HNB PLC weathered external headwinds in 2019 to post Rs. 15 bn in Group Profit After Taxes (PAT) and Rs. 14 bn in Bank PAT and remains the best capitalised bank in the sector, a media release from the Bank stated.
The sluggish economic conditions that prevailed resulted in a muted demand forced a drop in margins due to the introduction of interest rate ceilings and the cautionary approach exercised by the Bank towards growth resulted in a subdued growth in Net Interest Income (NII). NII grew by 3.4% to Rs. 49.2 bn for the Bank and by 5.1% to Rs. 56.4 bn for the Group.
The measures introduced to curtail import of motor vehicles and non-essential consumer goods, lower card and POS transactions due to drop in tourist arrivals resulted in the Bank’s Net fee and commission income dipping by 4.3% to Rs. 9 bn, for the year under review.
At Group level this gap narrowed to 1.2% due to contributions from Group companies. HNB Assurance recorded a modest growth of 12.6% in Net Insurance Premium income despite the challenging environment. The low volatility in the rupee during 2019 compared to 2018 and the slow down in international trade resulted in the exchange income for the year being relatively low.
The impairment charges which rose significantly in 2018 with the implementation of the stringent SLFRS9 standards increased by 3.9% YoY to Rs. 9.7 bn for the Bank.
The greater level of stress in the microfinance segment resulted in the total impairment charge for the Group increasing to Rs 11.4 bn for the year. Operating expenses of the Bank increased by 7.6%YoY to Rs. 23.8 bn and the cost to income ratio slid to 39.7% from 36.4% in 2018, reflecting expenses incurred under the Bank’s Transformation program and aggravated by the relatively low earnings growth in 2019.
The increase in ‘Benefits,Claims and Underwriting’ expenses by 24.9% YoY to Rs. 7.1 bn, along with the increase in Bank expenses pushed Group operating costs up by 12.7% to Rs. 36.4 bn.