For the year ended 31st December 2021
FINANCIAL COMMENTARY FOR THE YEAR ENDED 31ST DECEMBER 2021
Hatton National Bank PLC (HNB) solidified its position as one of the most sustainable and strongest banks recording a well-rounded performance in 2021. Group Profit After Tax (PAT) increased to Rs 20Bn, representing a growth of 47% YoY while Bank PAT improved to Rs 17.3 Bn as economic activity picked up during the year.
The monetary policy loosening adopted to spur economic growth post the first wave of the COVID-19 pandemic in 2020 continued to be in place upto August 2021. Although the interest rates increased subsequent to the 50bps increase in policy rates in August, the average AWPLR for 2021 was approximately 160bps below the rate for 2020. This resulted in a decline of 5.1% in interest income to Rs
98.6 Bn, despite a strong loan growth in the second half of the year. Similarly interest expense reduced by 17.2% to Rs 49Bn, resulting in a Net Interest Income (NII) growth of 10.8% YoY to Rs 49.6 Bn.
Net Fee and Commission income of the Bank grew by 27.5% YoY to Rs 9.6 Bn driven by higher card and trade business volumes as economic activity rebounded. Other non-interest income grew by 61% to Rs 6.5Bn, largely due to the position revaluations on account of the deprecation of the LKR by 8% during 2021.
Improvements made with regard to credit underwriting standards, approval processes and recovery action has resulted in further improvements in asset quality reflected by the NPA ratio which improved to 3.38% from 4.31% in 2020 to record one of the best NPA ratios in the industry. The Net Stage III loans ratio also improved by 85 bps to 2.55% as at end of 2021. The impairment charge for the year increased to Rs 18.8 Bn as significant management overlays were recognized on account of elevated risk industries and a provision of Rs 6.9Bn was made on account of foreign currency denominated government securities as the sovereign was downgraded to CC by Fitch Ratings.
Total operating expenses increased by only 2.3% YoY mainly due to a 6.1% reduction in personnel costs. The Bank continued its policy of not laying off or cutting salaries due to the pandemic and concluded a very successful collective agreement for the non-executive staff. However, the extension of retirement age to 60 years resulted in a reversal of Rs 2.3 Bn on provision for pension and retirement benefits which led to the drop in personnel expenses. Other operating expenses which account for 52% of total operating expenses increased by 11.4% YoY. However, this was still 3.9% below the pre-pandemic level.
The growth in Total Operating Income at a higher rate of 16.7%, resulted in the cost to income ratio improving considerably to 34.4% compared to 39.3% in 2020.
Profit Before Tax (PBT) amounted to Rs 19.8 Bn, a 31,5% YoY increase from the PBT reported in 2020. The total effective tax rate for 2021 was at 28.9% as the income tax rate reduced to 24% from 28% as well as due to reversals of excess provisions from previous years. Resulting PAT of Rs 17.3 Bn generated a ROA of 1.3% and a ROE of 12.1% respectively.
Robust growth in the last two quarters of 2021 led to a gross loan book growth of 14% during 2021, to Rs 929 Bn. On the funding side of the balance sheet deposits grew by 11.1% YoY to Rs 1.1Trillion. CASA grew at a higher pace of 15% YoY improving the CASA ratio to 41.0%. Total Assets of the Bank improved to Rs 1.4 Trillion while the equity capital improved to Rs 152 Bn.
With industry leading Tier I and Total Capital Adequacy ratios of 14.53% and 18.16% respectively HNB is very well capitalized. Liquidity levels also remain strong with Liquid Asset Ratios at 28% and Liquidity Coverage Ratio at 207% against the regulatory requirements of 20% and 90% respectively.
All Group Subsidiaries complemented the Bank's results as the Group recorded a PBT of Rs 23.1 Bn, a 31.1% YoY increase compared to 2020. The Group PAT of Rs 20.1 Bn enabled a ROA of 1.42% while Profit Attributable to Shareholders, which rose by 45.3% YoY to Rs 19 Bn delivered a ROE of 11.50%. Total Group Assets improved to Rs 1.5 Trillion, recording a 6% YoY expansion.
