HNB Group PAT hits Rs 11 b mark

HNB Group recorded a pre tax profit of Rs 16.2 bn and a post tax profit of Rs 11 bn for the year ended December 31, 2015, while the Bank posted a profit before tax of Rs 15 bn and a profit after tax of Rs 10.4 bn.

This is the first time the Bank surpassed the Rs 10 bn landmark in PAT, driven by a growth of over 25% in advances and deposits.

Managing Director and CEO, Jonathan Alles said, "The Bank's Profit Before VAT and Tax improved to Rs 17.9 bn, while Profit After Tax surpassed Rs 10 bn during the year. Both advances and deposits of the Bank increased by over Rs 100 bn, again the highest in the Bank's history whilst the NPA ratio improved to 2.43%, the lowest in the past few decades. It is significant that this NPA was achieved whilst attaining a loan growth of 26% and was a result of the proactive efforts and commitment of our recovery teams at the head office and across the country."

He attributed the exceptional performance for 2015 entirely to the tireless efforts, commitment and dedication of staff at all levels. "Our staff remains our greatest asset in driving the Bank to greater heights.

The growth in advances was propelled by a 30% growth in corporate banking, 25% growth in SME, 65% growth in leasing and a 67% growth in personal loans. The Bank's CASA ratio also remained strong at 42%, despite the shift witnessed from low cost deposits towards higher yielding fixed deposits during the year.

These efforts resulted in Net Interest Income (NII) for the Bank growing by 5.8% to Rs 26.3 bn, despite the banking sector margins continuing to drop during 2015. As at end 2015 the Bank maintained a net interest margin (NIM) of 4.5%. The Group witnessed a higher growth in NII of 14.3% to Rs 29.7 bn as a result of the Bank's acquisition of Prime Grameen Micro Finance during the latter part of 2014, now rebranded as HNB Grameen. The HNB Grameen loan book grew by 66% and deposits by 46.4%.

The Bank's commission income for 2015 grew 18.4% to Rs 5.8 bn with major contributions coming from merchant acquisitions, guarantees and trade business. Fee income grew by 23.1% with the commission income from HNB Grameen and Acuity contributing significantly.

During 2014, the Bank realised a capital gain of Rs 889 on account of the sale of shares held in Visa Inc and MasterCard. The absence of any realised capital gains from equity investments in 2015, resulted in lower net gain from financial investments.

The volatility of exchange rates during the year and the significant depreciation of the Rupee, aided the Bank to record substantial growth in exchange income.

Accordingly, the Bank recorded an operating income of Rs 34.8 bn for 2015, while the Group recorded Rs 42.6 bn with a growth of 12.7%. The Bank's process improvement and cost optimisation initiatives in recent years, contained operating expenses to a marginal 3.9% increase.

The cost increase reported by the Group is higher at Rs 22.5 bn, a 13.8% increase from 2014. This was a result of the additional cost that came about through the consolidation of HNB Grameen and due to the high claims ratio witnessed by HNB General Insurance for 2015.

The Bank improved its cost to income ratio to 45.95% in 2015 compared to 47.41% in 2014, a significant achievement during the year.

Improving asset quality through refinements in the loan origination and approval processes and risk management along with aggressive recovery efforts, stringent monitoring for early warning signals and conducting recovery camps helped the Bank achieve the lowest gross non performing ratio recorded in decades.

The Bank's effective tax rate increased to 30.6% from 25.4% recorded in 2014. During 2014 the Bank received several tax credits resulting in the effective tax rate being low.

The Bank paid Rs 2.1 bn as super gain tax resulting in a tax charge of approximately Rs. 9.5 bn for 2015.