Hatton National Bank 1H 2018 Performance
1H 2018 (Rs Bn) 1H 2017 (Rs Bn) Growth % Interest 51.0 46.5 9.6% Interest Expenses (29.0) (27.4) 5.6% Net Operating NII 22.0 19.1 15.3% Net Fee 4.4 4.1 8.8% Net Trading Gain/Loss Net Gain from Financial Investments (1.4) (0.9) 61.7% 0.2 0.2 6.2% Other Operating 2.7 1.3 103.6% 2
1H 2018 (Rs Bn) 1H 2017 (Rs Bn) Growth % Impairment (1.9) (1.5) 32.6% Expenses & Profits Net Operating Operating Expenses 26.0 22.4 16.3% (10.5) (9.9) 6.7% VAT & NBT (2.9) (2.5) 18.4% PBT 12.6 10.0 25.2% Tax (4.0) (2.9) 36.7% PAT 8.6 7.1 20.6% 3
1H 2018 (Rs Bn) 1H 2017 (Rs Bn) Growth % Interest 55.1 50.2 9.8% Interest Expenses (30.1) (28.2) 6.7% Net Operating NII 25.0 22.0 13.8% Fee 4.8 4.4 8.6% Trading Gain/Loss (1.4) (0.9) 66.8% Net Gain from Financial Investments Net Insurance Premium Other Operating 0.2 0.2 19.8% 3.0 3.5 16.9% 2.7 1.0 157.7% 4
1H 2018 (Rs Bn) 1H 2017 (Rs Bn) Growth % Impairment (2.3) (1.9) 21.6% Expenses & Profits Net Operating Operating Expenses 32.4 27.8 16.5% (15.3) (14.4) 5.9% VAT & NBT (3.1) (2.7) 17.2% PBT 14.1 10.8 30.7% Tax (4.5) (3.2) 39.5% PAT 9.6 7.5 26.9% Profit Attributable to Shareholders 9.1 7.2 25.8% 5
Rs Bn 12.0 10.0 +15.3% +8.8% 0.4 +134.7% +32.6% 0.8 0.5 +6.7% 0.7 +28.3% 1.5 +20.6% 8.0 2.9 6.0 4.0 7.1 8.6 2.0 - PAT 1H 2017 NII Net Fee Other Impairment Charges Operating Expenses Taxes PAT 1H 2018 6
Rs Bn 14.0 12.0 10.0 8.0 +13.8% +8.6% 0.4 3.0 +47.3% +21.6% +5.9% 0.4 1.6 0.8 +29.4% 1.7 +53.4% 0.2 +25.8% 6.0 4.0 7.2 9.1 2.0 - PAS 1H 2017 NII Net Fee Other Impairment Charges Operating Expenses Taxes Minority Interest PAS 1H 2018 7
1H loan growth of 8.9% Rs Bn 1,000 800 600 CAGR Bank 18.6% Group 19.1% Asset Growth YoY Bank 8.6% Group 9.0% Bank asset base crosses Rs 1 Trillion 400 200-2014 2015 2016 2017 1H 2017 1H 2018 Bank Group lending exceeds Rs 700 Bn 800 700 600 CAGR Loans 17.3% Deposits 18.7% Loans and Deposits YoY Loans 11.0% Deposits 10.1% Group 500 400 300 200 100-2014 2015 2016 2017 1H 2017 1H 2018 Loans Deposits 8
Bank NIM up by 16 bps during quarter, Group by 15 bps Rs Bn 14 12 10 8 6 4 2 NII Growth Bank 15.5% YoY Group 14.1% YoY 6.0% 5.5% 5.0% 4.5% 4.0% 3.5% NIM Bank 5.06% Group 5.51% Industry 4.14% Bank Exposure to higher yielding segments - 2Q 2017 3Q 2017 4Q 2017 1Q 2018 2Q 2018 Bank Group 3.0% 2Q 2017 3Q 2017 4Q 2017 1Q 2018 2Q 2018 Group Industry Lending Mix Deposit Mix LKR CASA ratio at 37.2% 52% 48% 64% 36% Industry CASA 33% Wholesale Retail CASA Other 9
Rs Bn 12.0 Fee YoY Bank 8.8% Group 8.6% Rs Bn 5 Leadership in card merchant acquiring business with 45% of market share 10.0 8.0 6.0 4.0 2.0 CAGR Bank 19.4% Group 21.1% 4.8 4.6 4.4 4.2 4 3.8 Bank Strong growth in core sources of Credit Cards and Trade Finance - 2014 2015 2016 2017 1H 2017 1H 2018 Sources of Fee 3.6 Group Fees contribute 16% of total operating income 11% 11% 6% 19% Loans Cards 22% 31% Trade and remittances Deposits Guarantees Others 10
