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HNB Chairman Dinesh Weerakkody[/caption]
Hatton National Bank PLC (HNB) demonstrated focus on sustainable business performance as it posted Rs 13.7 billion in Group Profit After Tax (PAT) during 2020, a year laden with unprecedented circumstances and challenges. Bank level Profit After Taxes amounted to Rs 11.5 billion.
Commenting on the performance, HNB Chairman Dinesh Weerakkody stated: “2020 has been a year unlike any other in recent memory as the Covid-19 pandemic transformed the socioeconomic landscape dramatically, elevating uncertainty and risks at every level, both locally and globally. We proved our ability to adjust rapidly as we leveraged technology and adapted to the new normal, sharing the responsibility to stay safe as well as keep our communities safe and empowered.”
HNB Managing Director/CEO Jonathan Alles, commenting on the performance, stated: “In the wake of the Covid-19 pandemic, we re-prioritised our focus to ensure that we navigate the uncertainties and risks effectively to safeguard the interests of all our stakeholders. Health and safety, business sustainability, and supporting the customers in need were at the core.”
The accommodative monetary policy adopted by the CBSL to drive economic growth saw AWPLR dropping sharply by over 400bps during the year. Nevertheless, the demand for credit did not pick up as anticipated due to prevailing uncertainty. As a result, the bank’s interest income declined by 10% YoY to Rs. 103.9 billion. The outstanding growth of approx. Rs. 99 Bn in CASA deposits during the year coupled with low interest rates eased pressure on interest costs to a certain extent. However, Net Interest Income of the bank dropped by 9% YoY to Rs. 44.7 billion. Net fee income declined more steeply by 16% YoY to Rs. 7.5 billion as import restrictions, depressed demand in export markets, lower card spends, and particularly during the first wave of Covid, the slow-down in economic activity as well the directions imposed by CBSL to waive off certain fees until September 2020, collectively impacted this channel of income.
[caption id="attachment_121085" align="alignright" width="311"]
HNB Managing Director/CEO Jonathan Alles[/caption]
Lower swap costs and volumes along with exchange rate movements during the year lead to an improvement of Rs. 2.2 billion in net trading gains compared to 2019. The bank also recorded a capital gain of Rs. 1.1 billion through disposal of government securities during the final quarter of 2020.
A facility of over Rs. 11.5 billion to an SOE which was classified as NPA in 2019 was regularised during the last quarter of 2020. This together with the bank’s efforts on improving asset quality enabled HNB to record a marked improvement in its NPA ratio, to 4.3% from 5.9% reported at end of 2019, despite the stressed market conditions. Nevertheless, the bank made prudent provisions taking into consideration factors such as elevated risks in certain sectors and the deterioration in economic conditions. Furthermore, the bank recognised substantial impairment charges on account of its investments in dollar denominated government securities due to the sovereign downgrade by rating agencies. These factors resulted in provisions increasing by 58% to Rs. 15.3 billion for the year ended December 2020.
Given the negative impact on the top line the bank focused on cost optimisation opportunities. This enabled them to record a drop of Rs 1.6 billion in total operating expenses compared to the previous year. Accordingly, the Cost to Income ratio improved to 39.3% despite the drop in operating income.
Profit Before Tax (PBT) amounted to Rs. 15.1 billion while the PAT of Rs. 11.5 billion was 18.3% YoY lower than that reported in 2019.
The bank’s asset base expanded by Rs. 167 billion to Rs. 1.3 trillion while the loan book recorded a moderate growth of 5.5%. The CASA ratio improved to 40% from 35% recorded a year ago, as CASA deposits grew by 35% to Rs. 384 billion. The funding side of the balance sheet was also bolstered by the $ 60 million long term loan from PROPARCO, the French Development Agency. This borrowing will be utilised to fund SME growth in 2021. Despite the substantial moratoria granted, the liquidity levels remained strong with LAR at 39.6% and LCR at 290.3% against the regulatory requirement of 20% and 90% respectively. HNB is also among the best capitalised banks with Tier I and Total Capital Adequacy Ratios of 14.73% and 17.98% respectively, well above the statutory requirement.
Insurance and Investment Banking led contributions from subsidiaries as the HNB Group made PBT of Rs 17.6 billion. Total Group assets rose by 14.5% YoY to Rs 1.4 trillion. The bank declared a final dividend of Rs. 8.00 per share consisting of a cash dividend of Rs. 4.50 and a scrip dividend of Rs. 3.50 per share.
