Hatton National Bank Investor Presentation 1Q 2018
1Q 2018 (Rs Bn) 1Q (Rs Bn) Growth % Interest 24.9 22.6 10.5% Interest Expenses (14.3) (13.3) 7.2% Net Operating NII 10.7 9.3 15.1% Net Fee 2.2 2.0 11.6% Net Trading Gain/Loss Net Gain from Financial Investments (0.3) 0.5 150.5% 0.2 0.2 6.4% Other Operating 1.0 (0.3) 2
1Q 2018 (Rs Bn) 1Q (Rs Bn) Growth % Impairment (1.1) (0.5) 122.0% Expenses & Profits Net Operating Operating Expenses 12.8 11.3 13.4% (5.0) (4.9) 2.1% VAT & NBT (1.4) (1.2) 15.8% PBT 6.3 5.1 23.6% Tax (1.8) (1.5) 26.5% PAT 4.5 3.7 22.5% 3
1Q 2018 (Rs Bn) 1Q (Rs Bn) Growth % Interest 27.0 24.4 10.7% Interest Expenses (14.9) (13.7) 8.6% Net Operating NII 12.2 10.7 13.4% Fee 2.4 2.2 11.6% Trading Gain/Loss (0.3) 0.5 151.6% Net Gain from Financial Investments Net Insurance Premium Other Operating 0.2 0.2 13.1% 1.8 1.5 17.0% 0.9 (0.3) 4
1Q 2018 (Rs Bn) 1Q (Rs Bn) Growth % Impairment (1.3) (0.4) 186.7% Expenses & Profits Net Operating Operating Expenses 15.9 14.4 10.5% (7.1) (7.2) 1.1% VAT & NBT (1.5) (1.4) 12.2% PBT 7.2 5.8 24.7% Tax (2.2) (1.8) 25.4% PAT 5.0 4.0 24.3% Profit Attributable to Shareholders 4.6 3.8 20.6% 5
Rs Bn 7.0 6.0 5.0 4.0 3.7 1.4 0.5 0.6 0.2 0.1 +11.6% +97.4% +122.0% +2.1% 0.6 +21.6% 4.5 +22.5% 3.0 +15.1% 2.0 1.0 - PAT 1Q 17 NII Net Fee Other Impairment Charges Operating Expenses Taxes PAT 1Q 18 6
Rs Bn 7.0 0.66 0.82 6.0 5.0 1.43 0.25 (0.08) +13.4% +33.7% +186.7% -1.1% 0.62 0.19 4.62 4.0 3.83 +19.6% +91.7% +20.6% +13.4% 3.0 2.0 1.0 - PAS 1Q 17 NII Net Fee Other Impairment Charges Operating Expenses Taxes Minority Interest PAT 1Q 18 7
Quarterly Loan Growth of 5.3% Group Assets up by Rs 37 Bn Bank loan book at Rs 673 Bn Rs Bn 1,200 1,000 800 600 400 200 - Asset Growth CAGR Bank 18.6% Group 19.1% 2014 2015 2016 Q1 YoY Bank 9.8% Group 10.4% Q1 2018 Bank Group Rs Bn 800 700 600 500 400 300 200 100 - Loans & Deposits CAGR Loans 17.3% Deposit 18.7% 2014 2015 2016 Q1 Q1 2018 YoY Loans 9.6% Deposit 13% Loans Deposits Deposit base of Bank grows to Rs 721 Bn by 2.7% Market Share - Loans 10% Market Share - Deposits 9% 90% 91% Industry HNB 8
Exposure to High Yield Segments Bank NIM up by 22 bps YoY, Group by 12 bps Substantial 10% quarterly growth in CASA CASA ratio rises from 35.5% in Dec to 38% (LKR CASA at 39%) Rs Bn 13 12 11 10 9 8 7 6 5 Q1 32% NII Growth Q2 Q3 Lending Mix 21% Q4 47% Bank 15.1% YoY Group 13.4% YoY Q1 2018 Bank Group 6.0% 5.5% 5.0% 4.5% 4.0% 3.5% 3.0% 2.5% 2.0% 62% Q1 Q2 NIM Deposit Mix Q3 38% Q4 Bank 4.9% Group 5.4% Industry 4.1% Q1 2018 Bank Group Industry Corporate SME & Micro Retail CASA Other Deposits 9
Rs Bn vs. Expenses Rs Bn Bank Cost to improves from 41.9% in Q1 to 36.3%. Best among Peers Group Cost to improves from 48.5% to 41.5% over the 12 months Group Operating Expenses decline YoY by 1% 55 50 45 40 35 30 25 20 15 10 55% 50% 45% CAGR TOI 15.3% Expenses 8.3% YoY TOI 17.8% Expenses 2.1% 2014 2015 2016 Q1 Q1 2018 Cost to Ratio 20 15 10 5 - TOI Operating Expenses 40% 35% 30% 25% 20% 2014 2015 2016 Q1 2018 Bank Group 10 Industry
