Amidst challenging market conditions, Hatton National Bank posted a profit before tax of Rs 3.3 billion and a profit after tax of Rs 2 billion for the first quarter of 2019.
HNB Chairman Dinesh Weerakkody Commenting on the performance noted that “amidst macroeconomic gains, Sri Lanka’s economic growth trajectory remains underwhelming and meandering below 4%. This has occurred due to a combination of tepid domestic demand, reduced government expenditure towards managing its deficit, tightening monetary policy, the political upheaval during the final quarter of 2018 and the overwhelming debt burden. Most of all this continues to exert enormous pressure on the performance of the Financial Sector”
During the 12 month period ended 3 March 31, 2019, advances and deposits of the Bank grew by 11.4% to Rs 749.8 billion and 11% to Rs 799.7 billion respectively. The Bank was also successful in maintaining a CASA base of Rs 279.6 billion enabling the Bank to record a 22.1% growth in Net Interest Income (NII) of Rs 13 billion for the period.
Net Fee income amounted to Rs 2.2 billion for the first quarter and constituted 14.9% of Total Operating Income.
Income from credit cards and guarantee commission which are key contributors to fee income, demonstrated robust growth.
Commenting on the performance Jonathan Alles, Managing Director CEO of Hatton National Bank stated that “the slowdown in economic growth, collection difficulties experienced by many industries as well as the impact from the extreme weather conditions experienced in previous years, has resulted in higher non-performing assets in the banking industry and it continues to affect the current portfolio. In addition, the introduction of the stringent SLFRS9 requirements on impairment on performing loans as well as on investments in other financial instruments has contributed to an increase in impairment charges for the period”.
Accordingly, impairment charges for the Bank, amounted to Rs 4.2 billion for the three months ended March 2019. Total Operating Expenses increased by 17.9% YoY to Rs 5.9 billion and the Bank reported a cost to income ratio of 39.6% for the period.
The introduction of the debt repayment levy in 4Q 2018 as well as the removalof certain exemptions on income from investments with effect from April 2018, resulted inan increase in the total effective tax rate to a significant 58.6%. Accordingly, the Bank’s total tax charge was at Rs 2.9 billion for the period. All Group companies contributed to Group Total Operating Income of Rs 18.7 Bn for the first quarter, recording a 9.6% YoY growth. HNB Group made a profit before tax of Rs 3.4 billion and a profit after tax of Rs 2 billion during the first three months of 2019.
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