Like most banks, challenging year’19 at HNB
View(s):HNB PLC weathered external headwinds in 2019 to post Rs.15 billion in group post-tax profit (PAT) and Rs.14 billion in bank PAT and remains the best capitalised bank in the sector.
In his review, HNB Chairman Dinesh Weerakkody said: “The year that preceded us has been extremely challenging with global trade friction contributing to a sombre global economic outlook and the unexpected Easter Sunday attack in Sri Lanka precipitating a macro economic slowdown locally. Despite these challenges, the HNB Group displayed noteworthy resilience and continued to focus on the transformation agenda.”
Commenting on the performance in 2019, Managing Director/CEO Jonathan Alles stated that, “the operating environment necessitated a prudent revision of our aggressive growth plans and making the right choices became a key imperative. We focused our efforts on enhancing the governance structure, credit culture and laying a sustainable framework to improve asset quality. Simultaneously we drove the transformational journey that we embarked upon in May 2018 with much passion. While the impact of many projects will become visible only next year, at the halfway point we have garnered success on many fronts, in creating a ‘future ready organisation’. ‘SOLO’ the payment app, rolling out a new branch operating model, significant improvements in turnaround times in delivery and technology upgrades which are in progress are a few such examples”.
In a media release, Mr. Alles said that the removal of the Debt Repayment Levy, NBT and the reduction in corporate taxes with effect from April 2020, would provide more capacity for the banking sector to support national development.
Sluggish economic conditions that prevailed resulted in a muted demand for credit, drop in margins due to the introduction of interest rate ceilings and the cautionary approach exercised by the bank towards growth resulted in a subdued growth in Net Interest Income (NII). During the year, the NII grew by 3.4 per cent to Rs.49.2 billion for the bank and by 5.1 per cent to Rs.56.4 billion for the group.
The measures introduced to curtail import of motor vehicles and non-essential consumer goods, lower card and POS transactions due to drop in tourist arrivals resulted in the bank’s Net fee and Commission income dipping by 4.3 per cent to Rs.9 billion, for the year under review (2019).
Operating expenses of the bank increased by 7.6 per cent YoY to Rs.23.8 billion and the cost to income ratio slid to 39.7 per cent from 36.4 per cent in 2018, reflecting expenses incurred under the bank’s transformation programme and aggravated by the relatively low earnings growth in 2019.
Retail banking saw a strong growth of 11.4 per cent in loans and advances despite the market conditions. Nevertheless, due to the slowdown in demand for corporate loans and the bank’s cautious approach towards stressed sectors, overall levels of loans and advances remained flat at Rs.772 billion.