HNB Group records Rs. 18.8 b in PAT for nine months

• Bank PAT of Rs. 16.6 b
• Deposits cross Rs. 1.5 t 
• Loans grow by Rs. 34 b in Q3 2023 to cross Rs. 1 t 
• Provides over Rs. 32 b for impairment 
• Maintains sound capital and liquidity levels

Chairman Nihal Jayawardene PC

Managing Director CEO Jonathan Alles

Hatton National Bank has posted a profit before tax (PBT) of Rs. 26.3 billion and a profit after tax (PAT) of Rs. 16.6 billion during the nine months ended September 2023. The Group recorded a consolidated PBT and PAT of Rs. 29 b and Rs. 18.8 b, respectively for the period.

HNB Chairman Nihal Jayawardene stated: “Sri Lanka has progressed well during the year with signs of recovery as indicated by most macro-economic variables. While we remain positive on the country’s journey ahead, as a premier bank in Sri Lanka, we are delighted to have surpassed Rs. 1.5 trillion in deposits. It is noteworthy to mention that a growth of Rs. 500 billion in deposits, has been achieved since June 2021, and we would like to place on record our sincere gratitude to our valued customers for their unwavering trust and confidence, despite extremely turbulent macro conditions experienced during this period.” 

The Bank’s interest income recorded a YoY growth of 63.5%, reaching Rs. 220.7 billion during the first nine months, in the background of a sharp decline in interest rates during the third quarter. 

Interest expense increased at a faster pace of 115% YoY, resulting in a 17.1% YoY growth in net interest income which improved to Rs. 83.2 billion. Bank’s net fee and commission income grew by 6.3% YoY to Rs. 11.7 billion primarily fuelled by cards and digital channels. The appreciation in the Sri Lankan rupee against the US dollar by approx. 12%, during the period resulted in the Bank having to record an exchange loss of Rs. 2.5 for the nine months. 

HNB continued to maintain its asset quality well above the industry, with net stage 3 ratio at 4.9% and stage III provision cover at 50.7%. The Bank recognised a total impairment charge of Rs. 32.4 billion during the first nine months of 2023, which comprised of impairment on account of loans and advances and foreign currency denominated government securities.

HNB’s cost to income ratio stood at 28.5% for the nine months, despite, operating expenses increasing by 16.1% YoY to Rs. 26.5 billion mainly driven by inflationary pressure.

Managing Director/Chief Executive Officer Jonathan Alles said: “As the country displays signs of recovery, we are pleased to record robust overall performance for the nine months, which outlines the proactive and prudent actions taken during adverse times. I would like to extend my heartfelt gratitude to the entire team at HNB for their continued dedication and commitment amidst many challenges.”

“We believe that the external debt restructuring programme would also be concluded soon, taking in to account the strain on the banking sector, which has incurred significant impairment charges of nearly Rs. 580 billion since 2022 and the increased effective tax rate of over 50% for the industry. Preserving banking sector stability and capital would be critical to enable banking sector to play a catalytic role in the revival of the nation and its people. We eagerly look forward to partner this resurgence as a responsible systemically important bank in the country.” 

The Bank’s total effective tax rate increased to 51.6% from 37.4% in the previous year, due to the increase in corporate tax rate from 24% to 30% and the introduction of social security contribution levy with effect from October 2022.

Bank’s asset base improved to Rs. 1.86 trillion as at end September 2023. Significant reduction in market lending rates in line with Central Bank’s relaxed monetary policy has enabled the Bank to record Rs. 34 billion growth in gross loans, to surpass Rs. 1 trillion in the third quarter. The Bank reached a significant milestone as its deposit base crossed the Rs. 1.5 trillion mark for the first time.

HNB recorded Tier I and Total Capital Adequacy Ratios of 11.91% and 14.73% against the minimum statutory requirements of 9.5% and 13.5% respectively, with the provision to drawdown a further 250 bps from the Capital Conversation Buffer. The Bank has continued to maintain a strong liquidity position with a Statutory Liquid Asset Ratio and an all currency Liquidity Coverage Ratio, which are both well above regulatory minimum requirements of 20% and 100% respectively.