Setting the stage for a new paradigm in banking with HNB

HNB CEO outlines visionary new strategic plan for one of Sri Lanka’s oldest banks

Halfway into 2016 and one of the leading players in the Sri Lankan banking sector, Hatton National Bank PLC (HNB) continues to record impressive growth rates, well above industry averages, across all key performance indicators (KPIs). Having consistently set industry benchmarks through its innovative product portfolio and unparalleled service delivery, HNB is paving the way for a new paradigm in banking through the adoption of cutting-edge technology aimed at disrupting conventional thinking and forging vibrant new avenues of growth. Leading the charge on this groundbreaking initiative, HNB CEO Jonathan Alles outlined his ambitious new vision for his organisation. Following are excerpts:

Could you describe the current positioning of HNB within the banking industry and the impact of that position in terms of the bank’s more recent performance?
HNB continues to command respect within our industry and the country as a whole. Our legacy as one of the best banks in Sri Lanka is a product of consistent refinement and innovation in terms of our product portfolio and superior customer service, complemented by a substantial emphasis on the integration of cutting-edge technology. 

The success of our approach has been amply demonstrated by our financial performance, most recently in the form of our results for the first half of 2016 when we were able to achieve a 54 percent year-on-year (YoY) increase in profit after tax, reaching Rs.7 billion despite the relatively low levels of credit growth. This strong performance was on the back of 2015’s outstanding results where we were able to cross Rs.10 billion in profits during the year – the highest on record for the bank. 

Diligent management of fundamentals is another crucial aspect of HNB’s continuing success. The composition of our loan book enabled the bank to improve its interest margins through repricing while our cost-income ratio was cut by nearly 300 bps YoY to 45.2 percent.
Considering that we were able to significantly revise staff salaries during this time, our reduction in costs stands out as one of several clear examples of the kind of efficiency gains possible through careful strategic planning and execution. Similarly, our non-performing assets ratio dropped to just 2.25 percent - another indicator of our superior asset quality. 

All of these achievements have translated into a strong Return on equity and return on assets, which stood at 19.4 percent and 1.7 percent, respectively. 
While we are greatly encouraged by these results, we also remain cognizant of our need to always look to the future. 
 

What are some examples of this type of technological development and what can we expect in the future? 
HNB has always been on the frontlines in terms of technology. Wherever we have been able to identify a tangible benefit to the early adoption of new technologies, we have aggressively pursued them and in most if not all cases, HNB has been the first to introduce such innovations to the domestic market. 

A recent example of our attitude towards technology can be seen in the notable upgrades to our electronic banking proposition. This has enabled distributor and supplier financing facilities as well as online trade financing and payment, cash management and other valued services for corporates and SMEs alike. 

We were the first to introduce an Augmented Reality mobile app to Sri Lanka that allows customers to quickly and conveniently get up-to-date on our products, services and special offers and assistance finding the nearest HNB branch or ATM. 
Similarly we introduced our New World Banking Virtual Reality Experience utilizing the latest Oculus Rift technology, allowing our Sri Lankans to take their first steps into a virtual bank for the first time in 
Sri Lanka.   

These new technologies have significant enterprise level applications and we are working closely with our external partners to develop products that move Sri Lanka towards a more sophisticated digital payment ecosystem. For example: our mobile Point of Sales system Momo is paving the way for a new crop of entrepreneurs to freely and affordably transact with debit and credit cards.     
Between the well-spring of content, products, services and ideas facilitated by the Internet and the sophisticated wireless, augmented and virtual reality technologies, we have been afforded a truly unprecedented opportunity to forge more personalised relationships with our customers. The potential for technology to revolutionize our business has never been greater. Our goal is to be at the vanguard of this technological revolution. 
 

How important is the human element towards reaching the goals that you have set out? 
One of our main challenges is one of human resources. We need to ensure that our key positions are filled by the right people who are passionate and motivated to succeed. In that context, we have already made excellent progress building a high-performance team that we are confident will be able to power the next phase of growth for the bank. 

Significant efforts are being channelled towards providing our team with the training and skills required to build competencies in their respective verticals. We have also implemented an aggressive succession plan, which is focused around developing our existing talent pool in order to groom the next generation of leaders for HNB. 

Moving beyond training and development, we are developing an approach that emphasizes talent management. In this manner we aim to ensure that each member of the HNB team - from my own position as CEO and below – clearly understands our vision and possesses the required capacity to effectively achieve their deliverables. 
Incentive also plays an important role and our team is among the highest rewarded in the industry. Strong performers are rewarded well above industry standards while similar efforts are also made to develop sales incentive programmes. 

What are the main dynamics driving the type of changes that you have described at HNB?
Our development is fundamentally linked to the development of the Sri Lankan economy as a whole. When we first established operations, the Sri Lankan economy almost completely focused on agriculture and plantations. 
In the century that has since passed, the face of the Sri Lankan economy has changed at practically every level to the point where today, it is the services and industrial sectors that provide the largest contribution to national GDP. 

Hence, it is imperative that HNB too must change and adapt in order to ensure that we don’t just survive, but instead serve as a catalyst for growth and development across all sectors. It is no longer enough to focus only on consolidating our market share and carrying on with a ‘business as usual’ attitude. 

The initiatives that we have initiated are intended to lay a foundation for a radically different approach to banking that will place the customer at the very centre of our operations, enabling them to reach out through any channel they wish to conveniently and intuitively acquire the banking products, services and advise they need to achieve their own goals in life. Our task is to manage this transition and position HNB to be the preferred partner in that journey.    
 

From a macroeconomic perspective, what are some of the main challenges to achieving your vision? 
From a local perspective, there have been many issues related to management of budget deficits, the profitability of state-owned enterprises and development within the SME sector that require urgent attention. We need to be decisive and consistent in the formation and implementation of public policy in order to build confidence in the national economy.

   
The good news is that the government has been able to get the ball rolling on some of these fronts and as we work to sustainably develop the Sri Lankan economy, there are many low-hanging fruits we can target to help us achieve our ultimate goals. 

It is important to increase our tax revenue and bring in new tax streams in order to ease the burden on its more traditional sources of tax revenue. I would also call upon the government to continue with its highly commendable efforts to bring in good governance and streamline the bureaucratic process.

 
Education is another crucial area. We must create opportunities for our youth – particularly in the case of women - to gain access to quality education and equip them with the skills needed to participate in an economy that will be dominated by IT.  Our efforts as a nation must be directed towards the creation of an effective policy framework to address the difficult challenges we face today. This will require new kinds of leadership and co-operation between the public and private sectors.