HNB Group PAT grows seven percent

HNB Group's post-tax profits grew to Rs 6.23 billion while the Bank recorded a profit after tax of Rs 5.69 billion during the nine months ended September 2014.

It is commendable that this performance was achieved despite declining margins and lower loan growth witnessed in the early part of the year.

Chairperson, HNB PLC, Dr Ranee Jayamaha said, "The industry witnessed the much anticipated acceleration in credit growth during the third quarter and HNB too recorded a strong growth reinforcing its position".

The third quarter saw net loans and advances of HNB increasing by Rs 14.7 billion driven by concerted sales efforts in corporate, SME and retail segments.

On a year-on-year basis, net loans and advances of the Bank recorded a 9.3% growth surpassing the industry growth rate, in spite of a drop of Rs 24 billion in the pawning portfolio.

HNB also improved its Current and Savings Account (CASA) ratio to approximately 44% from 40% as at end of December 2013 through a focused approach on mobilising low cost deposits.

The Bank recorded an 8% increase in total operating income to Rs 23.9 billion, despite a marginal drop of 3% in net interest income as a result of interest margins coming under pressure.

The increase was achieved by a growth of 17% in fee income, a healthy growth in exchange income and capital gains from fixed income and equity investments.

Aggressive recovery initiated by the Bank coupled with provision reversals made on account of pawning, resulted in an improvement in the provision for impairment to Rs 2.6 billion from Rs 3.1 billion for the corresponding period last year.

This impairment provision also included the interest written off on pawning which was netted off against the interest income during earlier reporting.

The focus on recoveries also resulted in the NPA ratio as at end of September 2014 improving to 3.71% in comparison to 4.06% recorded in June 2014 with industry NPA levels remaining to be high at 5.3%.

The Bank was successful in recovering approximately Rs 1.2 billion during Q3 from a hotel project in the Maldives, which was in NPA for couple of years. This was the second large recovery of NPA during the year from the Maldives.