- Bank PAT improves to Rs 8.6Bn
- Impairment charge of Rs 28 Bn in 1H
- Deposits grow by nearly Rs 70 Bn in 6 months
- Tier I and total capital ratios improve to 12.48% and 15.58% respectively
Hatton National Bank PLC continued its steady performance in Q2 2023, posting a 1H 2023 PBT of
Rs 13.6 Bn, while 1H 2023 PAT stood at Rs 8.6 Bn, growing 56% YoY. Meanwhile, the Group made
a consolidated PBT and PAT of Rs 15.2 Bn and Rs 9.8 Bn respectively.
Commenting on the performance, Nihal Jayawardene, Chairman of Hatton National Bank PLC,
stated that “This quarter underscored the Sri Lankan economy displaying signs of normalisation, with
inflation moderating, interest rates gradually pulling down, and the Rupee appreciating. Moreover,
the announcement of the much-awaited Domestic Debt Optimisation (DDO) plan and the resulting
clarity, marked a significant step towards settling the qualms surrounding the debt restructuring
programme and its potential impact on the banking sector.”
Although interest rates tapered off towards the latter part of Q2 2023, 1H 2023 rates still remained
relatively higher when compared with the corresponding period in 2022, enabling the Bank to report
a net interest income of Rs 59.3 Bn in 1H 2023, up 48% YoY. Additionally, net fee and commission
income grew by 12% YoY to Rs 8.0 Bn, driven by increased activity in cards, remittances, trade and
digital platforms.
On the back of improved foreign inflows and the consequent rising dollars in circulation, the Rupee
appreciated by approx. 15% YoY in the first six months of 2023. Currency volatility caused the Bank
to record a net exchange loss of Rs 3.8 Bn for 1H 2023, primarily stemming from revaluation losses
of FCBU retained earnings.
Despite the challenges, the Bank continued to prioritise asset quality, with the net stage III loan ratio
at 4.77% and stage III provision cover at 51.4% as at end June 2023. In terms of impairment
provisions, the Bank recorded a cumulative impairment of Rs 28.3 Bn in 1H 2023 which included
impairment on loans and advances as well as on investments in foreign currency denominated
government securities.
The Bank’s 1H 2023 operating expenses increased by 19% YoY, to Rs 17.6 Bn driven largely by
inflation. Nevertheless, the Bank maintained an efficient cost-to-income ratio of 27% for the first half
of 2023.
Jonathan Alles, Managing Director and Chief Executive Officer of Hatton National Bank PLC stated
that, “We are pleased to see the positive developments on the country’s macroeconomic front and
HNB’s solid performance in the first six months of this year. We commend the government’s DDO
plan – which insulated the banking sector from any reprofiling of Treasury Bills or Bonds. This in
turn enables banks, inundated with mounting credit impairment and higher taxes, to use much
needed capacity in supporting the revival of key sectors and the broader economy.”
“Going forward, we will step up efforts to expand support to those who have been adversely
impacted over the past few years, with a particular focus on the micro and SME sector. Our role
towards developing SMEs goes beyond that of a traditional financial partner, as we provide assistance
on capacity building and technical know-how through strategic partnerships with key multilateral
agencies and international stakeholders.
“While we will continue to enhance our digital offerings and infrastructure, we will also explore
capitalising on emerging digital technologies to improve our service delivery and workplace
productivity. Our consistent performance notwithstanding extremely volatile conditions, is a
testament to the untiring efforts of the HNB Team. Creating a culture of learning and development
is vital to the success of any organisation, and HNB reiterates its commitment towards investing in
our employees’ growth and wellbeing.”
“As Sri Lanka charts a new course towards its economic recovery, we at HNB remain undeterred in
supporting that journey, as we continue to raise the bar as the country’s premier corporate citizen”
Due to the increase in the corporate tax rate from 24% to 30% coupled with the introduction of the
social security contribution levy w.e.f. October 2022, the Bank’s total effective tax rate for 1H 2023
increased to 53%.
Since March 2023, the asset base marginally grew to Rs 1.8 Trillion as at end June 2023. Moreover,
given the tight credit conditions and exchange rate volatility prevailing for a majority of the June
quarter, the Bank’s gross loan book dropped to Rs 986 Bn as at end of 1H 2023. Meanwhile, as
deposits remained attractive to customers, the Bank’s deposit base reached closer to Rs 1.5 Trillion
at the end of June 2023.
Compared to Q1 2023, the Bank recorded stronger Tier I and Total Capital Adequacy Ratios of
12.48% and 15.58% against the minimum statutory requirements of 9.5% and 13.5% respectively,
with the provision to drawdown a further 250bps from the Capital Conservation Buffer. HNB’s
liquidity levels also continued to be strong and well above the regulatory minimum requirements,
with Statutory Liquid Assets ratio around 40% (vs. a 20% requirement) and all currency Liquidity
Coverage ratio at 341.5% (vs. a 100% requirement).
HNB is rated A (lka) by Fitch Ratings and was awarded the esteemed title of “Sri Lanka’s Best
Corporate Citizen” for 2022 by the Ceylon Chamber of Commerce. Other major accolades include
being ranked among the Top 1,000 Banks in the World for six consecutive years by the acclaimed
UK based “The Banker Magazine”, being adjudged the “Best Retail Bank in Sri Lanka” for the 13th
occasion by the Asian Banker, being declared the “Best SME Bank” by Asiamoney Magazine, as well
as securing a Top 5 position on Business Today’s Top 40 rankings for 2022.
Photo Captions
HNB Chairman Nihal Jayawardene PC
HNB Managing Director and Chief Executive Officer Jonathan Alles