Hatton National Bank PLC (HNB) posted a profit after tax (PAT) of Rs 8.0 bn for the nine month period ended September 2019 while the Group recorded a PAT of Rs 8.7 bn for the same period. The third quarter of 2019 saw HNB’s profits improving to Rs 3.2 bn compared to the previous quarters while the Group PAT for the quarter was Rs 3.6 bn.
The focus on CASA deposits enabled HNB to grow its CASA base to Rs 270Bn resulting in a 11% YoY growth in Net Interest Income over the corresponding nine month period ended September 2018.
The fee income for the nine months contracted marginally compared to the previous year.
The Rupee which experienced significant volatility between January to September 2018 resulted in an above average exchange gain of Rs 1.8 bn for 2018. With currency movements not being as pronounced during the first nine months of 2019, only Rs 287 Mn in net exchange gains were booked.
The interest margins of the sector are under pressure and stressed market conditions along with new IFRS 9 Accounting Standard have resulted in higher impairment charges hampering internal capital generation of the sector. In this backdrop, imposing higher taxes on the banking sector is counter- productive for the development of the Nation as the banks would be restricted in on-lending to stimulate economic growth.”
Total Operating Expenses for the nine month period up to September 2019 rose by 12.3% YoY to Rs 18 bn. The Bank was successful in maintaining its Cost to Income ratio under 40% as at end of 3Q 2019 enabling it to record an Operating Profit of Rs. 19.3 bn and a Profit Before Taxes (PBT) of Rs. 13.4 bn for the period. The Rs. 8 bn PAT reflected the total effective tax rate surge from 46.6% in the corresponding period of 2018 to 58.3% for the period ending September 2019 as a result of the introduction of Debt Repayment Levy (DRL) effective from the last quarter of 2018 as well as the removal of exemptions on Sri Lanka Development Bond (SLDB) and Debenture investments which were intact during the first quarter of the previous year.
All Group companies contributed to Group profitability during the nine month period with Group Operating Profit and PBT amounting to Rs. 20.8 bn and Rs. 14.6 bn respectively. Rs. 12.2 bn was paid as Group taxes as the increase in the total effective tax rate mirrored that of the Bank to weigh on Group PAT which was nearly Rs 8.7 bn.