Hatton National Bank : Net profit up by 58% YoY in FY2009

Hatton National Bank Plc (HNB) is Sri Lanka's second largest private commercial bank with 186 customer centers (4302 employees). In FY2010E we expect net earnings to be driven by loan book expansion, given the revival of business sentiment and fresh markets in north and east (Bank has 20 branches in the region).Branch network is expected to be increased to 200 at the end of FY2010.

HNB net profit for FY09 was up by approximately LKR 1.7 Bn to LKR 4.5 Bn from LKR 2.8 Bn for FY08 showing a 58% increase .This was mainly boosted by strong 4Q FY09 performance showing a 156% increase YoY to LKR 1.8 Bn from LKR 0.7 Bn.

Net Interest income (NII) shows a YoY growth of 16% for FY09 where it has increased to LKR 14.5 Bn from LKR 12.5 Bn.4Q FY09 shows a similar pattern albeit at 11% YoY.NII for the 4Q FY09 is LKR 3.8 Bn and 4Q FY08 is LKR 3.4 Bn.

Interest expenses remain consistent for FY09 and FY08 hovering around approximately LKR 20 Bn even though for 4Q FY09 it has dropped by 18% YoY to LKR 4.5 Bn.

Upward trend in profitability of the Bank is evident by increases to ROE and ROA which at end of FY09 stands at 19.89%( up 3.39percentage points YoY from 16.5%) and 2.21%(up 0.23percentage points YoY from 1.98%) respectively. Further Interest Margin for the Bank has increased by 0.21% for FY09 to 5.45% from 5.24%.

Deposit base of HNB has grown by 13% over FY09 to LKR 213.8 Bn from LKR 189.8 Bn.

NPL has come down by 8% over FY09 to LKR 12.4 Bn (at the beginning of FY09 the NPL were at LKR 13.5 Bn) where the majority contribution to that comes from overdrafts which has undergone a drop by 29% (from LKR 2.1Bn to LK 1.5 Bn) over the same period.

Group EPS for FY 2009 is LKR 19, which is an increase of LKR 6 from previous year's EPS of LKR 12.Further Group BVPS for FY09 is at LKR 111.86 ,up by 15% from LKR 97.32 for FY08 -Maintain BUY


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