6.0% NPA Ratio 5.0% HNB gross NPA slid slightly from Dec as industry is still witnessing weather related constraints on borrower capacities 4.0% 3.0% 2.0% 1.0% 2013 2014 2015 2016 Mar-18 Bank Industry Well Diversified across sectors Low concentration risk 13% Diversified Loan Book 16% 9% 12% 7% Agri & Fishing MANUFACTURING TOURISM Transport Construction 19% 22% 2% Traders Financial&Buisness Services Others 11
2014 2015 2016 Q1 Q1 2018 2014 2015 2016 Q1 Q1 2018 Bank ROA up 18 bps YoY to 1.84%. Group by 19 bps to 1.96% Bank & Group ROE still relatively lower at 16.4% and 15.1% respectively due to large capital base from rights issue 30 25 20 15 10 5 0 30 25 20 15 10 5 0 Bank Operating Profit & PAT (Rs Bn) CAGR OP 22.9% PAT 22.3% Operating Profit PAT 10 Group Operating Profit & PAT (Rs Bn) CAGR OP 22.2% PAS 17.5% 8 6 4 2-8 6 4 2 0 YoY OP 22.1% PAT 22.5% YoY OP 24.5% PAS 20.6% 2.2% 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 Q1 2018 ROE Bank Group Operating Profit PAS 0.0% 2014 2015 2016 Q1 2018 12
The rights issue funds of Rs 14.5 Bn is the largest such capital raising by a private bank and boosts Capital Total Tier I > 400 bps above minimum Total Capital nearly 300 bps above minimum 14.0% 12.0% 10.0% 8.0% 6.0% 4.0% 2.0% 17.0% 15.0% 13.0% 11.0% 9.0% Total Tier I Capital BASEL III ratios reported since 2014 2015 2016 Q1 2018 Total Capital Higher minimums owing to BASEL III Bank Minimum BASEL III ratios reported since Higher minimums owing to BASEL III 7.0% 5.0% 2014 2015 2016 Q1 2018 Bank Industry 13
ROE 16.43% (18.78%) ROA 1.84% (1.66%) Leverage Multiplier 8.93x (11.32x) NII 4.40% (4.22%) Other income 1.29% (1.12%) Impairment 0.44% (0.22%) - 2018 - Operating Costs 2.06%(2.23%) Taxation 1.35% (1.22%) 14
ROE 15.05% (16.63%) ROA 1.96% (1.75%) Leverage Multiplier 8.36x (10.03x) NII 4.74% (4.64%) Other income 1.95% (1.78%) Impairment 0.49% (0.19%) - 2018 - Operating Costs 2.77%(3.11%) Taxation 1.47% (1.37%) 15
4/28/ 5/28/ 6/28/ 7/28/ 8/28/ 9/28/ 10/28/ 11/28/ 12/28/ 1/28/2018 2/28/2018 3/31/2018 280 260 240 220 200 180 160 140 120 100 Price - 12 Months (N) (X) 4.8% growth vs. Growth : Voting share (1.2%) in ASPI Growth : Non Voting share (2.4%) DPS (Rs) Rs 8.50 Cash DPS Rs 6.50 EPS (Rs) Rs 37.52 BVPS (Rs) Rs 250.79 PBV (X) 0.96 PE (X) 6.42 Total Shareholder Return Voting 8.5% Total Shareholder Return Non Voting 2.0% 16
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 Bank of the Year by The Banker in Top 1000 Banks in the World by The Banker Highest ranked bank in Sri Lanka by LMD and Business Today 5 th Most valued Brand in Sri Lanka by Interbrand Emerging Technologies Led Innovation award HNB FIT account (mid-size bank category) by Infosys India 17
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