HNB records Rs 6.9 Bn PAT in Q1 2023

 Total operating income rises 22% YoY to Rs 34 Bn
 Net stage III ratio at 3.8%; one of the best in the industry
 Tier I and total capital ratios improve to 11.41% and 14.43% respectively
 Liquidity position remains strong with LAR at nearly 40%
Following a turbulent year marred by the country facing its most profound economic crisis
post-independence, Hatton National Bank PLC made a resilient start to 2023, posting a PBT
of Rs 10.7 Bn, up 80% YoY, while PAT stood at Rs 6.9 Bn in the first quarter, growing 42%
YoY. The Group made a consolidated PBT and PAT of Rs 11.3 Bn and Rs 7.3 Bn respectively.
Commenting on the first quarter performance, Aruni Goonetilleke, Chairperson of Hatton
National Bank PLC, stated that “Despite the country still reeling from last year’s economic,
social and political disruptions, the Bank recorded a solid performance for the first three
months of 2023, reflecting our steadfast focus, prudent decision making and agility in the
face of changes. Although uncertainties prevail, the positive developments on the country’s
macroeconomic front are encouraging, and I would like to reiterate our unwavering
commitment to safeguarding the interest of our stakeholders and supporting the economic
Relatively high interest rates compared to Q1 2022, facilitated the Bank to report a net
interest income of Rs 31.6 Bn during 1Q 2023, reflecting an 87% YoY growth. With higher
card volumes coupled with an increased adoption of our digital services, net fee and
commission income grew by 31% YoY to Rs 4.2 Bn.
The positive sentiments brought on by the IMF programme and the improved foreign
exchange liquidity, gave way to a part relaxation of foreign exchange controls. This led to
the appreciation of the Sri Lankan Rupee by approx. 10% during the 3 months up to March

  1. This resulted in the Bank recording a net exchange loss of approximately Rs 2 Bn for
    the quarter due to revaluation losses.
    Despite vulnerabilities in the operating income, the Bank was able to maintain one of the
    best asset quality positions in the industry, with the net stage III loan ratio at 3.8% and stage
    III provision cover at 55.5% as at end March 2023. Having made significant provisions on
    account of impairment in 2022, the Bank made a total impairment of Rs 11.4 Bn for the
    quarter. This consisted of impairment on loans and advances and other off-balance sheet
    exposures of Rs 6.7 Bn, and impairment of Rs 4.7 Bn on foreign currency denominated
    government securities.
    Operating expenses increased by 26% in 1Q 2023, driven largely by the impact of the higher
    inflation compared to corresponding period of 2022. However, growth in income
    outperformed that of cost, translating to a cost-to-income ratio of 26% for the first quarter of
    Jonathan Alles, Managing Director and Chief Executive Officer of Hatton National Bank PLC
    noted that, “Following an unprecedented year mired in challenges, with the banking sector
    wrestling with multiple headwinds, we are pleased to see HNB’s performance in the first
    quarter of 2023. Securing the IMF Extended Fund Facility will bring in the much-needed

Classification | Strictly Confidential-External

Classification | Strictly Confidential-External
credibility to restore investor confidence, allowing Sri Lanka to gradually regain access to
foreign capital markets. Moving forward, it is imperative that the debt restructuring
framework is finalised, ensuring that the stability of the financial sector is safeguarded.”
“In the current backdrop, our prime focus has been on managing asset quality, capital and
liquidity levels. The success of our delivery is reflected in our above par indicators. We have
continued to stand by our customers. supporting them through extremely difficult times to
stay afloat and we look forward to supporting their growth, as the operating environment
improves further. The pandemic led to a shift towards online channels and this enabled an
exponential growth in our digital adoption levels. We expect to see further growth as we
continue to add value to our digital banking platforms for our retail as well as wholesale
banking clients.”
“The foundation of HNB’s success rests with our people and I am truly grateful to be part of
a fantastic team with unwavering dedication. While the road ahead may not be smooth, we
look forward to the opportunities that arise with optimism.”
The effective tax rate for the quarter increased to 36% from 19% in Q1 2022 mainly due to the
increase in corporate tax rate from 24% to 30% and introduction of social security
contribution levy with effect from October 2022.
Since December 2022, the asset base grew to Rs 1.7 Trillion as at end 1Q 2023. As a result of
low demand for credit due to high interest rates and a stronger Rupee, the Bank’s gross
loan book dropped by 4% to Rs 1.0 Trillion during the quarter. On the other hand, Bank
deposits continued its growth trajectory, expanding by Rs 29 Bn to reach Rs 1.4 Trillion.
The Bank reported Tier I and Total Capital Adequacy Ratios of 11.41% and 14.43% against the
minimum statutory requirements of 9.5% and 13.5% respectively. The Bank has provision to
drawdown further up to 250bps on the capital conservation buffer under the concessions
granted by the Central Bank of Sri Lanka. HNB’s liquidity levels also continued to be strong
and well above the regulatory minimum requirements, with Statutory Liquid Assets and all
currency Liquidity Coverage ratios at 39.31% (vs. a 20% requirement) and 353.42% (vs. a 100%
requirement) respectively.
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 13 th occasion by the Asian Banker, as well as securing a Top 5 position on
Business Today’s Top 40 rankings for 2022.

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