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Hatton National Bank PLC (HNB), a leading bank in Sri Lanka’s private sector, has reported a mixed financial performance for the nine-month period ending September 2023. Despite a challenging economic environment marked by falling interest rates and monetary easing by the Central Bank, HNB achieved a pre-tax profit of Rs 26.3 billion and a post-tax profit of Rs 16.6 billion. These figures were bolstered by the Group’s consolidated pre-tax and post-tax profits, which stood at Rs 29.0 billion and Rs 18.8 billion, respectively.
Chairman Nihal Jayawardene highlighted the bank’s significant milestones, including surpassing Rs 1.5 trillion in deposits, a growth of Rs 500 billion since June 2021. This achievement comes even as the bank navigates through a period of declining interest rates. In the third quarter of 2023, HNB’s net interest income fell by 18 percent year-over-year to Rs. 27.18 billion, reflecting the pressure on the bank’s net interest margin due to rising interest expenses outpacing income growth.
Despite these pressures, HNB’s interest income saw an impressive year-over-year growth of 63.5%, reaching Rs 220.7 billion. However, this was offset by a sharp 115% increase in interest expenses, leading to an overall net interest income growth of 17.1% to Rs 83.2 billion for the nine-month period.
The bank has maintained solid asset quality with a net stage 3 ratio at 4.9% and stage III provision cover at 50.7%. However, it faced an impairment charge of Rs 32.4 billion during the first nine months of the year due to loans and advances as well as foreign currency denominated government securities.
Operating expenses rose by 16.1% year-over-year to Rs 26.5 billion, resulting in a cost to income ratio of 28.5%. CEO Jonathan Alles acknowledged the challenges ahead, citing an impending external debt restructuring program due to significant impairment charges since 2022 and an increased effective tax rate over 50%.
The bank’s asset base showed resilience, improving to Rs 1.86 trillion as of end September, with Tier I and Total Capital Adequacy Ratios standing strong at 11.91% and 14.73%, respectively.
While HNB is contending with market headwinds and economic policy shifts, its robust growth in deposits and assets demonstrates resilience in turbulent times. The bank continues to navigate the economic landscape with strategic focus on maintaining asset quality and managing operational costs amidst external challenges.
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