Hatton National Bank PLC (HNB), the second largest private lender with an asset base of Rs.819 billion, saw its September quarter (3Q16) net profit rising by as much as 50 percent to Rs.4.0 billion or Rs.9.71 a share from a year ago, amply supported by core banking operations and commission incomes, the interim results released to the Colombo Stock Exchange showed.
The bank on a standalone basis grew its loan book by Rs.45.8 billion or 9.0 percent during the nine months to September 30, 2016. The bank now has a total loan book of Rs.555 billion.
Rupee housing loans grew by Rs.2.6 billion, credit cards by around Rs.1.0 billion and overdrafts by Rs.11.3 billion.
This growth was strongly backed by deposits as they grew by over Rs.53 billion or 10 percent to end the nine months with a Rs.580.5 billion portfolio.
However, the low cost deposits measured by current and savings account (CASA) ratio dropped to 38.4 percent from 41.3 percent at the beginning of the year.
In October, the bank raised Rs.6.0 billion in subordinated debentures between 11.75 percent and 13.0 percent interest rates, which also could be utilized to lend while strengthening its capital base.
The bank also managed to maintain the margins as the net interest margin (NIM) edged up to 4.30 percent from 4.10 percent at the start of the year. This is despite the industry average narrowing to just about 3.5 percent.
The net Interest income (NII) grew by 39 percent Year-on-Year (YoY) to Rs.10.4 billion while the net fee and commission income rose by 16 percent YoY to Rs.1.88 billion, providing a strong operating income base for the banking group.
Nevertheless, the bank’s trading portfolio booked a loss of Rs.707.9 million against a gain of Rs.1.32 billion during the corresponding period.
For the nine months this loss was Rs.1.27 billion and according to the bank this has stemmed from the “mark-to-market of the swaps taken by the bank to hedge its foreign currency borrowings.”
Meanwhile, the unrealised gains made from the bank’s financial assets categorized under the available-for-sale category turned positive Rs.1.6 billion but for the nine months this was a loss of Rs.1.73 billion, up 9.0 percent from a year ago.
The bank’s available-for-sale assets largely comprise of equities, HNB said.
However, the other operating incomes during the quarter turned positive Rs.1.0 billion from a negative Rs.665.6 million a year ago, as a result of “conversion gains from balance sheet foreign currency positions,” the bank said.
The banking group provided lesser amount in respect of losses expected from possible bad loans.
Despite the relatively strong growth in loans, the bank was able to contain the gross non-performing loan ratio to 2.18 percent from 2.43 percent at the beginning of the year, demonstrating the quality of its loan book.
Meanwhile, the cost-to-income ratio dropped to 43.6 percent from 48.5 percent during the nine months demonstrating increase in efficiency levels.
As of end September, the bank was well capitalized with its Tier I and Tier II capital adequacy ratios clocking in at 10.4 percent and 13.44 percent, respectively, when the regulatory minimums stand at 5.0 percent and 10.0 percent each.
Meanwhile, for the nine months ended September 30, 2016 the banking group made a net profit of Rs.10.7 billion or Rs.25.87 a share, up 53 percent from a year ago.
The NII rose by 30 percent to Rs.28.4 billion from a year ago.
Employees’ Provident Fund, the state-controlled private sector pension fund, held 9.79 percent stake in the bank followed by 9.69 percent stake by the state-owned Sri Lanka Insurance Corporation by September 30.
Meanwhile, the business tycoon Harry Jayawardena-owned companies collectively held a 17.91 percent stake in the bank.