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Hatton National Bank (HNB) Net profit down 9% YoY in 1Q2010 | Sri ...

Hatton National Bank’s (HNB) net profit has dipped 9% YoY to LKR649.7 mn in 1Q2010 mainly on the back of 14% increase in non interest expenses and 34% increase in corporate taxes. With the economy expected to grow by circa 6%-7% during the next few years and contributions from the previously war affected North and East to the main stream economy the banking sector outlook remains positive with loan growth expected to gather momentum with the low interest rate environment. HNB’s net interest margins are expected to be intact at around 5%, whilst continuing to benefit from the wider reach facilitated by 187 branches (20 branches in the North and East) and higher retail focus. However, we maintain our forecast 2010 net profit at LKR4,101.0 mn (down 9% YoY)with slower credit growth in 1Q2010 than anticipated coupled with high operating costs and projected 2011 net earnings at LKR4,547.8 mn (up 11% YoY) . Interest expenses dipped 28% YoY to LKR3,942.3 mn in 1Q2010