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| Chairman Nilanth De Silva |
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| MD/CEO Jonathan Alles
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Hatton National Bank (HNB PLC) said on Friday it continued to demonstrate resilience amidst volatile conditions, posting a Profit Before Tax (PBT) of Rs. 10.9 billion and a Profit After Tax (PAT) of Rs. 9.1
billion. The Group profits also improved in line, with PBT and PAT at Rs. 12 billion and Rs. 9.8 billion, respectively.
The loan book recorded a growth of 8.6% over the past 12 months to June 2021. Despite this, the reduction of over 280 bps in AWPLR over the same period resulted in a 10.6% YoY drop in 1H interest income, to Rs. 48.1 billion.
Strong CASA mobilisation efforts led to a 27.1% YoY growth in the CASA base which improved to Rs. 405.5 billion as at end of June 2021. This growth together with the low deposit rates, contributed to a 20.4% YoY drop in interest expenses to Rs. 25 billion. Accordingly, Net Interest Income for the first half 2021 exhibited a 3.2% YoY growth to Rs. 23.2 billion.
Fee and Commission income continued its uptrend in 2021 increasing to Rs. 4.4 billion, a 27.7% YoY growth over the corresponding six months in 2020, a period in which considerable disruption to business activities were witnessed. Card and Trade businesses were key contributors towards this growth, while fees from digital banking also improved significantly driven by higher level of adoption.
HNB Chairman Nilanth De Silva said: “The operating environment has continued to be uncertain with a multitude of challenges for the nation and the industry for almost two years. The re-emergence of higher numbers of COVID-positive patients and the fast spread of the Delta variant, threaten macro fundamentals and industry dynamics. We greatly appreciate the efforts expended by the authorities in rapidly rolling out the vaccinations across the country which is the most sustainable solution in winning the war against COVID. In this backdrop, I would like to place on record my sincere appreciation to all our stakeholders for their continued patronage and especially our staff for their untiring efforts and unwavering commitment in serving our valuable clients.”
Bank recorded an exchange gain of Rs. 3.4 billion during 1H 2021 relative to Rs. 1.5 billion in the first six months of 2020 due to the depreciation of the rupee and lower swap volumes.
The Gross NPA ratio of the bank improved during the first six months of 2021 to 4.25% in comparison to a deterioration of nearly 50 bps witnessed during 1H 2020. The bank made an impairment charge of Rs. 6.3 billion for the 1H 2021 compared to the impairment of Rs. 9.1 billion in the corresponding period of 2020. The higher impairment charge in the previous year was largely on account of the rising NPAs and the sovereign downgrade in April 2020. The bank reassessed the uncertainties in the operating environment and continued to improve the management overlay in the impairment provisions for this period. HNB’s total impairment against the NPA base remained over 100% as at end of 1H 2021.
The bank was successful in containing the increase in Operating Expenses to 5.2% YoY, despite the Operating Expenses for 1H 2020 being 6% below the corresponding period of 2019. This together with the healthy growth of 13.3% YoY in Total Operating Income resulted in an improvement of 289 bps in Cost to Income ratio which stood at 37.4% as at end of June 2021.
Commenting on the overall performance, Managing Director and CEO Jonathan Alles said: “HNB has yet again demonstrated resilience, stability and strength in a highly volatile environment. We are proud to have crossed the Rs. 1 trillion landmark in deposits which clearly demonstrates the continued trust and confidence placed in us by our customers. We remain the best-capitalised bank among domestic systemically important banks, which has been further bolstered by the Basel III compliant debenture issue which was oversubscribed on day one. Our asset quality continues to be ahead of the industry while our liquidity levels are well above the statutory levels. “
“This has been possible through our relentless focus on ensuring that we remain on a solid foundation built on strong governance, risk management and compliance, which has enabled us to intensify our transformation efforts on digitalisation, process efficiency and people development in our pursuit to be future-ready,” Alles added.
“As a responsible D-SIB, supporting revival and sustainability of our customers has also been a key priority for us. We have continued to grant moratoriums to customers under stress over the past two years and have provided necessary working capital financing through CBSL schemes and our own funds. We extended grants to 200 microfinance clients to support the recovery of their business operations,” he said.
Alles further commented: “Sri Lanka is at a crucial juncture and a national-level action plan is the need of the hour to revive the economy. As a true ‘partner in progress’ for the nation and its people, HNB has supported national development over a century by financing micro and SME clients, funding infrastructure development projects, facilitating international trade and remittances and having stood by our customers during most challenging times, HNB remains committed to playing a pivotal role in rebuilding Sri Lanka.”
In line with the reduction in Corporate Tax Rate to 24% from 28%, the current tax liability and the deferred tax asset as at end-2020 were reassessed. Accordingly, the effective tax rate for the period improved compared to the corresponding period of 2020. PAT of Rs. 9.1 billion translated to a Return on Assets of 1.4% and a Return on Equity of 13.2%. Strong second-quarter growth facilitated a 3% expansion in the loan book during the first half to Rs. 839 billion. Total deposits increased to Rs. 1.032 trillion as at end of 1H 2021 recording a growth of 6.7%. The bank is also among the best capitalised and most liquid in the industry as demonstrated by a Tier I Capital Adequacy Ratio of 15.31%, Total Capital Adequacy Ratio of 18.42%, a Liquid Coverage Ratio of 273.7%, and a Loan to Deposit ratio of 81.2%. The CASA ratio also stood at 39.3% as at the end of 1H 2021. Total assets expanded by 3.5% in the six months ended June 2021 to Rs. 1.337 trillion, while Group assets grew to Rs. 1.417 trillion.
All Group companies complemented the bank in enabling the Group to post a PAT of Rs. 9.8 billion and a profit attributable to shareholders of Rs. 9.5 billion. Accordingly, the Group recorded a ROA and ROE of 1.4% and 12%, respectively.