373 bps YoY to 37.7% Group Cost to improves by >450 bps to 44.0% Bank s Cost to better by 373 bps YoY to 37.7% Opex Growth contained to 6.7% while Total Operating reports growth of 17.3% YoY. Profit/Branch Rs 68.6 Mn vs Industry Rs 36.3 Mn Profit/Staff Rs 3.9 Mn vs Industry Rs 2.3 Mn. 60% 50% 40% 30% 20% Rs Mn 70.0 60.0 50.0 40.0 30.0 20.0 10.0 - Cost to 2014 2015 2016 2017 1H 2018 Bank Group Industry Efficiency 2014 2015 2016 2017 1H 2018 Profit/Branch Profit/Staff (RHS) Rs Mn 4.5 4.0 3.5 3.0 2.5 2.0 1.5 1.0 11
Gross NPA slid from Dec 2017 mainly due to weather related constraints and collection delays especially in construction sector 5.0% 4.0% 3.0% 2.0% 1.0% 0.0% Gross NPA 2014 2015 2016 2017 1H 2018 4.0% 3.5% 3.0% 2.5% 2.0% 1.5% 1.0% 0.5% 0.0% Quarterly Gross NPA Bank Industry Quarterly increase of 19 bps in NPA to 2.9% while Industry asset quality dips by 30 bps to 3.3% 11% 9% Diversified Loan Book 3% 12% 9% 11% 7% 20% 18% Agriculture Manufacturing TOURISM Construction Trade FINANCIAL SERVICES Health Care & Support CONSUMPTION Others 12
Total Tier I Capital Healthy Balance between sound capitalization & growth 15.0% 10.0% 5.0% Rights Issue Higher minimum of 8.75% owing to BASEL III Total Tier I Capital at 12.48%, 373 bps higher than Basel III Minimum Total Capital Ratio at 15.22%, 235 bps better than Basel requirement 0.0% 20.0% 15.0% 10.0% 5.0% 2014 2015 2016 2017 1H 2018 HNB Reg Min Total Capital Minimum of 12.875% Rs Bn 120 100 80 60 40 20 0.0% 2014 2015 2016 2017 1H 2018 - Capital (RHS) Total Capital Ratio Reg Min 13
Bank ROA up 16 bps YoY to 1.76%. Group by 24 bps to 1.85%. Industry ROA at 1.22% Higher capital and resulting lower leverage impacts ROE marginally. Group ROE down by 60 bps to 14.60%. Bank ROE at 15.54%. 2.0% 1.8% 1.6% 1.4% 1.2% 1.0% 25.0% 20.0% 15.0% 10.0% 5.0% ROA 2014 2015 2016 2017 1H 2018 Bank Group ROE 0.0% 2014 2015 2016 2017 1H 2018 Bank Group 14
ROE 15.54% (17.73%) ROA 1.76% (1.60%) Leverage Multiplier 8.83x (11.06x) NII 4.51% (4.29%) Other income 1.21% (1.06%) Impairment 0.39% (0.33%) - 1H 2018-1H 2017 Operating Costs 2.15%(2.22%) Taxation 1.41% (1.20%) 15
ROE 14.60% (15.26%) ROA 1.85% (1.61%) Leverage Multiplier 8.27x (9.85x) NII 4.85% (4.70%) Other income 1.91% (1.68%) Impairment 0.46% (0.41%) - 1H 2018-1H 2017 Operating Costs 2.97%(3.09%) Taxation 1.48% (1.26%) 16
EPS (Rs) 36.98 BVPS (Rs) 258.77 PBV (X) 0.87 PE (X) 6.08 DPS (Rs) 8.50 Dividend Yield (%) 3.9 (N) & 5.0 (X) N 1H TSR (%) (6.2) X 1H TSR (%) (4.1) ASPI (%) (5.2) 17
Best Retail Bank in Sri Lanka for the 10 th time by The Asian Banker Best SME Bank, Best Digital Bank & Best Cash Management Bank in Sri Lanka by Asiamoney Gold Award Banking Category & Overall Runner Up - ACCA Sri Lanka Sustainability Reporting Awards Islamic Finance Entity of the Year, Gold Award for Islamic Banking Window of the Year & Silver Award for Islamic Finance Deal of the Year Sri Lanka Islamic Banking & Finance Industry Awards No. 1 Bank in Sri Lanka in Banker Global Top 1000 ranking Silver Award for Investor Relations from CFA Sri Lanka Best Private Sector Organization for Promoting Women in the Workplace Top 50 Professional & Career Women Awards 2018 18
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