Hatton National Bank (HNB) has posted an after-tax profit of Rs.3.2 billion, its highest ever in the year ended December 31, 2008, up from Rs.3 billion a year earlier despite the many constraints and challenges faced during the year.

The bank’s Managing Director/CEO, Mr. Rajendra Theagarajah, said in the annual report that this profit was one of the highest in the entire banking industry for 2008 and said that given the circumstances these earnings were a "remarkable achievement."

Theagarajah said that the group earnings, as expected, were less by Rs.333.2 million than that of the bank. This was due to the divestiture of HNB Stockbrokers, a fully owned subsidiary, and HNB Securities which was 50.01% owned by the bank to a newly formed joint venture with DFCC Bank which had released Rs.475.5 million by way of profit on disposal and dividend income, he said.

The bank’s Chairman, Mr. Rienzie Wijetilleke, reported "a robust performance" in 2008 despite an uneven and negative background.

"Our bank’s inherent strength and values maintained over the years, helped the bank to perform well above normal expectations," he said.

Theagarajah also reported that HNB was continuing efforts to expand its presence overseas with their joint venture in Oman, Majan Exchange LLC in which HNB has a 40% stake, concentrating on remittance business "for the whole of Pan Asia."

"We have just completed regulatory formalities for two more similar operations in the UAE and Canada with the launch of commercial operations due to begin in the first half of 2009 for both," he said.

In South Asia, they have signed a Memorandum of Understanding with the City Union Bank of India and were now awaiting regulatory clearance from the Reserve Bank of India and the Securities and Exchange Board of India to commence investment banking operations.

"We believe the economic meltdown permeating across the region slows regular processes but we have ample faith that we will get the necessary approvals and clearance to start operations soon as HNB has met the required criteria," he said.

The bank is also awaiting clearance for an application to open shop in Bangladesh once it is cleared by the Central Bank of that country. The process has been slowed as a result of political turmoil experienced there for most of 2008 that had slowed down the system.

"However, we are confident that given the change of political regime, we may see accelerated development of the economy, which would require a faster grasping of opportunities," Theagarajah said.

Wijetilleke, in a reference to the oil hedging experience, commented that Sri Lanka had been unable to benefit from the steep decline in the world market price for oil due to some ``irrational decisions creating medium term commitments at exorbitant rates.’’

He saw new opportunities for the bank, with its well established branch network,

from the prospect of peace in the North and the East. This would open a window for participation in the development of these areas, Wijetillake noted.

He urged that the authorities should have in place strategies and a plan for accelerated infrastructure development for the newly liberated areas and get private sector institutions to play a role promoting economic activity particularly in agriculture, small and medium industry and trading.

He also recommended that Sri Lanka should make an effort to obtain, on favorable credit terms or as grants, surplus goods and services available in China, Japan and India due to their decline in exports to the West.

These could be utilized for rural infrastructure development here creating economic activity in those areas.

HNB has a stated capital of Rs.5.06 billion, a statutory reserve fund of Rs.982.7 million, retained earnings of Rs.3 billion and other reserves of Rs.11.5 billion in its books.

Customer deposits had grown to Rs.186.8 billion from Rs.175.7 billion the previous year.

The bank’s net interest income for the year at Rs.12.7 billion was up from Rs.11.1 billion the previous year. It has made Rs.1.16 billion provisions for loan losses, up from Rs.907.9 million the previous year.

Basic earnings per share had grown to Rs.13.67 from Rs.12.83 and the directors have recommended a dividend of Rs.4 per share against Rs.3.50 per share paid the previous year.

HNB’s leading shareholder was the Deutsche Bank Trust Company Americas with 15% but the Browns Group and the Stassen/Distilleries Group were also major shareholders with member companies holding stakes. Browns have 7.29% on its own account and 4.77% through Standard Finance Limited while the Stassen interest was via CBD Exports (6.53%), Milford Exports (6.53%), Stassen Exports (5.66%), Sri Lanka Insurance Corporation Life Fund (4.90%) and the Distilleries Company (2.53%).

Two directors of the bank, Dr. V.P. Vittachi and Mr. R. Sivaratnam, died during the year under review shortly after they had tendered their resignations due to ill health.

The directors of the company are: Messrs. Rienzie T. Wijetilleke (Chairman), Rajendra Theagarajah (MD/CEO), D.H.S. Jayawardena, M.V. Theagarajah, R.K.Obeyesekere, Ms. Pamela C. Cooray, R. Seevaratnam, V.P. Vittachi (Resigned 21.8.2008) and R. Sivaratnam (resigned 24.4.2008).