Wednesday 1 March 2017

HNB posts record Group profit of Rs 15.67 bn in 2016

An outstanding performance throughout 2016 on every front culminated in the HNB Group posting the best financial results in its history. Group Profit Before VAT, NBT and Taxes grew by 41.3% to Rs 27.1 bn while Profit Before Tax (PBT) reached Rs 22.5 bn with a 39.2% growth.

Group Profit After Tax (PAT) witnessed an exceptional growth of 41.2% to be recorded at Rs 15.7 bn. Group assets grew by 19.0% to cross the Rs 900 bn mark, representing yet another historical milestone for HNB. The remarkable performance by the Bank was the main contributor towards this exceptional performance by the Group. The Profit Before VAT, NBT and corporate taxes of the Bank increased by 37.1% to Rs 24.5 bn while the PBT improved to Rs 20.1 Bn by 33.9% from Rs 15.1 Bn recorded in 2015, amidst a 54.7% increase in VAT and NBT charge due to the increase in the rate of VAT from 11% to 15%.

The PAT for the Bank also recorded an outstanding growth of 35.4% to Rs 14.1 bn for the year.

The Bank reported a net trading loss of Rs 1.8 Bn due to higher swap cost incurred during the year on swaps taken to hedge foreign currency borrowings.

The corresponding impact on on-balance sheet open positions as well as a significant growth in exchange income contributed to the other operating income of Rs 3.3 Bn recorded for the year.

Portfolio quality which has been considered a strategic imperative by the Bank, saw HNB adopting many initiatives such as the centralisation of Retail and SME credit evaluation, intense training on credit underwriting and rigorous focus on recoveries. The efforts have yielded rich dividends as the Bank’s NPA ratio has improved to 1.8%, well below the industry average of 2.6%. The ratio as at the end of 2016 represents a 63 bps improvement during the year and a quantum improvement of 186 bps over a four year period.

The Bank’s total operating expenses increased by 14.5% to Rs 18.3 Bn for the year. Containing of controllable expenses enabled through the lean transformation journey embarked upon by the Bank through initiatives such as the centralisation of credit and target operating model for branches, resulted in the cost to income ratio improving by 344 bps to 42.51% in 2016 and by more than 10 percentage points since 2012.

The Bank’s total tax allocation for the year amounted to Rs 10.4 Bn which is a significant increase of 39.5% from 2015 (excluding the one off super gains tax paid in 2015) and the highest among the private sector commercial banks.

The growth of PAT in excess of 35% to Rs 14.1 Bn enabled to record a Return on Assets (ROA) of 1.79% and Return on Equity (ROE) of 19.91% which is a significant improvement from 1.61% and 16.59% posted during 2015.

Growth of 18.4% in the Bank’s Balance Sheet to Rs 859.8 Bn easily eclipsed the industry growth of 12%. The instilling of a service culture universally while strengthening sales teams allowed HNB to rebound strongly from a subdued first few months to reach Rs 584.4 Bn in advances which is a growth of 17.3% yoy. HNB during the year has played a key role in driving the economy’s engine of growth through disbursing over Rs 105 Bn to SME and micro finance customers in addition to serving the grass-root micro customers through its subsidiary HNB Grameen. HNB Grameen yet again performed well to contribute strongly to Group results along with HNB Assurance and the Joint Venture Investment Bank, Acuity Partners, also reporting results far superior to those recorded in the previous year. Group ROA and ROE were recorded at 1.89% and 17.69% respectively and similar to the Bank represented a marked increase from the levels of 1.64% in ROA and 14.71% in ROE achieved in 2015.

HNB Managing Director and CEO Jonathan Alles said the adoption of dynamic strategies, focusing on delivering an unparalleled customer experience, relentless focus on operational excellence and commitment to a high level of asset quality woven around a robust business model has been pivotal to HNB’s remarkable performance in 2016.

“Our digital drive towards becoming the most future ready bank also contributed immensely towards this great success”.

The Bank declared a final dividend of Rs 7.00 per both ordinary voting share and ordinary non-voting share consisting of a cash dividend of Rs 3.50 per share and a scrip dividend of Rs 3.50 per share in addition to the interim dividend of Rs 1.50 per share declared in December 2016. Accordingly the total Dividends for the year 2016 amounted to Rs 3.5 bn.
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