The Board of Directors declared a final dividend of Rs 9.00 per share which is the highest dividend declared over the past few decades, consisting of a cash dividend of Rs 6.50 per share and a scrip dividend of Rs 2.50 per share.
HNB is rated AA- (lka) by Fitch Ratings and has been ranked among the Top 1000 Banks in the World over five consecutive years by the acclaimed UK based "The Banker Magazine".HNB was once again recognised among the Top 10 'Most Admired Corporates of Sri Lanka' at the CIMA/ICCSL awards, a recognition bestowed for the fourth successive year. HNB is also a 11 time winner of the 'Best Retail Bank in Sri Lanka' award by the Asian Banker Magazine and is ranked as a Top 10 company in Sri Lanka by the 'Business Today' Magazine.
2
INCOME STATEMENT
BANK | BANK | GROUP | GROUP | |||||||||
For the year ended | For the 3 months ended | For the year ended | For the 3 months ended | |||||||||
31st December | 31st December | 31st December | 31st December | |||||||||
2021 | 2020 | % Increase / | 2021 | 2020 | % Increase/ | 2021 | 2020 | % Increase / | 2021 | 2020 | % Increase/ | |
(Audited) | (Audited) | (Decrease) | (Decrease) | (Audited) | (Audited) | (Decrease) | (Decrease) | |||||
Rs 000 | Rs 000 | Rs 000 | Rs 000 | Rs 000 | Rs 000 | Rs 000 | Rs 000 | |||||
Gross income | 115,047,325 | 115,813,618 | (1) | 30,444,876 | 28,274,023 | 8 | 135,710,455 | 134,436,232 | 1 | 35,930,721 | 33,260,714 | 8 |
Interest income | 98,600,557 | 103,944,602 | (5) | 26,065,178 | 24,337,276 | 7 | 107,407,723 | 112,825,455 | (5) | 28,128,247 | 26,608,357 | 6 |
Less : Interest expenses | 49,041,200 | 59,235,456 | (17) | 12,084,991 | 13,441,406 | (10) | 50,945,355 | 61,988,268 | (18) | 12,495,467 | 14,201,659 | (12) |
Net interest income | 49,559,357 | 44,709,146 | 11 | 13,980,187 | 10,895,870 | 28 | 56,462,368 | 50,837,187 | 11 | 15,632,780 | 12,406,698 | 26 |
Fee and commission income | 9,893,263 | 7,794,929 | 27 | 3,046,909 | 2,179,642 | 40 | 10,676,982 | 8,399,641 | 27 | 3,319,442 | 2,306,023 | 44 |
Less: Fee and commission expenses | 270,702 | 249,880 | 8 | 85,809 | 60,138 | 43 | 360,771 | 374,084 | (4) | 118,276 | 84,961 | 39 |
Net fee and commission income | 9,622,561 | 7,545,049 | 28 | 2,961,100 | 2,119,504 | 40 | 10,316,211 | 8,025,557 | 29 | 3,201,166 | 2,221,062 | 44 |
Net interest, fee and commission income | 59,181,918 | 52,254,195 | 13 | 16,941,287 | 13,015,374 | 30 | 66,778,579 | 58,862,744 | 13 | 18,833,946 | 14,627,760 | 29 |
Net gains/(losses) from trading | (522,039) | (837,108) | (38) | 886,863 | 580,103 | 53 | (383,772) | (816,896) | (53) | 946,088 | 606,996 | 56 |
Net gain from financial investments at fair value through | 195,927 | 207,321 | (5) | 12,720 | - | - | 196,167 | 209,217 | (6) | 10,280 | 680 | 1,412 |
other comprehensive income | ||||||||||||
Net gains arising on de-recognition of financial assets | - | 1,053,543 | (100) | - | 1,053,543 | (100) | 5,874 | 1,106,649 | (99) | (3,616) | 1,080,846 | (100) |
