The Honkong and Shanghai Banking Corporation Limited Sri Lanka branch (HSBC Sri Lanka) posted a net profit of Rs.3.58 billion for the six months ended in June 30, 2017 (1H17), increasing from Rs.3.27 billion during the same period last year, the interim financial accounts of the bank showed.
The bottom line demonstrates a 10 percent increase, fully attributable to the loan book reprising during the period, as the bank’s loan book contracted by Rs.6.5 billion, and also the higher yields from government securities.
The loan portfolio stood at Rs.207.5 billion, shrinking from Rs.214 billion at the beginning of the year. The Sri Lankan unit of HSBC by June 30 has an asset base of Rs.421 billion, up from Rs.411 billion at the start of the year.
The bank recorded net interest income of Rs.8.64 billion up from Rs.8.4 billion recorded during the corresponding period last year.
The bank maintains the net interest margin at 4.24 percent, unchanged from last year supported by the higher government secures yields and interest rates on its loans which rose in tandem with market interest rates.
The bank increased its investments in ‘available-for-sale assets,’ mostly holding investments in government securities such as treasury bills and bonds, by over Rs.20 billion to Rs.142. 9 billion.
Placements with banks— probably the placements with the parent—came down by about Rs.16 billion, which may have been re-invested back in the Sri Lankan government securities to maximise yields as no new loans were granted during the period.
The marked-to-market gains made on these were Rs.812.3 million compared to a loss of Rs.1.3 billion a year ago.
Trading gains also rose by about Rs.100 million to Rs.1.34 billion.
Meanwhile, the deposit base shrank to Rs.207. 5 billion from Rs.214 billion at the beginning of the year due to contraction in foreign currency term loans.
HSBC Sri Lanka unit recorded a return on equity (RoE) of 15.27 percent, up from 11.17 percent in December 2016.
The bank operates with a strong capital position as both Tier I and Tier II capital bases were flirting with 20 percent levels by end-June.