Financial Times

HNB mulls expansion in South Asia
Hatton National Bank (HNB) has ambitious plans to become a financial conglomerate and extend its reach to the South Asian region, its chairman and managing director Rienzie Wijetilleke said.

The bank, one of the biggest domestic private banks, is also overcoming problems caused by heavy capital spending on its head office building and bad loans to two big customers, he told The Sunday Times FT in an interview.

Wijetilleke, who has headed HNB since 1988, was also sharply critical of the alarming increase in crime saying that the deteriorating law and order situation was not conducive to economic growth. He said crime has got completely out of control, with no law and order even in parliament for leaders to lead by example and that law enforcement officers have vested interests.

"There cannot be economic freedom in a country if there is no law and order and discrimination." Wijetilleke said HNB is gearing itself to become "an umbrella organisation" in the financial sector.

"When the present constraints, such as the regulatory restrictions or the operational issues the bank has, get sorted out, we certainly want to play a more dominant role in banking not only in Sri Lanka, but in the region as well. We have already a stregy in place." Wijetilleke said the bank hopes to take advantage of the trade agreements that have been signed and are being negotiated with neighbouring countries such as India, Pakistan, and Bangladesh. "We have a large role to play particularly in financial services.

HNB is ready to take up that role not only in the region, but also in the Middle East as well, since we have a lot of Sri Lankans working in the Middle East." But he said this was subject to the country environment being conducive and provided the bank gets a good return.

Wijetilleke said it was important for the country to have macro-economic stability for at least five years for organisations like HNB to plan and allocate resources for such ambitious expansion projects.

"There are many opportunities in the region for HNB, not only in banking but financial services as well. We are aware of the strengths in India. They have a large trading population. The Middle East, particularly the UAE, is no longer dependent on oil. They are looking at trade. I see many opportunities for trade there."

Sri Lanka should be able to emulate Dubai in catering to India's huge market. "If we can develop agriculture and farming scientifically, there is a large market in India. One percent of the Indian market share is enough to elevate our GDP to a very high level." HNB has diversified into various financial sectors in recent years and intends to further grow business in its stock brokering, money market and insurance subsidiaries.

"Diversification is a must and we have started early. HNB realised we cannot only be doing traditional banking for much longer." The new Rs 5.5 billion head office complex was started when the country was on "a fairly sound footing economically", he said. The bank had benefited with more space and an improved image but the spending had become a strain on the bank's capital although it had got over the initial difficulties in renting out space.

"The benefits of the building will be reaped in the long term." HNB is making some head way in recovering loans to Kabool Lanka and Browns Group. Wijetilleke said HNB was trying to help revive Kabool Lanka but had adopted a "worst-case scenario" and planned to make full provisioning for the loans by end of next year, including the value of the asset.

"There are many opportunities in the region for HNB, not only in banking but financial services as well. We are aware of the strengths in India. They have large trading population. The Middle East, particularly the UAE, is no longer dependent on oil. They are looking at trade. I see many opportunities for trade there."

Sri Lanka should be able to emulate Dubai in catering to India's huge market "If we can develop agriculture and farming scientifically, there is a large market in India. One percent of the Indian market share is enough to elevate our GDP to a very high level."

HNB has diversified into various financial sectors in recent years and intends to further grow business in its stock brokering, money market and insurance subsidiaries. "Diversification is a must and we have started early. HNB realised we cannot only be doing traditional banking for much longer."

The new Rs 5.5 billion head office complex was started when the country was on "a fairly sound footing economically", he said. The bank had benefited with more space and an improved image but the spending had become a strain on the bank's capital although it had got over the initial difficulties in renting out space.

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