HNB 3Q profit flat amid higher credit costs, slow­down in new loans

Daily Mirror (Sri Lanka) - - BUSINESS NEWS -

Hat­ton Na­tional Bank PLC’S (HNB) Septem­ber quar­ter profit came un­der pres­sure amid sig­nif­i­cant credit costs charged against the prof­its while the core bank­ing op­er­a­tions mod­er­ated amid slow­down in de­mand for new loans.

Ac­cord­ing to the in­terim fi­nan­cial ac­counts, the sec­ond largest pri­vate lender by as­sets, re­ported earn­ings of Rs.8.27 a share or Rs.4.07 bil­lion for the July – Septem­ber pe­riod (3Q17) against the Rs.9.41 a share or Rs.4.01 bil­lion profit. While the prof­its were largely un­changed,

the per share earn­ings came down by 12 per­cent dur­ing the quar­ter un­der re­view as the bank in July raised Rs.14.5 bil­lion in a rights is­sue to drum up its cap­i­tal base in line with the BASEL III rules.

The lender pro­vided a mas­sive Rs.932.3 mil­lion against the profit for pos­si­ble bad loans dur­ing the quar­ter, up from just Rs.48.4 mil­lion in the same pe­riod, last year.

The as­set qual­ity came un­der pres­sure as the gross non-per­form­ing loan ra­tio rose to 2.64 per­cent from 1.80 per­cent at the start of the year.

The loans slowed sub­stan­tially com­pared to its clos­est com­peti­tor.

The bank on a stand­alone ba­sis grew its loans by Rs.42.3 bil­lion, an in­crease of 7.1 per­cent dur­ing the nine months.

The fi­nan­cials show some cau­tious ap­proach pur­sued by HNB in new lend­ing in view of pos­si­ble knock-on im­pact on the as­set qual­ity when the rates rise.

The short-term ru­pee loans con­tracted by about Rs.12 bil­lion dur­ing the 9 months.

The bank now has a to­tal loan book of Rs.638 bil­lion and an as­set base of Rs.953 bil­lion, an in­crease of 11 per­cent.

Mean­while the de­posits grew by Rs.76.4 bil­lion or 12.3 per­cent to Rs. 700 bil­lion.

The cur­rent and sav­ings ac­count base of the to­tal port­fo­lio fell a lit­tle to 35.3 per­cent from 36.2 per­cent at the be­gin­ning of the year.

The bank’s net in­ter­est in­come for the quar­ter rose by 15 per­cent year-on-year (YOY) to Rs.11.9 bil­lion while the net fee and com­mis­sion in­come rose by 22 per­cent YOY to Rs.2.28 bil­lion.

Mean­while for the 9 months ended in Septem­ber, 2017, the bank­ing group re­ported earn­ings of Rs.26.01 a share or Rs.11.3 bil­lion, up 6 per­cent YOY. The net in­ter­est in­come was Rs.33.9 bil­lion, up 20 per­cent YOY.

The bank man­aged to stretch its net in­ter­est mar­gin to 4.34 per­cent from 4.26 per­cent at the be­gin­ning of the year.

Post-rights is­sue cap­i­tal ad­e­quacy ra­tios – both com­mon eq­uity Tier I and Tier II— were re­ported at 12.91 per­cent and 16.42 per­cent re­spec­tively. By Septem­ber, 2017, the gov­ern­ment con­trolled 25.13 per­cent stake in HNB through Em­ploy­ees’ Prov­i­dent Fund, Sri Lanka In­sur­ance Cor­po­ra­tion Lim­ited and Na­tional Sav­ings Bank.

Harry Jayawar­dena-con­trolled Mil­ford Ex­ports Cey­lon Lim­ited, Stassen Ex­ports Lim­ited and Dis­til­leries Com­pany of Sri Lanka col­lec­tively held 17.88 per­cent stake but vot­ing rights are lim­ited to 10 per­cent.

MD/CEO Jonathan Alles

Chair­man Rien­zie Ar­seculer­atne

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