Net insurance premium income | - | - | - | - | - | - | 10,641,842 | 8,907,731 | 19 | 2,990,805 | 2,493,833 | 20 |
Net other operating income | 6,879,617 | 3,650,331 | 88 | 433,206 | 123,459 | 251 | 7,165,639 | 3,804,435 | 88 | 539,475 | 163,979 | 229 |
Total operating income | 65,735,423 | 56,328,282 | 17 | 18,274,076 | 14,772,479 | 24 | 84,404,329 | 72,073,880 | 17 | 23,316,978 | 18,974,094 | 23 |
Less: Impairment charge for loans and other losses | 18,778,047 | 15,258,468 | 23 | 7,584,686 | 3,446,941 | 120 | 19,534,309 | 16,046,578 | 22 | 7,701,561 | 3,944,000 | 95 |
Net operating income | 46,957,376 | 41,069,814 | 14 | 10,689,390 | 11,325,538 | (6) | 64,870,020 | 56,027,302 | 16 | 15,615,417 | 15,030,094 | 4 |
Less : Operating expenses | ||||||||||||
Personnel expenses | 10,757,563 | 11,459,352 | (6) | 1,298,590 | 2,798,003 | (54) | 13,676,004 | 13,903,432 | (2) | 2,052,471 | 3,420,995 | (40) |
Depreciation and amortisation | 2,442,963 | 2,359,326 | 4 | 650,545 | 735,601 | (12) | 2,905,296 | 2,837,073 | 2 | 771,543 | 923,614 | (16) |
Benefits, claims and underwriting expenditure | - | - | - | - | - | - | 8,955,217 | 7,374,868 | 21 | 1,945,539 | 1,682,805 | 16 |
Other expenses | 9,433,001 | 8,300,307 | 14 | 2,723,304 | 1,922,061 | 42 | 11,812,874 | 10,690,354 | 11 | 3,380,963 | 2,438,091 | 39 |
Total operating expenses | 22,633,527 | 22,118,985 | 2 | 4,672,439 | 5,455,665 | (14) | 37,349,391 | 34,805,727 | 7 | 8,150,516 | 8,465,505 | (4) |
Operating profit before taxes on financial services | 24,323,849 | 18,950,829 | 28 | 6,016,951 | 5,869,873 | 3 | 27,520,629 | 21,221,575 | 30 | 7,464,901 | 6,564,589 | 14 |
Less :Value Added Tax (VAT) on financial services | 4,498,822 | 3,869,649 | 16 | 929,654 | 1,096,466 | (15) | 4,759,882 | 4,048,466 | 18 | 1,002,267 | 1,087,364 | (8) |
Operating profit after taxes on financial services | 19,825,027 | 15,081,180 | 31 | 5,087,297 | 4,773,407 | 7 | 22,760,747 | 17,173,109 | 33 | 6,462,634 | 5,477,225 | 18 |
Share of profit of joint venture (net of income tax) | - | - | - | - | - | - | 292,837 | 407,215 | (28) | 148,362 | 128,835 | 15 |
PROFIT BEFORE INCOME TAX | 19,825,027 | 15,081,180 | 31 | 5,087,297 | 4,773,407 | 7 | 23,053,584 | 17,580,324 | 31 | 6,610,996 | 5,606,060 | 18 |
Less: Income tax expense | 2,525,260 | 3,618,544 | (30) | 22,321 | 1,049,728 | (98) | 2,969,222 | 3,918,061 | (24) | (85,265) | 744,269 | (111) |
PROFIT FOR THE YEAR | 17,299,767 | 11,462,636 | 51 | 5,064,976 | 3,723,679 | 36 | 20,084,362 | 13,662,263 | 47 | 6,696,261 | 4,861,791 | 38 |
Profit attributable to: | ||||||||||||
Equity holders of the Bank | 17,299,767 | 11,462,636 | 51 | 5,064,976 | 3,723,679 | 36 | 19,024,882 | 13,095,420 | 45 | 6,051,559 | 4,489,939 | 35 |
Non-controlling interests | - | - | - | - | - | - | 1,059,480 | 566,843 | 87 | 644,702 | 371,852 | 73 |
