HNB posts Rs 1.1 b PAT for Q1

The challenging conditions encountered by the banking and financial services sector in 2013, continued into 2014, with interest margins coming under further pressure, deteriorating asset quality and low gold prices continuing to impact profitability.

In this backdrop, HNB recorded a profit after tax of Rs 1,019.6 million in Q1 2014, compared to Rs 1,157.9 million in the corresponding period of 2013.

Despite the anticipation of demand for credit to accelerate, the industry witnessed a negative growth of 0.6% in loans and advances in Q1 2014, while HNB expanded its loan book by 3% during the corresponding period by 18% year-on-year, despite a gradual reduction in its pawning portfolio.

However, low yields coupled with interest written off on account of pawning during Q1 2014, resulted in a 5% decline in interest income to Rs 13.0 billion.

Current and Savings Account (CASA) deposits accounted for 45% of the total deposits mobilised during Q1 2014 while re-pricing of deposits at lower rates continued, thereby reducing interest expense to Rs 7,438 million compared to the corresponding period of the previous year. As a result, the net interest income declined from Rs 6,103 million to Rs 5,611 million as at March 2014.

HNB Chairperson, Dr Ranee Jayamaha said, “The Bank recorded an impressive growth in advances and in low cost deposits despite intense competition within the industry, which is testimony to the trust and confidence placed in us by customers.” The focus on improving fee based income enabled the Bank to record a robust growth of 19% in fee and commission income for the quarter compared to the corresponding period of the previous year, driven by higher card transaction volumes, trade business and guarantee commissions.

Overall the Bank’s total operating income improved to Rs 7,195 million for the first three months of 2014 from Rs 7,023 million in Q1 2013.

Impairment provision on individually significant portfolio reduced by 30% to Rs 96 million, while the collective impairment increased by Rs 376 million largely on account of provisioning on pawning.

Managing Director and CEO, HNB, Jonathan Alles said, “Relatively lower gold prices compared to Q1 2013, have resulted in writing-off of interest receivables and providing for impairment on pawning.”