Investor Upd Investor Update ate 20 August 2019 Financial - - PowerPoint PPT Presentation

Investor Upd Investor Update ate

20 August 2019

Financial Financial Performance Performance 1H 2019 1H 2019

Net Operating Net Operating Income Income - Group Group

Interest Income Interest Expenses NII Net Fee Income Net Insurance Premium Impairment Net Operating Income 2019 (Rs Bn) 2018 (Rs Bn) Growth % 63.6 34.4 29.2 4.9 3.9 7.0 31.0 55.0 30.1 24.9 4.8 3.5 3.8 30.9 16% 14% 17% 3% 11% 86% 0.4%

4

Other Income 0.02 1.5 99%

Expen Expenses ses & & Profits Profits - Group Group

Operating Expenses Profit Before VAT & Taxes Total Taxes PAT 2019 (Rs Bn) 2018 (Rs Bn) Growth % 18.1 12.9 7.8 5.1 15.3 15.6 7.4 8.3 19% 17% 5% 38% Profit Attributable to Shareholders 4.9 7.8 37%

5

Net Operating Net Operating Income Income - Bank Bank

Interest Income Interest Expenses NII Net Fee Income Other Income Impairment Net Operating Income 2019 (Rs Bn) 2018 (Rs Bn) Growth % 59.0 33.1 25.9 4.4 (0.1) 6.3 24.0 50.9 29.0 22.0 4.4 1.5 3.3 24.5 16% 14% 18% 0.2% 107% 87% 2%

6

Expen Expenses ses & & Profits Profits - Bank Bank

Operating Expenses Profit Before VAT & Taxes Total Taxes PAT 2019 (Rs Bn) 2018 (Rs Bn) Growth % 11.9 12.0 7.2 4.8 10.5 14.0 6.7 7.3 13% 14% 8% 34%

7

Movement Movement in Group in Group Profit Profit Attribut Attributable able to to Sha Shareholders reholders

Rs Bn

+19%

8

+17% +3% +86% (22%) (37%) 7.8 4.9 4.3 0.2 1.1 3.2 2.8 0.4 0.2 2 4 6 8 10 12 14 1H 2018 PAS NII Fee Income Other Income Provisions OpEx Taxes Minority 1H 2019 PAS +5% (53%)

Movement Movement in Bank P in Bank Profit After Tax rofit After Tax

Rs Bn

+13%

9

+18% +0.2% +87% (107%) (34%) +8% 7.3 4.8 3.9 0.01 1.6 2.9 1.4 0.6

• 2

4 6 8 10 12 14 1H 2018 PAT NII Fee Income Other Income Provisions OpEx Taxes 1H 2019 PAT

DuPont An DuPont Analys alysis is – Group Group

ROE 7.31% (12.52%) ROA 0.90% (1.60%) NII 5.11% (4.83%) Other income 1.55% (1.91%) Impairment 1.23% (0.73%) Operating Costs 3.17% (2.97%) Taxation 1.37% (1.44%) Leverage Multiplier 8.50x (8.27x) Minority Interest 0.04% (0.09%)

1H 2019 1H 2018

10

DuPont An DuPont Analys alysis is – Bank Bank

ROE 8.17% (13.21%) ROA 0.89% (1.50%) NII 4.79% (4.49%) Other income 0.80% (1.21%) Impairment 1.16% (0.68%) Operating Costs 2.21% (2.15%) Taxation 1.34% (1.36%) Leverage Multiplier 9.19x (8.83x)

1H 2019 1H 2018

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Performance of Group C Performance of Group Compani

• mpanies

es

PAT - Rs 288 Mn ROE – 9.8%

60% Insurance

PAT- Rs 337 Mn ROE – 13.9%

51% (voting) Microfinance

PAT - Rs 165 Mn ROE - 7.6% PAT - Rs 140 Mn ROE - 4.0%

50% Investment Banking 100% Real Estate

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Strong Strong Core Banking Core Banking Amid Cha Amid Chall llenge enges

Balanced portfolio with 53% in higher yielding segments Supported by low cost CASA of Rs 266 Bn Prudent ALM Management drives NIM despite slow loan growth and rates falling late in 2Q.

