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| Sunday, 13 June 2004 |
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HNB net income grows by 7% During the first quarter of 2004, the Bank recorded a 7% increase in net income mainly attributed to a 12% increase in net interest income and a 25% increase in foreign exchange income. However, due to an 18% increase in operational expenses, the bank's profits for the period recorded a decline compared to the corresponding period of the previous year. For the period ended 31 March 2004, the bank recorded a before tax profit of Rs 205 Mn. and an after tax profit of Rs 181 Mn. This is in comparison to the Rs 302 Mn profit before tax and Rs 235 Mn profit after tax made during the corresponding period of 2003. Activity in many sectors during the first quarter slowed down as the main focus was on the impending General Elections. The uncertainty in the environment has naturally affected the performance in the financial sector broadly and more directly on bank's like ours mainly due to low trading activities. What is clear so far is that the commitment to expenditure such as the subsidies, promises of new employment to large numbers and other such commitments made during election time will need huge resources in the form of direct funds. We are still not clear from what sources these funds will be generated. In these circumstances, there is a genuine concern that the market liquidity which was experienced in the past will gradually erode in a short time resulting in the rise in interest rates which will naturally have a chain reaction. The global situation, particularly the steep rise in oil prices has added to our concerns. An encouraging feature has been the quick action taken by Her Excellency the President to take forward the peace process. Our genuine desire is to ensure that the economy will continue to show strong growth as seen during the last two years for which a peaceful environment is of utmost importance. We also hope that the commitments by the Donor Agencies will be fulfilled enabling the new Government to carry out the much-needed infrastructure development as well as rehabilitation of the North and East. An exercise for 'confidence building', in our view should receive priority by the new Government. In the balance sheet, bank's advances portfolio increased by approximately Rs. 2.5 Bn from end 2003. The banks deposit base only grew marginally compared to the position as at year end last year. In the group accounts, HNB group showed a profit before tax of Rs. 229 Mn and a net profit of Rs 184 Mn. This reflected a 36% drop in profit before tax and a 43% decline in net profits. The prevailing market conditions were not conducive for the operations of HNB Securities Ltd, which posted a modest net profit of Rs. 9.5 mn. down from Rs. 103 Mn net profit made during the corresponding period in 2003. The bank's insurance subsidiary also posted a modest profit of Rs. 2.5 mn. However, bank's Stock Brokering subsidiary posted a Rs. 6.9 Mn profit, compared to the Rs. 1.6 Mn profit made during the corresponding period of the previous year. Despite the uncertainty governing the country and its economy, the bank will continue to stay abreast of developments and take appropriate action to further its business and shareholder value. The bank would also extend its fullest cooperation to the new government to pursue its economic development agenda utilizing both its vast experiences in the local economy and its extensive presence in the country. |
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