PROFIT FOR THE YEAR | 17,299,767 | 11,462,636 | 51 | 5,064,976 | 3,723,679 | 36 | 20,084,362 | 13,662,263 | 47 | 6,696,261 | 4,861,791 | 38 |
Earnings per share | ||||||||||||
Basic earnings per ordinary share (Rs) | 32.90 | 21.80 | 51 | 9.63 | 7.08 | 36 | 36.18 | 24.90 | 45 | 11.51 | 8.54 | 35 |
Diluted earnings per ordinary share (Rs) | 32.90 | 21.80 | 51 | 9.63 | 7.08 | 36 | 36.18 | 24.90 | 45 | 11.51 | 8.54 | 35 |
3
STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME
BANK | BANK | GROUP | GROUP | |||||||||||
For the year ended | For the 3 months ended | For the year ended | For the 3 months ended | |||||||||||
31st December | 31st December | 31st December | 31st December | |||||||||||
2021 | 2020 | % Increase/ | 2021 | 2020 | % Increase/ | 2021 | 2020 | % Increase/ | 2021 | 2020 | % Increase/ | |||
(Audited) | (Audited) | (Decrease) | (Decrease) | (Audited) | (Audited) | (Decrease) | (Decrease) | |||||||
Rs 000 | Rs 000 | Rs 000 | Rs 000 | Rs 000 | Rs 000 | Rs 000 | Rs 000 | |||||||
PROFIT FOR THE YEAR | 17,299,767 | 11,462,636 | 51 | 5,064,976 | 3,723,679 | 36 | 20,084,362 | 13,662,263 | 47 | 6,696,261 | 4,861,791 | 38 | ||
Other comprehensive income that will not be reclassified | ||||||||||||||
to profit or loss in subsequent periods | ||||||||||||||
Change in fair value of investments in equity instruments designated | ||||||||||||||
at fair value through other comprehensive income | (257,524) | (1,372,363) | (81) | 2,300 | (238,907) | (101) | (257,524) | (1,372,363) | (81) | 2,300 | (238,907) | (101) | ||
Remeasurement of post-employment benefit obligations | 1,030,928 | (1,556,496) | (166) | 1,030,928 | (1,556,496) | (166) | 1,100,788 | (1,608,998) | (168) | 1,075,068 | (1,601,491) | (167) | ||
Revaluation gain on freehold land and buildings | 4,878,773 | - | - | 4,878,773 | - | - | 8,547,116 | - | - | 8,547,116 | - | - | ||
Share of other comprehensive income of joint venture that | ||||||||||||||
will not be reclassified to profit or loss | - | - | - | - | - | - | 1,108 | 483 | 129 | 1,108 | 483 | 129 | ||
Less:Tax expense relating to items that will not be | ||||||||||||||
reclassified to profit or loss | (576,923) | - | - | (1,155,785) | - | - | (786,036) | 2,102 | (37,495) | (2,033,270) | - | - | ||
Total other comprehensive income that will not be | ||||||||||||||
reclassified to profit or loss | 5,075,254 | (2,928,859) | 273 | 4,756,216 | (1,795,403) | 365 | 8,605,452 | (2,978,776) | 389 | 7,592,322 | (1,839,915) | 513 | ||
Other comprehensive income that will be reclassified | ||||||||||||||
to profit or loss in subsequent periods | ||||||||||||||
Debt instruments at fair value through other comprehensive | ||||||||||||||
income : | ||||||||||||||
Net gains / (losses) on investments in debt instruments measured | ||||||||||||||
at fair value through other comprehensive income | (2,972,433) | 833,584 | 457 | (840,501) | (1,278,972) | (34) | (3,916,786) | 1,528,985 | 356 | (1,104,680) | (1,429,401) | (23) | ||