5.1% 5.2% 5.5% 5.7%

0% 1% 2% 3% 4% 5% 6% 7% Q2 2018 Q3 2018 Q4 2018 Q1 2019 Q2 2019

Consistent & Superior NIM

Bank Group 12.9 14.6

5 10 15 20 Q2 2018 Q3 2018 Q4 2018 Q1 2019 Q2 2019

NII Growth (Rs Bn)

Bank Group SME & Micro 31% Mid Size Corporates 4% Large Corporates 43% Retail 22%

Diversified Loan Book

Non Fund Income Non Fund Income

• Net fee Income amounts to 15% of Bank TOI
• Fees and Insurance income collectively contribute 23% to Group TOI

Cards, ATM & Digital 32% Trade 19% Current Accounts 18% Guarantees 8% Remittances & Int'l 5% Others 18%

Bank Fee Income

NII 75% Fee Income 13% Insurance Premium 10% Others 2%

Group TOI (prior to trading losses)

Operati Operational

• nal Exc

Excelle ellence nce

• Group and Bank Cost to Income ratios improve by

nearly 10% between 2015 and 2018

• % changes in 1H OpEx exceed % changes in TOI;

lead to marginal increase in Cost/Income ratios

CAGR 15-18 TOI 20% OpEx 11%

15% 20% 25% 30% 35% 40% 45% 50% 55% 2015 2016 2017 2018 1H 2019

Cost to Income

Bank Group Industry 28 30 11 12

• 5

10 15 20 25 30 35

• 10

20 30 40 50 60 70 2015 2016 2017 2018 1H 2018 1H 2019

Bank - TOI vs. Opex (Rs Bn)

Bank TOI Bank Opex 35 38 15 18

• 5

10 15 20 25 30 35 40 45

• 10

20 30 40 50 60 70 80 2015 2016 2017 2018 1H 2018 1H 2019

Group - TOI vs. Opex (Rs Bn)

Group TOI Group Opex CAGR 15-18 TOI 21% OpEx 13%

Asse Asset t Qualit Quality y & Credi & Credit Cost t Cost

• Stressed operating conditions within the Agri

and Construction sectors precipitated NPA crisis.

• Proactive steps taken and and dedicated vertical

specializing in underwriting set up.

• Despite worsening of scenario post 21/4 attacks,

HNB has been able to curtail and bring NPA down during June.

• Concentration risk remains low with well

diversified loan book

• Construction & Infrastructure collectively at 16%
• nly.

Agri, forestry & Fishing 7% Construction & Infra Dev 16% Consumption 11% Financial Services 10% Healt Care & Support 10% Manufacturing 11% Tourism 6% Wholesale & Retail Trade 20% Others 9%

Sector wise Loans

0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 2015 2016 2017 2018 Mar-19 May-19 Jun-19

Gross NPA

Bank Corporate Segment SME Segment

Sound C Sound Capit apitali alizati zation

• n
• Capital Adequacy maintained above requirements despite higher credit costs and taxes affecting internal capital generation.
• Impending Debenture Issue of Rs 7 Bn to strengthen Total Capital

13.0% 10.0%

0% 2% 4% 6% 8% 10% 12% 14% 16% 18% 20% 2015 2016 2017 2018 1H 2019

Total Tier I

Total Tier I Minimum - DSIB DSIB – Banks with assets above Rs 500 Bn 15.6% 14.0%

0% 2% 4% 6% 8% 10% 12% 14% 16% 18% 20% 2015 2016 2017 2018 1H 2019

Total Capital

Total Tier I Minimum - DSIB

Taxes and Taxes and Levies Levies

17% 48% 2% 0% 28%

VAT NBT DRL Corp Tax Total Tax

Tax Breakup – 1H 2018

19% 60% 2% 10% 29%

VAT NBT DRL Corp Tax Total Tax

Tax Breakup – 1H 2019

• Effective Total Tax rate of 48% in 1H

2018 on Bank Operating Profit.

• 10% DRL in 1H 2019 drives Total Tax

rate to 60%

Posit Position ion Analys Analysis is

696 725 741 793

• 200

400 600 800 1,000 2015 2016 2017 2018 1H 2018 1H 2019

Loans & Deposits (Rs Bn)

Loans Deposits

• 1,000

2,000 3,000 4,000 5,000 6,000 2015 2016 2017 2018 1H 2019

Private Credit Extended by Commercial Banks (Rs Bn)

• YoY growth in loan book and deposits amount to 4.2% and 7% respectively
• 3% & 1% negative growth during 1H for Loans and deposits respectively
• Negative loan Growth during 1 H as Bank focusses on NIM and NPA management - Mirrors industry flat growth trend

Shar Shareholder eholder Ret Return urn

Annualized EPS (Rs) 19.67 BVPS (Rs) 272.95 PBV Voting 0.49 PE Voting

6.84

Total Dividends (Rs)

8.50

Dividend Yield (%) 6.3 (N) & 7.0 (X)

20

50 100 150 200 250

12 Month Share Movement - Rs (Aug 18/19)

Voting Non Voting

Than Thank k you 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 21