Financial Performance

9 M 2018

2

Net Operating Income - Bank

Interest Income

Interest Expenses

NII

Net Fee Income

Trading Gain/Loss

Net Gain from Financial

Investments

Other Operating Income

9 M 2018

(Rs Bn)

9 M 2017

(Rs Bn) Growth

%

78.4

(44.2)

34.2

6.8

(1.2)

0.2

3.4

71.5

(41.9)

29.6

6.1

(2.8)

0.2

2.8

9.6%

5.5%

15.5%

10.8%

55.3%

7.0%

23.3%

3

Expenses & Profits - Bank

Impairment

Net Operating Income

Operating Expenses

VAT & NBT

PBT

Income Tax

PAT

9 M 2018

(Rs Bn)

9 M 2017

(Rs Bn) Growth

%

(3.6)

39.8

(16.0)

(4.5)

19.3

(6.2)

13.1

(2.3)

33.7

(14.6)

(3.7)

15.4

(4.5)

10.9

57.3%

18.2%

10.0%

21.0%

25.4%

37.0%

20.6%

4

Net Operating Income - Group

Interest Income

Interest Expenses

NII

Net Fee Income

Trading Gain/Loss

Net Gain from Financial

Investments

Net Insurance Premium

9 M 2018

(Rs Bn)

9 M 2017

(Rs Bn) Growth

%

84.7

(46.0)

38.7

7.3

(1.3)

0.3

5.5

77.1

(43.2)

33.9

6.7

(2.7)

0.2

4.6

9.8%

6.4%

14.1%

9.3%

54.1%

35.5%

17.9%

Other Operating Income 3.6 2.5 42.1%

5

Expenses & Profits - Group

Impairment

Net Operating Income

Operating Expenses

VAT & NBT

PBT

Income Tax

PAT

9 M 2018

(Rs Bn)

9 M 2017

(Rs Bn) Growth

%

(4.2)

49.9

(23.7)

(4.8)

21.5

(4.5)

14.5

(2.9)

42.3

(21.6)

(4.0)

16.8

(3.2)

11.8

43.6%

17.9%

9.7%

19.4%

28.1%

41.1%

22.7%

Profit Attributable to

Shareholders 13.9 11.3 22.7%

6

Financial Performance – Bank

Rs Bn

+15.5% +10.8%

+1021.4% +57.3%

+10.0%

+29.8%

+20.6%

7

10.9

13.1

4.6

0.7

2.2 1.3

1.5

2.4

-

2.0

4.0

6.0

8.0

10.0

12.0

14.0

16.0

18.0

20.0

PAT 09M 17 NII Net FeeIncome

Other Income Impairment Opex Taxes PAT 09M 18

Financial Performance – Group

Rs Bn

+14.1% +9.3%

+73.0% +43.6% +9.7%

+31.3%

+21.8% +22.7%

8

11.3

13.9

4.8

0.6

3.5 1.3

2.1

2.8

0.1

-

5.0

10.0

15.0

20.0

25.0

PAS 09M 17 NII Net FeeIncome

OtherIncome

Impairment Opex Taxes MinorityInterest

PAS 09M 18

Profitable Balance Sheet Growth

Group & Bank balance sheets above a

Trillion

09 month loan growth of 12.3%, Deposits up 10.7%

Bank lending book surpasses Rs 700 Bn in 3Q

9

-

200

400

600

800

1,000

2014 2015 2016 2017 09M17

09M18

Asset Growth

Bank

Group

CAGR

Bank 18.6%

Group 19.1%

YoY

Bank & Group

8.6%

Rs Bn

-

100

200

300

400

500

600

700

800

2014 2015 2016 2017 09M17

09M18

Loans & Deposits

Advances

Deposits

Rs Bn

CAGR

Loans 17.3%

Deposits 18.7%

YoY

Loans 14.8%

Deposits 10.9%

Profitable Balance Sheet Growth

Bank NIM up by 25 bps during quarter, Group by 23 bps

Exposure to higher yielding segments

Bank 16.0% YoY

Group 14.8% YoY

Bank 5.31%

Group 5.74%

10

64%

36%

LKR Deposit Mix

Other

CASA

44%

56%

Lending Mix

Large Corporates

Retail & MSME

3.0%

3.5%

4.0%

4.5%

5.0%

5.5%

6.0%

Q32017

Q42017

Q12018

Q22018

Q32018

NIM Growth

Bank

Group

5

7

9

11

13

15

Q32017

Q42017

Q12018

Q22018

Q32018

NII Growth (Rs Bn)

