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Hatton National Bank (HNB), Sri Lanka's premier private sector commercial bank has ended 2005 with a robust performance delighting investors. Commenting on the results, HNB's Managing Director Rajendra Theagarajah said.

"In 2004, we committed to implement selected strategies designed to meet the set of challenges we identified as critical for delivering superior value to our stakeholders. The management team has pursued this path during the last twelve months with extraordinary vigour".

Pre tax profits of the Bank increased by 95% over the previous year to Rs. 1.85 billion and post tax profits increased by 69% to reach Rs. 1.65 billion. Growth in Net Interest Income (24%), Fee and Commission Income (9%) and other income (83%) contributed towards a healthy growth in net income of 20%. Foreign exchange contributed Rs 646 million at similar levels to 2004.

The continued focus on cost management has led to operating costs increasing by only 5.8% during the year while the Bank's Cost/Net income ratio declined by 8% to reach 62% in 2005. Advances grew by 14%. Focus on portfolio quality was evident with the Non Performing Advances Ratio reducing to 8% (from 9.7% in 2004) while the provision cover improved to 62%. Selective acquisition of assets ensured that the total assets of the bank increased by a modest 9% to reach Rs. 166 billion. The deposit base grew by 8% to Rs 128 billion led by a healthy 41% increase in demand deposits

HNB's Capital Adequacy too showed a marked improvement with Tier I ratio reaching 10.87% while the combined Tier I and II ratio reaching 11.55% well above the minimum regulatory requirement of 5% and 10%. The return on average assets improved to 1.04% from 0.68% in 2004 while shareholders' funds grew by a healthy 24% to reach Rs. 11.2 billion.

The Directors have recommended a final dividend of 20% to be paid which will result in the total dividend for 2005 being 40% (35% in 2004). Group post tax profit increased by 134% to reach Rs. 1.77 billion with solid contributions made by group companies involved in Insurance, Stock Brokering, Primary Dealership in Government Securities and Venture Capital Business.

The share price increased by over 90% in 2005 to close at Rs. 112.50 at the year end with a Price/Earnings Ratio of 7.5 times current earnings. HNBs voting share closed at Rs. 129.50 on Friday, March 3, 2006.

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