Hatton National Bank PLC (HNB) posted robust overall performance in 2024, demonstrating marked improvement on all fronts, a media release from the company stated.
Group Profit After Tax (PAT) improved to Rs 44.8 bn in 2024, up from Rs 23.6 bn in 2023 while the Bank’s PAT increased to Rs 41.3 bn, compared to Rs 20.3 bn in the previous year.
Bank recorded a 11.3% YoY growth in loans and advances during 2024. Despite the growth in the loan book, interest income of the Bank experienced a YoY decline of 21.6%, primarily due to the gradual relaxation of monetary policy, which led to the average yields on loans and government securities dropping by nearly 45% in 2024 compared to 2023.
However, the decrease in net interest income was moderated towards the latter part of the year, as the reduction in interest expenses outpaced the drop in income, owing to lower rates and the focus on driving CASA deposits.
Net fee and commission income of the Bank saw a YoY increase of 12.7% to Rs 17.8 bn. Growth in fee income was driven primarily by the growth in transactional volumes across digital platforms and card services compensating for the drop in commission income from trade services. Trade commission dropped by over 25% YoY despite notable growth in trade volumes as the tariffs continued to adjust downwards reflecting higher foreign currency liquidity among the banks. The appreciation of the Sri Lankan rupee against the dollar resulted in an exchange loss of Rs 2.9 bn.
The gradual improvement of the economic environment supported by the concerted efforts on rehabilitation and recovery efforts led to much improved asset quality. This resulted in positive movements in stage 2 and stage 3 loans. Nevertheless, on a prudent basis the Bank recognised a total impairment of Rs 11.5 bn on loans and receivables. The Bank’s Net Stage 3 ratio improved to 1.88% from 3.76% in the previous year, while the Stage 3 Provision Coverage ratio improved to 74.4%, from 57.5% in 2023.
With the International Sovereign Bond (ISB) restructure in December 2024, the Bank opted for the ‘Local option’, which included 30% of the ISB exposure being exchanged to rupee bonds, with the balance 70% in USD bonds being subject to a 10% haircut. As a result, the Bank reversed the provisions of Rs 91.6 bn that had been made previously on account of the exposure to ISB.
Simultaneously the Bank recognised a loss of Rs 49.5 bn as losses arising from derecognition of ISBs which included the haircut on previously held ISBs and the day one loss on the new instruments. The restructure resulted in an increase of Rs 38.0 bn in profit before taxes. With the reversal of the impairment provisions made previously on ISBs, a net deferred tax asset of Rs 26.2 bn was charged resulting in a net positive impact of Rs 11.8 bn in PAT. Excluding the impact of the ISB restructure the YoY growth in Bank’s PAT would be 45% YoY.
In 2024, the Bank’s Asset base exceeded Rs 2.0 tn, a 7.5% YoY expansion. Total Gross Loans and Advances grew by Rs 117.8 bn during the year, reaching a total of Rs 1.16 Tn despite a Rs 26.5bn drop witnessed in the first quarter of 2024.
The Bank’s deposit base increased by 8.6% YoY to Rs 1.7 tn. CASA deposits led this growth, with an impressive increase of Rs 113.5 bn, raising the CASA ratio to 34.2% from 29.9% in 2023.
The Bank recorded strong capital buffers with Tier 1 and Total Capital Adequacy ratios at 19.59% and 23.96%, against the minimum statutory requirements of 9.5% and 13.5%. This increase was driven by higher profitability, a Tier II capital infusion, and the favourable impact on capital from the reversal of deferred tax assets due to the reversal of provisions on ISBs.
On February 21, 2025, the Board of Directors of HNB PLC proposed a final cash dividend of Rs 15 per share, applicable to voting and non-voting shares, subject to approval of the shareholders.
