HNB goes to shareholders after six years for biggest fundraiser

• Announces Rs. 15 b Rights Issue; Raised Rs. 13 b in 2016 via debentures and $ 100 m from a foreign bank
• Last Rights Issue in 2011; Latest move comes as Private Placement move of $ 50 m for 10% stake to ADB being battled in Court

Hatton National Bank (HNB), the second largest private sector-owned financial conglomerate, is going to shareholders after a lapse of six years for what would be its biggest fundraising exercise.

The bank on Thursday announced a 1 for 6 Rights Issue, which means it will offer 55.99 million voting shares at Rs. 220 each and 14.08 million non-voting shares at Rs. 190 each. HNB voting shares closed unchanged at Rs. 230 on Friday and non-voting at Rs. 194.70, down by Rs. 2.30. Net assets value per share at the bank level as at 31.12.2016 was Rs. 186.11, up 16% from 2015.

The last time HNB went to shareholders to raise cash (Rs. 7 billion) was in 2011 on the basis of 1 for 10. The original move in 2011 was Rights on the basis of 1 for 6 (to raise Rs. 12 billion) and a private placement of 13.5 million at Rs. 235 each to raise Rs. 3 billion. 

Due to then “developments in equities and debt markets”, HNB dropped the private placement and raised Rs. 7 billion via long-term debt.

The latest move comes while the bank and a group of major shareholders battle in Court over a planned move to raise $ 50 million by way of private placement of 10% stake to Asian Development Bank (ADB) at an average price between Rs. 220 and Rs. 190 per voting share. The opposing shareholders have been maintaining that the bank can always tap shareholders for cash rather than diluting the shareholding or opt for a debt-to-equity arrangement. 

During 2016 the bank also raised Rs. 13 billion by way of two Subordinated Debentures issues of Rs. 7 billion and Rs. 6 billion. Further, the bank also raised $ 100 million as long-term debt from a foreign bank to support its balance sheet growth. The current stated capital of HNB is Rs. 16.79 billion.

HNB said the purpose of the Rights Issue is to strengthen the capital base and the Balance Sheet and to support the overall business growth of the bank.

During 2016, HNB’s Tier I Capital Adequacy improved from 10.53% in 2015 to 11.22% while the Total Capital Adequacy Ratio increased from 12.70% to 15.27%.

The Rights Issue is subject to shareholder and regulatory approval.

In 2016, HNB achieved an outstanding performance on every front culminating in the HNB Group posting the best financial results in its history. Group Profit Before VAT, NBT and Taxes grew by 41.3% to Rs. 27.1 billion while Profit Before Tax (PBT) reached Rs. 22.5 billion with a 39.2% growth. 

Group Profit After Tax (PAT) witnessed an exceptional growth of 41.2% to be recorded at Rs. 15.7 billion. Group assets grew by 19.0% to cross the Rs. 900 billion mark, representing yet another historical milestone for HNB.

The remarkable performance by the bank was the main contributor towards this exceptional performance by the group. The Profit Before VAT, NBT and corporate taxes of the bank increased by 37.1% to Rs. 24.5 billion while PBT improved to Rs. 20.1 billion by 33.9% from Rs. 15.1 billion recorded in 2015, amidst a 54.7% increase in VAT and NBT charge due to the increase in the rate of VAT from 11% to 15%. 

The PAT for the bank also recorded an outstanding growth of 35.4% to Rs. 14.1 billion for the year. 

The Balance Sheet of the bank, which grew by Rs. 133.7 billion to Rs. 858.9 billion, represented an 18.4% increase, which surpassed industry growth of 12%. The bank was also able to grow its lending portfolio by 17.3%, in line with the industry growth of 17.5% for the year. This represented an increase of Rs. 86.1 billion to Rs. 584.4 billion in net loans. The total deposit base of the bank grew by Rs. 96.4 billion to Rs. 623.5 billion, an 18.3% growth compared to the industry growth of 16.5%.