HNB sees profits soar despite huge tax burden

Hatton National Bank (HNB) posted 34 percent profit increase in 2006 relative to 2005 with Rs.2, 220 million and is confident about sustaining the same performance this year despite the macro economic challenges.

“We posted this profit notwithstanding a charge of Rs.799 million for corporate taxes and are positive about sustaining it,” HNB Managing Director Rajendra Theagarajah told The Sunday Times FT.

Commenting on the budget proposal on general provisioning of one percent on loans, he said that HNB is more than halfway in compliance. “The regulator has given 10 successive quarters, starting from the fourth quarter 2006. Since we are already halfway in compliance, we are also confident that we will complete it this year,” he added.

The bank’s growth had a pre tax profit of Rs.3, 019 million which is a 63 percent growth over the previous year.

Post tax profit recorded by the HNB group was Rs.2,276 million compared to Rs.1,795 million in 2005 and had a 54 percent increase in pre tax profit during 2006 with Rs.3,095 million compared to Rs.2,008 million in 2005.

The group turnover increased by Rs.5 billion to reach Rs.23.2 billion and the growth in net interest income which increased by 26 percent and fee and commission income which posted a growth of eight percent contributed towards a healthy growth in net income of 21 percent.

The total assets of the bank increased by Rs.30 billion to reach Rs.196 billion and the deposit base grew by 15 percent to Rs.148 billion. Foreign exchange contributed Rs.792 million recording an increase of 22 percent over 2005. HNB has managed to reduce the provision for bad and doubtful debts by a massive 47 percent while increasing the gross loans by Rs.21 billion to Rs.136 billion. The Non Performing Advances Ratio reduced to 2.2 percent from 3.05 percent in 2005 with the provision cover improved to 74 percent.

Theagarajah said that HNB’s Capital Adequacy showed a healthy position despite an upward revision during 2006 in the risk weights applied to a majority of the advances categories including housing by 10 percent.