Reclassification of net gains on de-recognition of debt instruments at | ||||||||||||||
fair value through other comprehensive income to income | ||||||||||||||
statement | - | (1,053,543) | (100) | - | (1,053,543) | (100) | (5,874) | (1,106,649) | (99) | 3,616 | (1,080,846) | (100) | ||
Net change in expected credit losses of debt securities measured at | ||||||||||||||
fair value through other comprehensive income | 186,758 | (150,378) | 224 | 160,437 | 358,515 | (55) | 186,758 | (150,378) | 224 | 160,437 | 358,515 | (55) | ||
Transfer (to) / from life policy holder reserve fund | - | - | - | - | - | - | 851,693 | (576,094) | 248 | 236,838 | 153,418 | 54 | ||
Share of other comprehensive income of joint venture | ||||||||||||||
that will be reclassified to profit or loss | - | - | - | - | - | - | 61,665 | 26,448 | 133 | 3,445 | 4,113 | (16) | ||
Less:Tax expense relating to items that will be reclassified to profit or loss | 754,541 | 61,588 | 1,125 | 201,720 | 653,104 | (69) | 763,270 | 54,565 | 1,299 | 196,823 | 654,309 | (70) | ||
Total other comprehensive income that will be reclassified to | ||||||||||||||
profit or loss | (2,031,134) | (308,749) | 558 | (478,344) | (1,320,896) | (64) | (2,059,274) | (223,123) | 823 | (503,521) | (1,339,892) | (62) | ||
OTHER COMPREHENSIVE INCOME FOR THE YEAR,NET OF TAX | 3,044,120 | (3,237,608) | (194) | 4,277,872 | (3,116,299) | 237 | 6,546,178 | (3,201,899) | 304 | 7,088,801 | (3,179,807) | 323 | ||
TOTAL COMPREHENSIVE INCOME FOR THE YEAR,NET OF TAX | 20,343,887 | 8,225,028 | 147 | 9,342,848 | 607,380 | 1,438 | 26,630,540 | 10,460,364 | 155 | 13,785,062 | 1,681,984 | 720 | ||
Total comprehensive income attributable to: | ||||||||||||||
Equity holders of the Bank | 20,343,887 | 8,225,028 | 147 | 9,342,848 | 607,380 | 1,438 | 25,574,417 | 9,892,718 | 159 | 13,135,770 | 1,339,117 | 881 | ||
Non-controlling interests | - | - | - | - | - | - | 1,056,123 | 567,646 | 86 | 649,292 | 342,867 | 89 | ||
TOTAL COMPREHENSIVE INCOME FOR THE YEAR,NET OF TAX | 20,343,887 | 8,225,028 | 147 | 9,342,848 | 607,380 | 1,438 | 26,630,540 | 10,460,364 | 155 | 13,785,062 | 1,681,984 | 720 |
4
STATEMENT OF FINANCIAL POSITION
BANK | GROUP | |||||
As at | As at | % Increase / | As at | As at | % Increase / | |
31.12.2021 | 31.12.2020 | (Decrease) | 31.12.2021 | 31.12.2020 | (Decrease) | |
Audited | Audited | Audited | Audited | |||
Rs 000 | Rs 000 | Rs 000 | Rs 000 | |||
ASSETS | ||||||
Cash and cash equivalents | 38,185,254 | 34,123,562 | 12 | 40,900,372 | 34,898,957 | 17 |
Placements with banks | - | - | - | 6,371,273 | 12,126,434 | (47) |
Balances with Central Bank of Sri Lanka | 25,820,489 | 7,212,395 | 258 | 25,820,489 | 7,212,395 | 258 |
Reverse repurchase agreements | - | - | - | 6,246,276 | 2,827,050 | 121 |
Derivative financial instruments | 927,487 | 1,032,318 | (10) | 927,487 | 1,032,318 | (10) |
