HNB Finance: Navigating growth through strategic lending and risk management

There is no doubt that HNB Finance PLC’s recent financial performance and strategic initiatives have propelled the company towards notable growth. HNB Finance Managing Director and CEO Chaminda Prabhath talks about changing market dynamics, the company’s focus on diversifying lending portfolios, and the proactive measures taken to navigate economic challenges. With a keen eye on stability, risk management, and strategic financial planning, the company’s CEO sheds light on the company’s commitment to sustained growth in the ever-evolving financial landscape. Below are excerpts from the interview:

Q: Can you share insights on the growth in borrowers at HNB Finance compared to the previous year, especially in terms of lending?

Certainly, the positive shift in borrower engagement at HNB Finance compared to the previous year is reflective of our strategic initiatives and responsiveness to market trends. According to our latest financial reports, there has been a noticeable increase in our lending portfolio, showcasing a robust growth trajectory. This expansion can be attributed to our concerted efforts to diversify our services and cater to the evolving needs of our customers. The strategic move towards a more comprehensive lending approach, especially in leasing, has played a pivotal role in attracting a larger pool of borrowers.

Q:  Could you elaborate on the initiatives undertaken to boost lending, particularly in leasing, and how this aligns with your overall business strategy?

 Our lending initiatives are carefully crafted to optimise our portfolio for sustained and diversified income streams. As I mentioned earlier, the leasing business is a cornerstone for us, providing stability to our balance sheet and ensuring consistent interest income. We are strategically increasing our focus on leasing, with a goal to make it 50% of our portfolio.

This emphasis on leasing aligns with our commitment to stability amidst market fluctuations. In addition to leasing, our focus on micro-businesses and gold loans is part of our broader goal to have a well-diversified and resilient loan book. These strategies are not just business decisions; they are a reflection of our commitment to adapting to changing market landscapes and ensuring the long-term sustainability of our business.

Q:  With the economic challenges and reduced purchasing power in the market, how does HNB Finance ensure the sustainability of its leasing business and manage the repayment capabilities of its customers?

 Navigating economic challenges requires a meticulous approach to risk management. We view leasing not just as a high-return product but as a stability factor, providing a steady and predictable income over a more extended period. This approach minimises our exposure to market fluctuations, and we are proactive in assessing the financial capabilities of our customers before approving leases. Our risk management strategy extends to product-specific approaches, such as focusing on consumer vehicles, which continue to show demand despite challenges in the commercial vehicle market. This multi-faceted risk management approach is a testament to our commitment to maintaining a robust and adaptable business model.

Q:  The company has reported a 139% increase in profit for the first two quarters of 2023, compared to the previous year. Could you highlight the key initiatives that contributed to this significant improvement in financial performance?

 The reported 139% increase in profit for the first two quarters from 2022 to 2023 is a result of our strategic financial management. Recognising the impact of interest costs, we took proactive measures to mitigate their effect. According to available financial data, steps were initiated from October of the previous year to gradually pass on interest rate reductions. This proactive approach to interest rate management, coupled with prudent cost management and strategic liability-side initiatives, such as short-term funding with attractive rates through HNB bank, has played a crucial role in achieving this significant improvement in our financial performance.

Q:  What growth strategies is HNB Finance planning for the future, and are there any new branches or initiatives on the horizon to further expand your reach?

 Looking ahead, our growth strategy for the year involves a concerted effort to expand our leasing portfolio further accompanied by micro financing and gold loan services. As I mentioned, we aim to enhance our base and improve other products in our portfolio. This growth strategy is not only based on our internal capabilities but also considers external factors, such as economic constraints. Our commitment to maintaining a robust and diversified portfolio for sustained growth aligns with industry best practices and positions HNB Finance as a dynamic and adaptive player in the financial services sector.