HNB Chairman Dinesh Weerakkody[/caption]
Hatton National Bank PLC (HNB) demonstrated focus on sustainable business performance as it posted Rs 13.7 billion in Group Profit After Tax (PAT) during 2020, a year laden with unprecedented circumstances and challenges. Bank level Profit After Taxes amounted to Rs 11.5 billion.
Commenting on the performance, HNB Chairman Dinesh Weerakkody stated: “2020 has been a year unlike any other in recent memory as the Covid-19 pandemic transformed the socioeconomic landscape dramatically, elevating uncertainty and risks at every level, both locally and globally. We proved our ability to adjust rapidly as we leveraged technology and adapted to the new normal, sharing the responsibility to stay safe as well as keep our communities safe and empowered.”
HNB Managing Director/CEO Jonathan Alles, commenting on the performance, stated: “In the wake of the Covid-19 pandemic, we re-prioritised our focus to ensure that we navigate the uncertainties and risks effectively to safeguard the interests of all our stakeholders. Health and safety, business sustainability, and supporting the customers in need were at the core.”
The accommodative monetary policy adopted by the CBSL to drive economic growth saw AWPLR dropping sharply by over 400bps during the year. Nevertheless, the demand for credit did not pick up as anticipated due to prevailing uncertainty. As a result, the bank’s interest income declined by 10% YoY to Rs. 103.9 billion. The outstanding growth of approx. Rs. 99 Bn in CASA deposits during the year coupled with low interest rates eased pressure on interest costs to a certain extent. However, Net Interest Income of the bank dropped by 9% YoY to Rs. 44.7 billion. Net fee income declined more steeply by 16% YoY to Rs. 7.5 billion as import restrictions, depressed demand in export markets, lower card spends, and particularly during the first wave of Covid, the slow-down in economic activity as well the directions imposed by CBSL to waive off certain fees until September 2020, collectively impacted this channel of income.
[caption id="attachment_121085" align="alignright" width="311"] HNB Managing Director/CEO Jonathan Alles[/caption]
Lower swap costs and volumes along with exchange rate movements during the year lead to an improvement of Rs. 2.2 billion in net trading gains compared to 2019. The bank also recorded a capital gain of Rs. 1.1 billion through disposal of government securities during the final quarter of 2020.
A facility of over Rs. 11.5 billion to an SOE which was classified as NPA in 2019 was regularised during the last quarter of 2020. This together with the bank’s efforts on improving asset quality enabled HNB to record a marked improvement in its NPA ratio, to 4.3% from 5.9% reported at end of 2019, despite the stressed market conditions. Nevertheless, the bank made prudent provisions taking into consideration factors such as elevated risks in certain sectors and the deterioration in economic conditions. Furthermore, the bank recognised substantial impairment charges on account of its investments in dollar denominated government securities due to the sovereign downgrade by rating agencies. These factors resulted in provisions increasing by 58% to Rs. 15.3 billion for the year ended December 2020.
Given the negative impact on the top line the bank focused on cost optimisation opportunities. This enabled them to record a drop of Rs 1.6 billion in total operating expenses compared to the previous year. Accordingly, the Cost to Income ratio improved to 39.3% despite the drop in operating income.
Profit Before Tax (PBT) amounted to Rs. 15.1 billion while the PAT of Rs. 11.5 billion was 18.3% YoY lower than that reported in 2019.
The bank’s asset base expanded by Rs. 167 billion to Rs. 1.3 trillion while the loan book recorded a moderate growth of 5.5%. The CASA ratio improved to 40% from 35% recorded a year ago, as CASA deposits grew by 35% to Rs. 384 billion. The funding side of the balance sheet was also bolstered by the $ 60 million long term loan from PROPARCO, the French Development Agency. This borrowing will be utilised to fund SME growth in 2021. Despite the substantial moratoria granted, the liquidity levels remained strong with LAR at 39.6% and LCR at 290.3% against the regulatory requirement of 20% and 90% respectively. HNB is also among the best capitalised banks with Tier I and Total Capital Adequacy Ratios of 14.73% and 17.98% respectively, well above the statutory requirement.
Insurance and Investment Banking led contributions from subsidiaries as the HNB Group made PBT of Rs 17.6 billion. Total Group assets rose by 14.5% YoY to Rs 1.4 trillion. The bank declared a final dividend of Rs. 8.00 per share consisting of a cash dividend of Rs. 4.50 and a scrip dividend of Rs. 3.50 per share.