Bank

Group

Fee Income

Leadership in card merchant acquiring business with 45% of market share

Strong growth in core sources of Credit Cards and Trade Finance

Fees contribute 16% of total operating income

Rs Bn

11

18%

31% 22%

11%

11% 7%

Sources of Fees

Loans

Cards

Trade and remittances

Deposits

Guarantees

Others -

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

9.0

10.0

2014 2015 2016 2017 09M17

09M18

Fee Income Growth

Bank

Group

YoY

Bank 10.8%

Group 9.3%

CAGR

Bank 19.4%

Group 21.1%

Operational Excellence

100% of retail applications processed centrally

Centralized Disbursements

Central Security Repository

Paperless Office Systems

Group Cost to Income improves nearly

400 bps YoY to 43.9%

Bank’s Cost to Income better by 360 bps YoY to 36.9%

12

20.0%

25.0%

30.0%

35.0%

40.0%

45.0%

50.0%

55.0%

60.0%

2014 2015 2016 2017 09M 18

Cost to Income

Bank

Group

-

1.0

2.0

3.0

4.0

5.0

6.0

-

10.0

20.0

30.0

40.0

50.0

60.0

70.0

2014 2015 2016 2017 09M 18

Efficiency

Profit/Branch Profit/Staff (RHS)

Rs Mn Rs Mn

Risk and Compliance

Specialization via Centralized Credit Underwriting

Centralized Collection System

Cyber & Information Security, Data Loss

Prevention/Data Classification

Gross NPA slid from Dec 2017 with collections

across industry coming under pressure from

sluggish growth & volatile weather

13

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

2014 2015 2016 2017 09M 18

Gross NPA

3.10%

0.0%

1.0%

2.0%

3.0%

4.0%

Quarterly Gross NPA

9% 11%

6%

18%

18%

10%

9%

12% 7%

Diversified Loan Book

Agriculture

Manufacturing

Tourism

Construction & Infrastructure

Trade

Financial Services

Health Care & Support Services

Consumption

Others

Risk and Compliance

Healthy Balance between sound capitalization & growth

Total Tier I Capital at 13.02%, 427 bps higher than Basel III Minimum

Total Capital Ratio at 15.62%, 275 bps better than Basel requirement

Higher

minimum of

8.75% owing

to BASEL III

14

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

2014 2015 2016 2017 09M 18

Total Tier I Capital

HNB Reg Min

Surge in FY 17 due to Rights

correcting on loan growth

-

20

40

60

80

100

120

140

0.0%

5.0%

10.0%

15.0%

20.0%

2014 2015 2016 2017 09M 18

Total Capital

Capital (RHS) Total Capital Ratio Reg Min

Rs Bn

Profitability

Bank ROA up 16 bps YoY to 1.76%.

Group by 19 bps to 1.84%.

Higher capital and resulting lower leverage

impacts ROE marginally; Reported at

15.57%

Group ROE up 23 bps YoY to 14.62%.

15

1.00%

1.20%

1.40%

1.60%

1.80%

2.00%

2014 2015 2016 2017 09M 18

ROA

Bank Group

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

2014 2015 2016 2017 09M 18

ROE

Bank Group

DuPont Analysis – Bank

ROE

15.57% (16.12%)

ROA

1.76% (1.60%)

NII

4.58% (4.36%)

Other income

1.23% (0.93%)

Impairment

0.48% (0.34%)

Operating Costs

2.15% (2.14%)

Taxation

1.43% (1.21%)

Leverage Multiplier

8.85x (10.06x)

09M 2018

09M 2017

16

DuPont Analysis – Group

ROE

14.62% (14.39%)

ROA

1.84% (1.65%)

NII

4.92% (4.74%)

Other income

1.97% (1.60%)

Impairment

0.53% (0.41%)

Operating Costs

3.02% (3.03%)

Taxation

1.50% (1.26%)

Leverage Multiplier

8.28x (9.09x)

09M 2018

09M 2017

17

Shareholder Return – 12 Months to Nov 2 2018

EPS (Rs) 37.67

BVPS (Rs) 266.39

PBV (X) 0.83

PE (X) 5.84

DPS (Rs) 8.50

Dividend Yield (%) 3.9 (N) & 5.2 (X)

Voting 09M TSR(%) (8.2)

Non Voting 09M TSR

(%)

(11.5)

ASPI (%) (8.0)

18

0

50

100

150

200

250

300

11/2

/2017

12/2

/2017

1/2

/2018

2/2

/2018

3/2

/2018

4/2

/2018

5/2

/2018

6/2

/2018

7/2

/2018

8/2

/2018

9/2

/2018

10/2

/2018

11/2

/2018

12 Month share Prices (Rs)

Voting

Non Voting

Awards & Accolades 2018

• 'No. 1 Bank in Sri Lanka’ in Banker Global Top

1000 ranking

• ‘Best Retail Bank in Sri Lanka’ for the 10th time by

The Asian Banker

• ‘Best SME Bank’ & ‘Best Digital Bank’ in Sri

Lanka by Asiamoney

• ‘Best Cash Management Bank’ in Sri Lanka by

Asian Banker, Asiamoney and Euromoney

• 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

• ‘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

19

Thank you

Investor Relations Team

Hatton National Bank PLC

Level 16, HNB Towers

479, T B Jayah Mawatha

Colombo 10

Sri Lanka

Email : investor.relations@hnb.lk

Tel : +94 112 661555/1177

20