having to incur higher taxation on account of the imposition of Debt Repayment Levy, a position exacerbated by the unfortunate incident of April 21. Nevertheless, in this backdrop HNB has once again demonstrated resilience, proactively revisited our processes, setting up a dedicated vertical to specialise in underwriting; concurrent to other initiatives to entrench an outstanding credit and compliance culture.
We strongly believe that the situation would improve in the coming months, as we begin to witness signs of recovery as the country moves forward.”