HNB PAT Increases to Rs 4.7B
HNB recorded a Profit After Tax (PAT) of Rs 4.7 billion during the first quarter of 2021 while Profit Before income Tax (PBT) amounted to Rs 5.5 billion. At Group level PBT and PAT were at Rs 5.9 billion and Rs 4.8 billion respectively. The substantial monetary loosening adopted to revive the pandemic-hit economy resulted in AWPLR dropping by nearly 400 bps over the past 12 months. This resulted in the interest income decreasing by 13% YoY to Rs 23.7 billion. Interest expenses too exhibited a decline of 17.2% YoY to Rs 13.1 billion driven by strong CASA mobilisation.
The CASA ratio improved from 36.2% in March 2020 to 39.7% by the end of Q1 2021 as the CASA base grew by 30% YoY to Rs 395 billion. As a result, the Bank’s Net Interest Income (NII) for the first three months of 2021 decreased by 7.2% YoY to Rs 10.6 billion. Commenting on the Bank’s results Managing Director / CEO Jonathan Alles stated: “HNB has demonstrated resilience, strength and stability during a year of unprecedented disruption. We are grateful for the complete trust and support of our customers, investors and other stakeholders throughout this time.
I also wish to place on record my deepest appreciation for the unwavering dedication of our staff in continuing to serve our clientele through multiple waves of the pandemic, despite the inherent risks involved. Our top priority during this time was to ensure their safety while supporting customers affected by the pandemic. “We provided moratoria under three phases while granting working capital finance out of CBSL schemes and our own funds. In addition to the financial assistance provided during the last year, we enhanced our digital proposition to ensure that customers could securely and reliably access all of our services while staying safe from the pandemic.
This included introducing many new features on SOLO – our digital payment platform, and the launch of our new Digital Banking App and e-commerce capabilities for SME clients among many others. We are currently in the process of further refining these powerful new services, which will undoubtedly provide greater convenience for all HNB customers in the future,” he said. Net Fee and Commission income for the first quarter grew by 10.2% YoY to Rs 2.3 billion as business activity rebounded during the period.
The Credit Cards business, Trade and Remittances which constitute a major share of fees performed well despite restrictions on imports continuing to be in place. Other fee sources, which also encompass digital business lines rose by 24.4% YoY. Exchange rate volatility and movements during the period, led to substantial revaluation gains on swaps and forward agreements. Swap costs were also lower relative to the corresponding quarter of 2020 as swap premiums declined in line with Dollar interest rates.
Accordingly, the Bank recorded a net exchange gain of Rs 1.9 billion which was a 53% YoY improvement compared to Q1 2020. The total dividend income from investments for Q1 2021 was Rs 421million compared to Rs 13 million in the corresponding period of 2020, as dividends declared for the financial year 2019 were paid only in Q2 2020 due to the pandemic.
The NPA ratio of the Bank improved marginally to 4.28% as at end of Q1 2021 compared to 4.31% as at end December 2020, as a majority of customers who were previously under moratoriums commenced repayments after October 2020. The impairment charge for the quarter ended 31 March 2021 was Rs 2.7 billion in comparison to Rs 4.7 billion recorded in Q1 2020. The impairment for Q1 2020 included a charge of Rs 708 million on account of sovereign bonds mainly as a result of the sovereign downgrade that was affected in April 2020. “More than a year after the pandemic, it is unfortunate that we are now seeing the most severe rise in COVID-19 cases to date.
All of the lessons that we have learned over the past year will be put to the test. While progress has been made in terms of vaccinations, the economic impact of this latest wave of COVID-19 infections will hinge on how effectively we as a nation are able to rally together to control the spread of the virus. The zealous focus on cost optimisation facilitated a marginal 1% YoY dip in operating costs to Rs 5.8 billion. Cost to Income was hence improved by a commendable 170 bps relative to the comparative period in 2020 to 38% in Q1 2021. Profit Before Taxes (PBT) amounted to Rs 5.5 billion and was subjected to the reduced income tax charge of 24% in comparison to the 28% tax charge that was applicable previously.
Accordingly, the profit after tax for the Bank improved to Rs 4.7 billion by 78% during Q1 2021. The Bank’s assets crossed Rs 1.3 Trillion as at quarter end with the gross loan book at Rs 808.3 billion. Total deposits grew to Rs 996.1 billion recording an impressive Rs 155 billion growth (18.4% YoY) over the 12-month period since March 2020. As one of the best capitalised banks in the industry, Bank reported Tier I and Total Capital Adequacy Ratios of 14.82% and 17.88% respectively. Similarly, HNB’s liquidity levels continued to be strong and well ahead of regulatory minimum requirements with Statutory Liquid Asset and all currency Liquidity Coverage ratios at 39.98% (against a 20% requirement) and 271.79% (against a 100% requirement) respectively. HNB Group recorded a PBT of Rs 5.9 billion and a PAT of Rs 4.8 billion for the quarter ended March 2021 recording a growth of 35.7% YoY and 46.7% YoY respectively. Total assets of the Group increased to Rs 1,388 billion as at 31 March 2021.