HNB's next business stop -- Bangladesh

Having made inroads to India with City Union Bank of India (CUB) early this year, Hatton National Bank's (HNB) next stop will be Bangladesh.

"We know very much where we want to be other than India. Bangladesh is a lot of interest to us and our next stop will be there," R. Theagarajah, Managing Director HNB told The Sunday Times FT.

He added that South Asian Association for Regional Cooperation (SAARC) countries will be the main focus this year, after Bangladesh. "In Bangladesh, we want to get into financial services, but we have not finalised anything as yet. It all depends on the partnerships and opportunities that we have. However, we will be looking at the most cost-effective way of entering Bangladesh and will take a decision this year," he explained.

He said HNB will be focussing on rolling out the Indian operations this year as well. "This year our energies will be focussed on getting both local and Indian regulatory approvals for the venture with CUB. We hope to get the approvals by the second

quarter of this year and somehow start the operation this year as well," he said.

Theagarajah said the HNB-DFCC Investment Bank venture will also roll out in 2008. "We got the approvals on the December 31 last year and we are awaiting the launch of its logo and the name," he said.

HNB identified various overseas partnerships in 2007 with Qatar, UK, Dubai and Italy. "We will further increase this sort of alliances with Oman and probably Abu Dhabi this year. We hope to station our representatives and be able to cross sell our products to beneficiaries who use our services," Theagarajah said. He noted that in 2007 HNB had opened 17 new customer centres. "Two are in the Western province, but the bulk of them are out side. With the same intensity of last year, we hope to carry out our commercial banking expansion," he explained.

HNB will announce its calendar 2007 results this Tuesday. Theagarajah said the persistent interest rate volatility has been a challenge for HNB, but the bank's interest earning assets such as treasury bills, loans, etc have seen a fairly good growth. "The little drop in our margins have been offset by solid interest earning assets," he said

However, he said the bank has seen a customer shift towards higher interest time deposits unlike the good growth of demand deposits it saw during the past few years. He said HNB's cost to income ratio has seen a decline. "We have seen a drop compared to 2006 and this is what we aspired to do. Despite the high domestic inflation, we have managed to control the growth of our payrolls and administration costs by focussing on 'necessary' spending only," he said.

HNB's loan portfolio has grown by almost 20 percent last year on year from 2006. "This is very much in line with what we forecasted. Unless it was a housing loan or a leasing product, the rest of the loans were shifted you variable rates. Here, as the market rates move, the product's interest rates also move accordingly. This way the bank was able to shield itself from unusual costs," Theagarajah explained.