Hatton National Bank PLC (HNB) solidified its position as one of the most sustainable and strongest banks recording a well-rounded performance in 2021. Group Profit After Tax (PAT) increased to Rs 20 Bn, representing a growth of 47% YoY while Bank PAT improved to Rs 17.3 Bn as economic activity picked up during the year.

The monetary policy loosening adopted to spur economic growth post the first wave of the COVID-19 pandemic in 2020 continued to be in place up to August 2021. Although the interest rates increased subsequent to the 50bps increase in policy rates in August, the average AWPLR for 2021 was approximately 160bps below the rate for 2020. This resulted in a decline of 5.1% in interest income to Rs 98.6 Bn, despite a strong loan growth in the second half of the year. Similarly interest expense reduced by 17.2% to Rs 49 Bn, resulting in a Net Interest Income (NII) growth of 10.8% YoY to Rs 49.6 Bn.

Commenting on the performance during the year, Chairperson of HNB PLC Aruni Goonetilleke stated that “2021 was a test of endurance and agility as the COVID-19 pandemic continued to disrupt lives and economic activity. During the tumultuous year, our colleagues around the country, led by our Managing Director/CEO Jonathan Alles and the Management Team have focused on protecting the interests of shareholders, while ensuring the wellbeing of colleagues, supporting our customers and showing solidarity with our communities”.

“I am pleased to note the overall robust performance of the HNB Group during 2021, delivered through sustainable growth and profitability, improved asset quality as well as strong capital and liquidity. The Group was also successful in driving digital adoption through future ready products and services. I wish to place on record my sincere appreciation for the entire Hatna family for their commitment and dedication during testing times, our valued customers for their continuous patronage, our investors and all other stakeholders for their trust and confidence”.

Net Fee and Commission income of the Bank grew by 27.5% YoY to Rs 9.6 Bn driven by higher card and trade business volumes as economic activity rebounded. Other non-interest income grew by 61% to Rs 6.5 Bn, largely due to the position revaluations on account of the deprecation of the LKR by 8% during 2021.

Improvements made with regard to credit underwriting standards, approval processes and recovery action has resulted in further improvements in asset quality reflected by the NPA ratio which improved to 3.38% from 4.31% in 2020 to record one of the best NPA ratios in the industry. The Net Stage III loans ratio also improved by 85 bps to 2.55% as at end of 2021.

The impairment charge for the year increased to Rs 18.8 Bn as significant management overlays were recognized on account of elevated risk industries and a provision of Rs 6.9 Bn was made on account of foreign currency denominated government securities as the sovereign was downgraded to CC by Fitch Ratings.

Total operating expenses increased by only 2.3% YoY mainly due to a 6.1% reduction in personnel costs. The Bank continued its policy of not laying off or cutting salaries due to the pandemic and concluded a very successful collective agreement for the non-executive staff. However, the extension of retirement age to 60 years resulted in a reversal of Rs 2.3 Bn on provision for pension and retirement benefits which led to the drop in personnel expenses. Other operating expenses which account for 52% of total operating expenses increased by 11.4% YoY. However, this was still 3.9% below the pre-pandemic level.

The growth in Total Operating Income at a higher rate of 16.7%, resulted in the cost to income ratio improving considerably to 34.4% compared to 39.3% in 2020.

Commenting on the performance MD/CEO of HNB PLC Jonathan Alles stated that “Humanity has faced the crisis of a generation and HNB has demonstrated remarkable resilience against this backdrop. Our journey over the past 133 years has been through many peaks and troughs . We have continuously strengthened our risk management, compliance and governance, which has helped us overcome challenges. This is testament to our strong and stable performance”.

“HNB has continued to extend support to revive livelihoods. We are pleased to note that many customers have been successful in getting back on their feet as moratoria extended has reduced from 40% of our loan book to 9% as at end of December 2021. Currently the moratoria outstanding is only in the tourism sector, with concessions extended to other sectors ending in 2021. The relaxation of travel restrictions by many countries and high vaccination rate in Sri Lanka augurs well for the tourism sector”.

“Our focus on being future ready and the investments we have made over the past enabled us to support our customers to carry out their transactions seamlessly, through our digital platforms and payment solutions. With evolving customer needs and lifestyles as well as high digital adoption rates owing to the pandemic, we will continue our digital transformation journey to provide an enjoyable banking experience to our customers.”

“Team HNB is at the heart of our business and enhancing the employee value proposition has been a core focus. As we move on, we will continue our efforts on strategic workforce planning, build a strong talent pipeline to operate in a future fit organization, develop future leaders through structured programmes and promote work life balance”. (HNB)