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HNB – the Best Corporate Citizen, continues to deliver sustainable performance

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Chairperson Aruni Goonetilleke and Managing Director/CEO, Jonathan Alles
Chairperson Aruni Goonetilleke and Managing Director/CEO, Jonathan Alles

Hatton National Bank PLC (HNB) demonstrated resilience and a staunch focus on sustainable business performance as it posted Rs 15.7 Bn in Group Profit After Tax during 2022, a year marked by extraordinary circumstances and challenges.

Chairperson of HNB PLC, Aruni Goonetilleke commented that, “The year under review was challenging with many issues. Consequently, HNB remained vigilant, carefully recalibrating its priorities to maintain stability whilst supporting customers and keeping stakeholders closely engaged as the crisis unfolded. This focus is clearly affirmed by our performance”.

“Every crisis is an opportunity for positive change and Sri Lanka’s economic crisis is no different. Banks play a critical role in the country’s efforts to move beyond the current crisis mode to a growth mode and HNB is leading the way in unleashing potential with appropriate checks and balances.”

The Bank’s interest income increased by 110.0% YoY to Rs 207.0 Bn, primarily due to the increase in average AWPLR during the year by over 14 percentage points, consequent to the Central Bank’s restrictive monetary policy to arrest the inflationary pressure in the economy. Interest expense also grew at a similar rate as the high interest rates resulted in an industry wide shift from CASA to term deposits. The resultant net interest income expanded by 107.6% YoY to Rs 102.9 Bn.

The Bank’s net fee and commission income grew by 57.7% YoY to Rs 15.2 Bn driven by higher credit card volumes and trade income. Exchange income also improved significantly as the rupee depreciated by nearly 80% during the year. Factoring in the economic stress the Bank proactively increased its credit related impairments by 168% to Rs 31.2Bn for the year compared to Rs 11.7 Bn in 2021.

Pursuant to the announcement on suspending repayment of foreign currency debt by the government of Sri Lanka, HNB on a prudent basis recognized an impairment charge of Rs 59 Bn in 2022 on account of its investments in foreign currency denominated government securities. Accordingly, the total impairment charge for the year increased to Rs 90 Bn by nearly five folds.

HNB’s total operating expenses recorded an increase of 34.3% for the year. However, the operating expenses for 2021 included a reversal of Rs 2.2Bn on account of provisions made on pension and retirement benefits with the extension of retirement age to 60 years. Excluding this impact, the Bank’s operating expenses recorded an increase of 22%,in the backdrop of inflation peaking at over 70% in September 2022.

Bank’s standard tax rate increased from 24.0% to 30.0% during the year, and a newly implemented Social Security Contribution Levy of 2.5% came in to effect, while VAT on financial services increased from 15.0% to 18.0% w.e.f. January 1, 2022.

The Bank recorded a Profit After Tax of Rs 14.0 Bn compared to Rs 17.3 Bn recorded in 2021 while the Group recorded a PAT of Rs 15.7 Bn compared to Rs 20 Bn in 2021.

Managing Director / Chief Executive Officer of HNB PLC. Jonathan Alles, stated that “following the Easter Sunday attacks in 2019 and two years of the pandemic, year 2022 saw a series of extraordinary events unfolding. Suspension of external debt repayments, sovereign downgrades, significant rupee devaluation, increase in interest rates to 30% level subsequent to policy rate hikes to curb rising inflation, followed by power disruptions and fuel shortages, led to social unrest and political instability. Although the situation has stabilized since, it added significant pressure on asset quality, liquidity and capital levels of the banking sector. “

“We saw the need to reprioritize our strategies to address the crisis at hand. While we were restricted in supporting our customers with their imports during the height of the foreign exchange shortages, we prioritized essential medicine, food, gas imports and education related payments. The situation has improved today and this is demonstrated in our liquidity levels which are above the minimum requirements.”

“We are proud to be the Best Corporate Citizen in Sri Lanka in 2022. Winning this award in a year in which Sri Lanka went through multiple crises affirms that HNB stepped up to play our part as a responsible corporate citizen. In this journey, our people have faced many hardships in delivering our promise to customers and other stakeholders.”

“We remain hopeful that IMF board approval would be finalized soon, boosting investor confidence. In our path to recovery, we will continue to stand by our customers and support the important sectors of the economy in delivering sustainable value to all our stakeholders”.

Tuesday, February 21, 2023 – 01:00

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