HNB pre-tax profits soar 46% to Rs. 412 m in 1Q, 2006

Hatton National Bank (HNB) continues its impressive performance by recording a 46% rise in pre-tax profits to Rs. 412 million in the three months to March 2006.

HNB's Managing Director Rajendra Theagarajah said, "We are extremely pleased with such consistent performance which has been sustained during the past five successive quarters. Continued focus of our team at HNB in balancing business growth with profitability, improving productivity, managing costs, and enhanced asset quality has contributed towards this performance."

Net interest generated from interest bearing assets has increased by 27% while non interest income showed a growth of 12%. The three months have also seen the entire operating expense bill of Rs. 1.6 billion being met by Net interest income from core banking activity. Net Income including foreign exchange, commission income and investment income grew by 20% during the three-month period.

HNB has maintained its tight leash on expenses with operating costs increasing by only 14%. In its quest to improve asset quality, the bank's loan quality has shown steady improvement with two key performance indicators namely NPA Ratio and NPA Cover having improved to 7.8% and 72% in March 2006.

Provisioning for Bad and Doubtful Advances has shown a marked decline of 43% reflecting the significant provisions made in 2005 for Kabool Lanka and a few other large non performing loans.

Theagarajah expressed satisfaction on the efforts taken by HNB to improve its Portfolio Quality during the past two years and was confident that the results of such quality improvement would start contributing towards the bottom line from 2006/7.

Post Tax was Rs. 260 million which is a 5% growth compared to the corresponding period in 2005. Taxation in the form of financial VAT and Income Taxes has increased to Rs. 390 million due to a combination of increase in taxable profits, increase in staff emoluments which are added back (excluding retirement benefits), recent increase in the VAT by 5% and reduction in the availability of accumulated tax losses. Taxation will continue to pose a significant challenge to defending future profit targets, Theagarajah said.