Hatton National Bank PLC reported higher profits in the September quarter (3Q22) despite having to provide billions for possible bad loans and muted growth as the bank managed to navigate through the soaring interest rates quite successfully while making substantially higher non-fund incomes. 
The bank reported net interest incomes of Rs.33.1 billion in the July - September quarter, up 134 percent from a year earlier period on the back of the interest margin which expanded from 3.70 percent at the beginning of the year to 6.22 percent through September. 

The bank reported earnings of Rs.10.10 a share or Rs.5.41 billion for the quarter compared to earnings of Rs.6.53 a share or Rs.3.49 billion in the year earlier period. 
This was after Rs.20.6 billion in provisions made for possible loan defaults and other financial assets, predominantly the foreign currency denominated government securities. 
For the nine months through September, the bank provided Rs.41.0 billion for such assets out of a total impairment provision of Rs.60.3 billion. 

As the September quarter banks’ earnings season is currently in full swing, many banks reported massive provisions against loans and other financial assets which undermined their profitability, but HNB came as a rare exception with a higher bottom-line despite its hefty provisions.     
The bank with assets of Rs.1.63 trillion gave rupee loans worth Rs.64.6 billion in the nine months, recording 7.5 percent growth. 

While total loans including that are denominated in foreign currency reflect a relatively higher growth, that makes little sense as much of its expansion occurred due to the collapse of the rupee in early this year which gave a translation boost to the foreign currency loan portfolio.
The bank’s impaired loan ratio, the new term for the gross non-performing loans ratio, rose to 3.34 percent by September end from 2.55 percent at the start of the year. 
Meanwhile, the bank raised rupee deposits worth Rs. 146.3 billion, logging a robust 17.3 percent growth as the elevated rates drew much of the currency in circulation into the banking sector. 

The profit was also supported substantially by the fee incomes which grew by a robust 70 percent to Rs. 4.0 billion for the quarter. 
Although the bank reported a trading loss of Rs.4.8 billion, it reported a net other operating income of Rs.6.65 billion, more than thrice what the bank reported in the year earlier period, made possible by the steeper decline in the value of the rupee against the dollar.

The net insurance premium coming from its insurance subsidiary also brought in Rs.3.39 billion in the quarter compared to Rs.2.77 billion in the year earlier period. 
Meanwhile, the total operating expenses rose by 21 percent to Rs.12.36 billion compared to a year ago due to the soaring inflation and rupee collapse, which sent the cost of everything higher by many-fold. 
But the bank managed to retain its cost-to-income ratio to 22.9 percent, one of the lowest in the industry made possible by the significant growth in the net income.