HNB sails through turbulent 1H

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HNB Group recorded a Profit Before Tax of Rs 6.7 Bn and a Profit After Tax of Rs 6.1 Bn during the first six months of 2022 amid extremely challenging operating environment.

The gross income of the Bank grew by 71% YoY to Rs 97.1 Bn driven by a 53% growth in interest income, 61% growth in fee income and 349% growth in exchange income. The exceptional growth in net interest income from Rs 23.2 Bn to Rs 40.2 Bn was primarily due to the increase in average AWPLR by approximately 16 percentage points in line with the tight monetary policy adopted by the Central Bank of Sri Lanka.

The Fee income also recorded a steady growth increasing to Rs 7.3 Bn for the 6 months mainly on account of improved trade and card income. The total exchange income improved to Rs 15.3 Bn from Rs 3.4 Bn during the first half of 2021, as the rupee depreciated by over 80% during the period. Accordingly, the total operating income improved to Rs 63.3 Bn recording a 100% YoY growth.

The Bank made a total impairment of Rs 40.1 Bn for the first six months of the year compared to a charge of Rs 6.3 Bn in the previous year. The total impairment charge for the period included an impairment of Rs 27.3 Bn. Considering the volatilities and the economic factors, the Bank recognized an impairment of Rs 22.7 Bn on account of loans and advances for 1H 2022 compared to the provision of Rs 6.2 Bn made in the corresponding period of 2021. An amount totaling to Rs 10.8Bn relating to the exchange impact on impairment of foreign currency loans and investments was set off against the exchange income for the period. The net stage III ratio of the Bank improved to 2.46% from 2.55% as at end of December 2021 while the provision coverage on stage III loans improved from 56% to 63% maintaining the position as one of the best in terms of asset quality among peers.

The operating expenses for the 1H of 2022, increased by 26% to Rs 14.9 Bn. Nevertheless, the cost to income ratio of the Bank improved by approximately 14 percentage points to 23.5% as total operating income recorded a higher growth during the period.

The Bank recorded a Profit Before Tax of Rs 6.0 Bn and Profit After Tax of Rs 5.5 Bn for the six months ended June 2022 compared Rs 10.9 Bn and Rs 9.1 Bn in the corresponding period of 2021.

The Bank’s asset base expanded by Rs 239 Bn to Rs 1.6 Trillion during the first six months, with loans and advances growing by Rs 138 Bn to Rs 1.1 Trillion. Total Deposits of the Bank grew to Rs 1.3 Trillion by Rs 217 Bn during 1H 2022. The balance sheet growth was party supported by the devaluation of the rupee during the period.

The Bank reported Tier I and Total Capital Adequacy Ratios of 11.39% and 14.54% respectively against the minimum requirement of 9.5% and 13.5% respectively. The Central Bank also permitted licensed commercial banks to drawdown up to 250 bps on the capital conservation buffer lowering the requirement to 7% and 11% respectively. Furthermore, the Bank’s liquidity position continued to be strong with liquid asset ratio and all currency liquidity coverage ratio at 23.9% and 210.3%, against the statutory requirements of 20% and 90%, respectively.