Stability and sustainability underpin HNB 1Q

• Strong CASA growth, improved NPA, enable resilient 1Q performance  
• Fully geared to support economic and businesses revival efforts  
• Urges authorities to make vaccinations available to all, especially frontline bank staff  

Hatton National Bank (HNB) recorded a profit after tax (PAT) of Rs.4.7 billion during the first quarter of 2021, while the profit before income tax (PBT) amounted to Rs.5.5 billion. At group level, PBT and PAT were at Rs.5.9 billion and Rs.4.8 billion, respectively.  

The substantial monetary loosening adopted to revive the pandemic-hit economy resulted in the AWPLR dropping by nearly 400 bps over the past 12 months. This resulted in the interest income decreasing by 13 percent year-on-year (YoY) to Rs.23.7 billion. 

Interest expenses too exhibited a decline of 17.2 percent YoY to Rs.13.1 billion, driven by strong current accounts and savings accounts (CASA) mobilisation. The CASA ratio improved from 36.2 percent in March 2020 to 39.7 percent by end-1Q 2021, as the CASA base grew by 30 percent YoY to Rs.395 billion. As a result, the bank’s net interest income (NII) for the first three months of 2021 decreased by 7.2 percent YoY to Rs.10.6 billion.  

Commenting on the bank’s results, HNB Managing Director/CEO Jonathan Alles stated, “HNB has demonstrated resilience, strength and stability during a year of unprecedented disruption. We are grateful for the complete trust and support of our customers, investors and other stakeholders throughout this time. I also wish to place on record my deepest appreciation for the unwavering dedication of our staff in continuing to serve our clientele through multiple waves of the pandemic, despite the inherent risks involved. Our top priority during this time was to ensure their safety while supporting the customers affected by the pandemic.”

The net fee and commission income for the first quarter grew by 10.2 percent YoY to Rs.2.3 billion, as business activity rebounded during the period. The credit cards business, trade and remittances, which constitute a major share of fees, performed well despite the restrictions on imports continuing to be in place. Other fee sources, which also encompass digital business lines, rose by 24.4 percent YoY. 

The exchange rate volatility and movements during the period led to substantial revaluation gains on swaps and forward agreements. Swap costs were also lower relative to the corresponding quarter of 2020, as swap premiums declined in line with dollar interest rates. Accordingly, the bank recorded a net exchange gain of Rs.1.9 billion, which was a 53 percent YoY improvement compared to 1Q 2020. 

The total dividend income from investments for 1Q 2021 was Rs.421 million, compared to Rs.13 million in the corresponding period of 2020, as dividends declared for the financial year 2019 were paid only in 2Q 2020, due to the pandemic.  

The NPA ratio of the bank improved marginally to 4.28 percent as at end-1Q 2021, compared to 4.31 percent as at end-December 2020, as majority of customers who were previously under moratorium commenced repayments since October 2020. The impairment charge for the quarter ended on March 31, 2021 was Rs.2.7 billion in comparison to Rs.4.7 billion recorded for 1Q 2020. The impairment for 1Q 2020 included a charge of Rs.708 million on account of sovereign bonds mainly as a result of the sovereign downgrade that was effected in April 2020. 

The zealous focus on cost optimisation facilitated a marginal one percent YoY dip in operating costs to Rs.5.8 billion. Cost to income was hence improved by a commendable 170 bps relative to the comparative period in 2020 to 38 percent for 1Q 2021. 

The PBT amounted to Rs.5.5 billion and was subjected to the reduced income tax charge of 24 percent in comparison to the 28 percent tax charge that was applicable previously. Accordingly, the profit after tax for the bank improved to Rs.4.7 billion by 78 percent during 1Q 2021. 

The bank’s assets crossed Rs.1.3 trillion as at quarter end with the gross loan book at Rs.808.3 billion. Total deposits grew to Rs.996.1 billion, recording an impressive Rs.155 billion growth (18.4 percent YoY) over the 12-month period since March 2020.  

As one of the best capitalised banks in the industry, the bank reported Tier I and total capital adequacy ratios of 14.82 percent and 17.88 percent, respectively. Similarly, HNB’s liquidity levels continued to be strong and well ahead of regulatory minimum requirements with statutory liquid asset and all currency liquidity coverage ratios at 39.98 percent (against a 20 percent requirement) and 271.79 percent (against a 100 percent requirement), respectively. 

The HNB group recorded a PBT of Rs.5.9 billion and a PAT of Rs.4.8 billion for the quarter ended in March 2021, recording a growth of 35.7 percent YoY and 46.7 percent YoY, respectively. Total assets of the group increased to Rs.1,388 billion as at March 31, 2021.