Financial assets measured at fair value through profit | ||||||
or loss | 103,365 | 84,499 | 22 | 862,641 | 1,094,827 | (21) |
Financial assets measured at amortised cost - loans and | ||||||
advances to customers | 876,254,693 | 772,580,720 | 13 | 911,253,345 | 800,815,971 | 14 |
Financial assets measured at amortised cost - debt and | ||||||
other financial instruments | 160,677,520 | 186,605,516 | (14) | 171,930,640 | 193,349,496 | (11) |
Financial assets measured at fair value through other | ||||||
comprehensive income | 203,426,433 | 249,271,658 | (18) | 210,804,487 | 256,394,644 | (18) |
Investment in joint venture | 755,000 | 755,000 | - | 2,877,420 | 2,521,811 | 14 |
Investment in subsidiaries | 3,017,285 | 3,017,285 | - | - | - | - |
Investment properties | 469,774 | 475,109 | (1) | 964,854 | 1,028,956 | (6) |
Property, plant and equipment | 24,953,738 | 20,705,056 | 21 | 49,724,473 | 41,827,384 | 19 |
Right-of-use assets | 5,439,384 | 5,356,868 | 2 | 2,177,902 | 1,827,832 | 19 |
Intangible assets and goodwill | 1,429,544 | 1,309,172 | 9 | 1,989,134 | 1,749,994 | 14 |
Deferred tax assets | 4,461,561 | 806,539 | 453 | 4,941,105 | 1,728,958 | 186 |
Other assets | 12,415,094 | 8,515,839 | 46 | 15,858,665 | 11,045,479 | 44 |
Total assets | 1,358,336,621 | 1,291,851,536 | 5 | 1,453,650,563 | 1,371,482,506 | 6 |
LIABILITIES | ||||||
Due to banks | 17,075,502 | 89,746,709 | (81) | 17,075,502 | 89,746,709 | (81) |
Derivative financial instruments | 353,356 | 337,014 | 5 | 353,356 | 337,014 | 5 |
Securities sold under repurchase agreements | 33,524,226 | 10,361,383 | 224 | 33,524,226 | 10,361,383 | 224 |
Financial liabilities measured at amortised cost - due to | ||||||
depositors | 1,075,709,287 | 967,821,404 | 11 | 1,107,065,820 | 994,948,912 | 11 |
Dividends payable | 989,212 | 962,185 | 3 | 1,013,629 | 980,507 | 3 |
Financial liabilities measured at amortised cost - other | ||||||
borrowings | 24,747,869 | 30,526,261 | (19) | 25,555,834 | 30,526,261 | (16) |
Debt securities issued | 1,962,749 | 1,875,042 | 5 | 2,465,085 | 2,411,408 | 2 |
Current tax liabilities | 10,051,689 | 7,725,731 | 30 | 10,518,569 | 8,093,584 | 30 |
Deferred tax liabilities | - | - | - | 5,157,978 | 5,371,390 | (4) |
Insurance provision - life | - | - | - | 20,378,015 | 17,073,033 | 19 |
Insurance provision - non life | - | - | - | 3,735,921 | 3,309,150 | 13 |
Other provisions | 3,928,598 | 3,917,784 | - | 4,550,802 | 4,266,262 | 7 |
Other liabilities | 14,400,456 | 16,278,033 | (12) | 14,596,651 | 15,451,997 | (6) |
Subordinated term debts | 23,552,323 | 28,298,365 | (17) | 24,391,912 | 28,945,457 | (16) |
Total liabilities | 1,206,295,267 | 1,157,849,911 | 4 | 1,270,383,300 | 1,211,823,067 | 5 |
5
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Hatton National Bank plc published this content on 21 February 2022 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 21 February 2022 04:20:02 UTC.