IIFL Sri Lanka: 15th March 2012: "Hatton National Bank (HNB) 4QCY11 Results Update
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IIFL Sri Lanka: 15th March 2012: "Hatton National Bank (HNB) 4QCY11 Results Update
dinusl Thu Mar 15, 2012 2:15 pm
The Front Page: IIFL Sri Lanka: 15th March 2012
"Hatton National Bank (HNB) 4QCY11 Results Update"
Hatton National Bank’s (HNB) 4QCY11 net profit of LKR2,254m (up 21% YoY and 63% QoQ) was largely driven by reversal of provisioning for (a) NPA’s (b) operating expenses and (c) corporate taxes. Despite steady NIMs, net income remained broadly flat (up 1% QoQ and YoY) owing to conservative credit disbursements (up 2% QoQ) in 4QCY11.The regulatory intervention to cap banking sector lending is likely to ease pressure on NIMs and stabilise interest rates. However, excessive government borrowings could insert further upward pressure. Credit demand remains robust and is likely to register 19% Cagr in CY11-14ii. The adaptation of the “incurred loss model” for loan loss provisioning (as opposed to the current “ time based provisioning”) and lower provision reversals are however likely to result in higher credit cost for CY12. We cut our target price to LKR170 (1.5x P/B CY12ii and 1.3x P/B CY13ii) to factor in rising cost of capital. The justified valuations are at the discount to those of its peers owing to its higher-than-peer intermediation costs and relatively lower RoE. ADD.
"Hatton National Bank (HNB) 4QCY11 Results Update"
Hatton National Bank’s (HNB) 4QCY11 net profit of LKR2,254m (up 21% YoY and 63% QoQ) was largely driven by reversal of provisioning for (a) NPA’s (b) operating expenses and (c) corporate taxes. Despite steady NIMs, net income remained broadly flat (up 1% QoQ and YoY) owing to conservative credit disbursements (up 2% QoQ) in 4QCY11.The regulatory intervention to cap banking sector lending is likely to ease pressure on NIMs and stabilise interest rates. However, excessive government borrowings could insert further upward pressure. Credit demand remains robust and is likely to register 19% Cagr in CY11-14ii. The adaptation of the “incurred loss model” for loan loss provisioning (as opposed to the current “ time based provisioning”) and lower provision reversals are however likely to result in higher credit cost for CY12. We cut our target price to LKR170 (1.5x P/B CY12ii and 1.3x P/B CY13ii) to factor in rising cost of capital. The justified valuations are at the discount to those of its peers owing to its higher-than-peer intermediation costs and relatively lower RoE. ADD.
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