HNB posts group PBT of Rs 1.57 bln for Q1 2014
View(s):Hatton National Bank (HNB)’s profit after tax dipped in the first quarter of this year to Rs.1.0 billion compared to Rs.1.1 billion for the same period last year, the bank stated in a media release this week.
The challenging conditions encountered by the banking and financial services sector in 2013, continued in to 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. 1.0 billion in Q1 2014, compared to Rs.1.1 billion recorded in the corresponding period of 2013.
Despite the anticipation of demand for credit to accelerate, the industry witnessed a negative growth of 0.6 per cent in loans and advances in Q1 2014, while HNB expanded its loan book by 3 per cent during the same period and by 18 per cent year on year, despite a gradual reduction in its pawning portfolio, it was noted.
However, low yields coupled with interest written off on account of pawning during Q1 2014, resulted in a 5 per cent decline in interest income to Rs. 13 billion. Current and savings account (CASA) deposits accaounted for 45 per cent of the total deposits mobilized during Q1 2014 while re-pricing of deposits at lower rates continued, thereby reducing interest expense to Rs. 7.4 billion compared to the corresponding period of the previous year. As a result, the net interest income declined from Rs. 6 billion to Rs. 5.6 billion as at end of March 2014, the bank said.
Dr. Ranee Jayamaha, Chairperson of HNB PLC stated that “the bank recorded an impressive growth in advances and in low cost deposits despite intense competition within the industry, which is a testimony to the trust and confidence placed on us by our valued customers”.
The focus on improving fee based income enabled the bank to record a robust growth of 19 per cent 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, the bank noted.
Commenting on the performance Managing Director / CEO of HNB PLC, Jonathan Alles stated that “relatively lower gold prices compared to Q1 2013, have resulted in writing-off of interest receivables as well as providing for impairment on pawning. We are confident that the negative impact from pawning on our profitability will taper, as majority of the pawning advances granted at higher scale, had already matured or will be maturing in the near future”.