Many issues confronting SL banking sector, economy-HNB

HNB, one of Sri Lanka’s largest banks, in its review of activity for the first half of 2018 has flagged many issues confronting growth in the banking sector and the economy at large.

“As we move into the second half of 2018, we are fully cognizant of the macro- economic challenges, slowdown in economic growth and market liquidity constraints. These primary challenges and the need for additional capital to meet the enhanced regulatory requirements and taxes, continue to hamper growth in the banking sector,” said HNB Managing Director/CEO Jonathan Alles in the report on the bank’s result for January- June 2018, released this week.

He added: “As such, we remain optimistic of sustained policy consistency towards conducive environment for growth to enable the banking sector to be the prime catalyst for economic growth. We look forward to opportunities to support national development and to stimulate micro, small and medium sector enterprises and to play a pivotal role in the revival of exports across all sectors.”

As far as the results are concerned, the HNB banking Group recorded Rs. 14.1 billion in pre-tax profit (PBT) for the first six months of 2018 which is a 30.7 per cent Year- on-Year (YoY) increase over the first half of 2017.

Post-tax profit (PAT) rose by 26.9 per cent to Rs. 9.6 billion while at bank level, HNB’s PAT improved by 20.6 per cent YoY to Rs. 8.6 billion, the bank said in a media release.

Interest income grew by 9.6 per cent, outpacing the 5.6 per cent growth reported in interest expenses resulting in a 15.3 per cent YoY increase in NII to Rs. 22.0 billion for the period under review.

The report said the banking industry is witnessing a sharp increase in NPAs with significant collection and debt recovery difficulties experienced across the country. The agriculture sector continues to underperform due to adverse weather conditions while the construction sector is saddled with long delays in payments. In this backdrop, HNB’s NPA ratio increased to 2.91 per cent as at the end of June 2018 while remaining below the industry average which deteriorated to 3.3 per cent for the period.

The bank’s asset base grew by 4.8 per cent during the first six months of the year to cross the Rs. 1 trillion mark.

The agriculture sector continues to underperform due to adverse weather conditions while the construction sector is saddled with long delays in payments