22 November 2021 12:00 am Views - 104
HNB Finance PLC returned to a profit in the three months to September 2021, as the company is rebalancing its portfolio to reduce the reliance it has on micro-lending after the pandemic intensified the challenges it had with its biggest portfolio, after the collections became more difficult.
The company said its performance was affected by the lockdowns reimposed for the fourth time in August, as the restrictions hit its customers the hardest, leading to higher loss provisions. “Inevitably, most customers were also hit by the lockdown, further limiting their earnings to satisfy their monthly payments, resulting in a 7 percent quarterly increase and 26 percent biannual increase in impairment charges and other losses incurred by the company during this period,” the company said in a statement.
The September quarter performance was possible from the sharp decline in the company’s interest expense, which logged a 35.3 percent slump and a 14 percent increase in the interest expenses in the quarter over the same period last year, which was possible by the fast descent seen in the general market interest rates.
In the six months to September, the company reported a net profit of Rs.167.6 million or 10 cents a share, compared to a loss of Rs.328.1 million a year ago. The coming was coming off from an annual loss of Rs.124 million reported in the financial year ended on March 31, 2021.
As the troubles it faced with its micro-lending portfolio came to a head in the last financial year, due to collection challenges, the company was looking to reduce its reliance on the once lucrative business and was trying to build more strength in other areas such as leasing, pawning and specialised business loans.
In the financial year ended in March 2021, the company reported a gross non-performing loans ratio of 17.68 percent, from 12.25 percent a year ago. The NPL ratio for the most recent quarter wasn’t given in its interim report.
Perhaps in a reflection of this rebalancing activity, the company’s loans and receivables portfolio slipped by a little under Rs.400 million to Rs.17.69 billion in the six months to September 2021.
However, the company said its gold loans portfolio saw a strong growth during the period.
Micro-lending accounts for half of its loans book and the company is the pioneer of ‘Grameen’ micro-financing model in Sri Lanka and is sill among the leading micro-lenders in the country.
At the same time there was a slight uptick in leases, by about Rs.90 million in the period to Rs.10.38 billion.
HNB Finance, the subsidiary of Hatton National Bank, a few months ago disclosed that it is in the lookout for inorganic growth opportunities such as strategic partnerships, an option, which “will be further advanced in the new financial year”, according to the company’s Chief Executive Officer B.M.D. Chaminda Prabath.
Hatton National Bank has a 51 percent stake in HNB Finance while Prime Lands (Pvt.) Limited has a 38.71 percent stake, followed by the Development World Market ́s (DWM) Inclusive Finance Equity Fund, which has a 7.93 percent stake.