HNB’s game changer to global play; three foreign branches in five years
Mr. Damith Pallewatte
Hatton National Bank (HNB) is ready to stamp its brand regionally and make a global play while reengineering banking for Sri Lankans.
To position HNB Bank as an innovative financial solutions provider with aspirations for regional expansion and global outreach, the bank is set to implement a comprehensive strategy that enhances customer experience, aligns with purpose-driven goals, and to leverage technology across diverse sectors, HNB Managing Director/ CEO Damith Pallewatte said.
“It’s important to have a bolder vision as to where we want to end up in the next decade,” Mr. Pallewatte, just 16 days formally into his new responsibility, having been inducted to the role in April 2024, told The Sunday Times Business at an exclusive interview on Wednesday.
He noted that the acquisition of Pakistan-owned Bank Alfalah’s Bangladesh operations, if successful, is expected to be finalised within the first half of next year noting that there is another bidder for the same target. Currently, a non-binding offer by HNB to purchase the bank’s Bangladesh unit has been accepted and the involved parties are in the process of commencing due diligence post-Pakistan and Bangladesh regulators’ clearances. However, to conclude the acquisition HNB would need the approval of all three regulators including the Central Bank, upon submission of a binding offer after the due diligence exercise, Mr. Pallewatte added. “We will endeavour to have our presence in at least a couple of more locations globally over the next five years. We are in advanced discussions in parallel in two other markets to explore the potential and prioritise optimal locations.”
Explaining the rationale for venturing into Bangladesh, he pointed out that the bank that they are acquiring is a 7-branch operation, with 180 people, and a ‘small and sweet’ portfolio. “We are acquiring a bank with a better than average portfolio quality, smaller in size, and a capital adequacy ratio (CAR) of well above the required minimum levels specified by the regulator. We will leverage this acquisition without any need for further capital infusion, and we can drive growth without excessive risk.” Mr. Pallewatte, explaining his plans for the Bangladeshi operation, said that HNB will replicate some of the identified products from its current suite such as Islamic banking products in the Bangladeshi market. “We have 20 per cent of the market share in Islamic products in Sri Lanka and we hope to replicate the same products in Bangladesh. We also have a strong trade finance franchise with over 700 global correspondent bank network. “As opposed to Sri Lanka’s US$80 billion GDP, Bangladesh is at $460 billion, and the opportunity space is huge.”
When queried why it took so much time for HNB to venture out of Sri Lanka as opposed to its peers, Mr. Pallewatte noted the need for a bolder vision along with other fundamentals is intact at the right time. “It is important to have an idea of where you want to be in the next decade. HNB has a 600-basis point of excess buffer in capital and excess liquidity. In terms of asset quality, we are amongst the top three in the industry. This is why we thought of venturing out to make a stamp elsewhere as our fundamentals are strong. Also, the time was right.”
Mr. Pallewatte is joining other young and hungry new CEOs like him in other banks to steer the industry. Explaining the new backdrop that HNB is getting into, unlike the past half a decade where there was a lot of volatility in the economy, now there is more stability on the political front and, a low-interest rate regime, translating into business looking at the longer term in terms of investments etc. “Now it is likely that the government securities banks have invested in will be channelled back into loan growth and should be directed to the correct sectors such as the small and medium enterprises. Low interest rates will also see more demand for housing, which means more mortgages, and also leasing will increase with the vehicle importation embargo being lifted,” he added. He noted that the new CEOs are younger and have more energy and a longer-term vision as they all have more than 10 years of tenure in their current role. “They will drive innovation as they are more digitally savvy. They will have a more pragmatic approach as they cannot be seen as having a myopic vision. When making their decisions, they will be looking more at the industry and country as a whole,” he added.
In preserving and taking forward the 175-year-old legacy of HNB, Mr. Pallewatte and his team will adapt to the changes of time with more innovation and make banking more enjoyable through convenience, accessibility, and choice of products. “Traditionally, HNB’s growth has been aligned with the country’s objectives. We have noticed the new government machinery driving the country objectively, getting the key people in key positions such as in the government’s digital drive. In its anti-corruption agenda, the government is seemingly walking the talk. This will be seen as a huge positive and with low interest rates and banks having excess liquidity, upgraded country rating would have a massive boom in the economy.” The monetary and fiscal sectors are getting better organised, he said, noting that the public debt management bill is a huge win in this regard. On the monetary side, the Central Bank is getting more independent, he added.
Breaking down his broader vision for the bank, Mr. Pallewatte said that he aims to steer it to be an innovative financial solutions provider, serving different segments of the economy while increasing HNB’s market share and having a purpose-driven customer experience for consumers as well as being a regional bank spreading globally.
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