Sri Lanka’s Hatton National Bank Dec profits grow on tax cut

ECONOMYNEXT- Hatton National Bank Plc, the second largest listed lender, posted net profits of 6.26 billion for the December quarter, up 28 percent from a year earlier due to reversal of taxes on Sri Lanka Development Bonds.

HNB, which also owns finance and insurance firms, reported 12.52 rupees in earnings per share for the December quarter in its interim financials.

The banking group earned 29.32 rupees a share for the 12 months ending December, on net profits of 14.67 billion, down 17 percent from a year earlier. The HNB share closed trading on Tuesday 80 cents down at 155 rupees.

Gross income for the December quarter fell 4 percent from a year earlier to 36.61 billion rupees.

Interest income fell 3 percent to 30.95 billion rupees amid price controls on loans, while interest expenses grew 4 percent to 17.46 billion rupees, squeezing the net interest margin 11 percent to 13.49 billion rupees.

Provisioning for bad loans fell 48 percent to 2.31 billion rupees amid bank-level bad loans more than doubling to 5.91 percent.

The group loan book was flat at 769.4 billion rupees, despite new rules on Domestic Systemically Important Banks lowering HNB’s risk-weighted capital adequacies by 50 basis points.

The deposit base grew 2 percent to 835.06 billion rupees.

Net fee and commission income fell 8 percent to 2.56 billion rupees while net insurance premium income grew 16 percent to 2.28 billion rupees.

Operating profits before taxes were down 4 percent to 7.88 billion rupees.

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The bottom line grew on an income tax reversal of 488.50 million rupees, compared to a 321.31 million rupee corporate income tax a year earlier.

The government in February exempted income tax on Sri Lanka Development Bonds with effect from April 2018. Hatton National Bank holds the highest SLDBs among private banks in Sri Lanka.

The tier 1 capital ratio grew to 14.74 percent from 13.16 percent against a regulatory minimum of 9.5 percent, while the total capital ratio grew to 18.12 percent from 15.41 percent against a required 13.5 percent.

The bank return on assets fell to 11.57 percent from 14.10 percent.

The group net assets grew 10 percent to 145.51 billion rupees, while net assets value per share grew at a similar rate to 290.78 rupees. (Colombo/Feb25/2020)

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