Interest Income improved by 26% in the period under review whilst Interest Expenses increased by 30% during this period due to rising interest rates and the increase of Deposit base. However the Net Interest Income has shown 19% growth during the corresponding period. Fee Base Income of the Bank has also shown an improvement registering the growth of 52% when compared with 1Q during last year. The Bank was also able to reduce the Operating Expenses by 19% during the 1Q 2013 as against the previous year.
The Bank’s Tier I Capital Adequacy Ratio stood at 18.4% while the Total Capital Adequacy Ratio stood at 19.4% well above the regulatory requirement of the 5% and 10% respectively as at 31.03.2013.
Commenting further on way forward during the year 2013, Mamaduwa emphasized that "We believe diversification is a permanent and sustainable solution to reduce operational risks while opening up avenues of future growth. Therefore, we are in the process of changing our business model by rebalancing our business operations while long term housing finance will remain our core business. We are expanding the Bank’s short term asset base through new products and services which will promote greater operational flexibility while helping to spread the operational risk."
With the amendment of the HDFC Act in 2011, HDFC is also able to diversify business operations. Under our new broader operations mandate, the Bank plan to enter the Country’s leasing, Micro Finance, SME and Agriculture Markets. For this purpose, the Bank has already initiated a funding scheme with the Central Bank of Sri Lanka and the Bank hope to negotiate more such funding arrangements with specialized agencies. Through the Central Bank’s refinance scheme, HDFC is now ready to gain a foothold in Micro Finance, SME lending and Agricultural Financing.
During the year 2013, the Bank will also continue to promote the highly successful gold loans scheme. Expansion of the Bank’s savings base will continue to remain a priority for the Bank, for the purpose of mobilizing an ongoing stream or low cost funding. The Bank will continue to consolidate the operations in 2013 by improving the systems, processes and skill base to deal with future growth opportunities and to compete successfully in an increasingly competitive market. As part of this process, the Bank has already strengthened the Regional Management structure by giving greater decision making autonomy to Regional Managers.
HDFC Bank was one of the first Banks that published quarterly statements in line with IFRS Standards and the Bank’s final accounts for 2012 have been prepared in compliance with IFRS Standards.
The NPL Ratio saw an improvement at 20.52% as against 22.21% in 2011, due to the implementation of more stringent credit evaluation processes coupled with a strong emphasis on recoveries. However it is noteworthy to mention that this includes NPL Loans backed by EPF Balances which are guaranteed by the Central Bank of Sri Lanka (CBSL). The ratio excluding EPF category stands at 7.8% as at 31.12.2012 as against 11.37% in 2011.
Improving Technology remains a priority during the year to capitalize on efficiency and productivity gains that can be facilitated through the creative use of IT and other Technologies. The Bank is in the process of introducing a new Core Banking Solutions to meet the future requirements.
HDFC Bank’s transparency in communications is gaining recognition. HDFC Bank won the ACCA Sustainability Reporting Award for the 3rd consecutive year in the small scale category for the Bank’s 2011 Annual Report. This was HDFC’s first integrated report in line with international integrated reporting standards and was also a first for the local banking industry.