Financial Performance 9 M 2018 2 Net Operating Income - Bank 9 M - - PowerPoint PPT Presentation

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Financial Performance 9 M 2018 2 Net Operating Income - Bank 9 M - - PowerPoint PPT Presentation

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Financial Performance 9 M 2018 2 Net Operating Income - Bank 9 M 2018 9 M 2017 Growth (Rs Bn) (Rs Bn) % Interest Income 78.4 71.5 9.6% Interest Expenses 5.5% (41.9) (44.2) NII 34.2 29.6 15.5% Net Fee Income 6.8 6.1 10.8%

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SLIDE 2

Financial Performance 9 M 2018

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SLIDE 3

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%

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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%

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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%

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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%

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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 Fee Income Other Income Impairment Opex Taxes PAT 09M 18

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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 Fee Income Other Income Impairment Opex Taxes Minority Interest PAS 09M 18

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SLIDE 9

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

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  • 200

400 600 800 1,000 2014 2015 2016 2017 09M 17 09M 18 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 09M 17 09M 18 Loans & Deposits Advances Deposits

Rs Bn CAGR Loans 17.3% Deposits 18.7% YoY Loans 14.8% Deposits 10.9%

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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%

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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% Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018

NIM Growth

Bank Group 5 7 9 11 13 15 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018

NII Growth (Rs Bn)

Bank Group

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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 09M 17 09M 18 Fee Income Growth Bank Group

YoY Bank 10.8% Group 9.3% CAGR Bank 19.4% Group 21.1%

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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

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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

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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

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SLIDE 15

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%.

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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

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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

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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

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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)

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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

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SLIDE 19

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

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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