ECONOMYNEXT – Profits at Sri Lanka’s Hatton National Bank fell 55 percent to 1.94 billion rupees in the March 2019 quarter from a year earlier, amid sharply higher loan losses, a new tax and slow credit, interim accounts show.
The group reported earnings of 3.89 rupees per share for the quarter.
HNB group Interest income grew 17 percent to 31.3 billion rupees in the March quarter, interest expenses grew at slower 14 percent to 31.6 billion rupees and net interest income grew at a faster 21 percent to 14.6 billion rupees.
Loans were flat at 749 billion rupees at bank level. Loans barely grew to 772.2 billion rupees at group level from 770.2 billion rupees.
Loan losses trebled to 4.6 billion rupees in the quarter from 1.57 billion rupees a year earlier.
Gross bad loans grew to 3.37 percent from 2.85 percent. Total capital adequacy improved to 14 percent from 12.63 percent with capital being boosted to 47.9 billion rupees from 43.4 billion rupees.
Operating expenses grew 27 percent to 9.0 billion rupees with personnel cost up 20 percent to 3.25 billion rupees.
Value added tax on financial services fell 21 percent to 1.04 billion rupees, nation building tax fell 20 percent to 140 million rupees and a new debt repayment levy cost 583 million rupees.
The total balance sheet marginally contracted to 1,084 billion rupees from 1,086 billion rupees at banks level. At group level, total assets barely grew to 1,149 billion rupees from 1,148 billion rupees.
Sri Lanka’s central bank printed money in March and April 2018 to generate monetary instability just as the credit system was recovering from an earlier balance of payments crisis triggered by its soft-pegged exchange rate regime involving real effective exchange rate targeting.
In the last quarter of 2018, a political instability triggered by President Maithripala Sirisena worsened monetary instability generating capital flight.
The currency collapse and prolonged liquidity shortages after a recovery of less than a quarter due to a combination of real effective exchange targeting and trying to close the gap between a perceived output and measured output. (Colombo/May15/2019)