Hatton National Bank PLC (HNB) showcased strong and sustainable performance in 2023, in all aspects namely liquidity, asset quality, capital, efficiency and profitability amidst global and local economic uncertainties.
Chairman of Hatton National Bank PLC, Nihal Jayawardene, stated that “we commenced the year with optimism, hoping that the worst of the financial crisis was behind us. However, we remained cautious about the uncertainties that prevailed. The Board continued to maintain focus on key risk areas and the opportunities, to navigate through the uncertainty in the operating environment.This enabled us to record robust performance overall”
The Bank’s interest income experienced a YoY growth of 37.2%, reaching Rs 284.1 Bn despite the decline in AWPLR by approx.eight percentage points during the last two quarters of the year, in line with Central Bank’s expansionary monetary policy. Although deposits rates also declined in line, the 12.2% growth in deposits and the term deposits mobilized at higher interests resulted in Interest expense increasing by 72.6% to Rs 179.8 Bn.
The Bank’s net fee and commission income saw a YoY increase of 4.4%, rising from Rs 15.2 Bn to Rs 15.8 Bn, primarily fueled by higher volumes in credit cards, improved remittancesand an increased adoption of our digital banking services.Increased SWAP volumes and therevaluation of on-balance sheet assets with the appreciation of Sri Lankan Rupee during the yearas opposed to the significant depreciation experienced in the previous year,resulted in the Bank recording a net exchange loss for the period.
Having provided Rs 73 Bn on investments in foreign currency denominated government securities up to 2022, the Bank increased its impairment cover up to 52% from 35% on a prudent basis, with an additional provision of Rs 38Bn during the year.
The Bank’s total effective tax rate increased to 52.5%, reflecting the full year’s impact of the increase in corporate tax rate from 24% to 30% and the introduction of the social security contribution levy of 2.5%, which took effect from October 2022.
The Bank recorded a profit after tax of Rs 20.35Bn compared to Rs 14.0 Bn recorded in 2022 while the Group recorded a PAT of Rs 23.6 Bn compared to Rs 15.7 Bn in the previous year.
Managing Director / Chief Executive Officer of HNB PLC Jonathan Alles, stated that “During these most challenging and uncertain times the Bank has focused on sustainable growth ensuring the safety of depositors, facilitating access to finance and business revival for customers, providing fair rewards and recognition for employees, and offering investors a reasonable return for the assumed risk.”
“We also want to groom the next generation of entrepreneurs through dedicated programmes and working with educational institutions at different levels. Simultaneously we will work to attract greatly needed foreign direct investments to optimise the infrastructure in place.”
The Bank’s asset base expanded at 14.4% YoY to Rs 1.9 Trillion as at end of December 2023. However, the Bank witnessed a contraction in gross loan book of 1.8%due to sluggish demand for credit and thecautious approach adopted during the first half with interest being relatively high. On the other hand, the total deposits of the Bank continued its growth trajectory, expanding by 12.2% YoY to Rs 1.6 Trillion.
The Bank reported strong Tier 1 and Total Capital Adequacy ratios of 13.66% and 17.13% against the minimum statutory requirements of 9.5% and 13.5% respectively, with the provision to drawdown a further 250 bps from the Capital Conservation Buffer.
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