Sri Lanka’s HNB Group records Rs. 23.7 b PAT by Q3
The Morning: Hatton National Bank PLC (HNB) Group recorded a profit-after-tax (PAT) of Rs 23.7 billion, witnessing a year-on-year (y-o-y) growth by 26%, while the bank’s PAT increased by 34% y-o-y to Rs. 22.2 billion for the nine months ended September.
Acting Chief Executive Officer Damith Pallewatte said: “Sri Lanka’s key macro variables continued to move in the right trajectory during the first nine months of the year. However, at bank level, these variables resulted in mixed financial outcomes. The overall improvement in the operating environment created an environment for businesses and individuals leading to better credit growth and debt serviceability by the borrowers.”
“However, steep drop in market rates impacted both yields from the loans and advances and investment portfolio negatively exerting pressure on interest margins. While strengthening of the rupee against the US dollar resulted in improved economic activity on the imports front, this also resulted in the bank having to recognise an exchange loss on the revaluation of foreign exchange reserves. Nonetheless, in this backdrop, the bank’s core focus remained on sustainable growth through responsible lending, mobilisation of low-cost deposits, growing non-interest income and improving asset quality,” Pallewatte added.
A decline in AWPLR by nearly 50% compared to last year and remaining at an average level of 10% for the first nine months directly reflected in the loan yields as the loan book re-priced at lower rates leading to a considerable 25% decline in gross interest income for the period.
The interest expense also recorded a 29% drop in line, supported by the strong growth in CASA deposits. The resultant NII for the period was recorded at Rs. 68.5 billion, reflecting an 18% y-o-y contraction.
The net stage 3 ratio improved to 3.32% while the stage 3 provision coverage ratio improved to 60.50%, during the quarter, compared to 4.09% and 56.08% recorded in 1H24.
The total impairment charge for the nine months amounted to Rs. 3.2 billion, compared to Rs. 32.4 billion for the same period in 2023. The impairment charge for the previous period included an amount of Rs. 25 billion on account of the bank’s investments in international sovereign bonds (ISBs).
With the agreement on the external debt restructuring, in line with the industry practice, the bank maintained its provision cover of 52% on the investments in ISBs. This together with the positive movement in stage-wise loans, led to a significant reduction in the impairment charge for the period.
OSL take:
A strong banking network is a pre-requisite for an emerging economy, especially one that is targeting on achieving hub status in the South Asian region. It is in such a backdrop that local banks are posting strong growth and profits. The strength, resilience and growth shown by Sri Lanka’s banking sector even during challenging economic conditions faced by the country in the past few years ensures foreign businesses/investors looking at doing business in Sri Lanka with financial security. Sri Lankan banks are fully-prepared to facilitate foreign funds while also increasing lending for foreign collaborations in the country. Given that Sri Lanka’s economy is on a growth path with an expansion in business/investment opportunities in the key economic sectors in the country, foreign businesses/investors could explore the expanding opportunities and also look at setting up bases in Sri Lanka to engage with other countries in the region using the preferential treatment enjoyed by Sri Lanka with many other countries.
| Article Code : | VBS/AT/28112024/Z_3 |