Hatton National Bank

Investor Presentation 1Q 2018

Net Operating

Income

Interest Income 22.624.9 10.5%

1Q 2017 (Rs Bn)

1Q 2018(Rs Bn)

Growth%

Interest Expenses (13.3)(14.3) 7.2%

NII 9.310.7 15.1%

Net Fee Income 2.02.2 11.6%

Net Trading Gain/Loss

0.5(0.3) 150.5%

2

Net Gain from Financial Investments 0.20.2 6.4%

Other Operating Income

(0.3)1.0

Expenses & Profits

Operating Expenses

(4.9)(5.0) 2.1%

1Q 2017 (Rs Bn)

1Q 2018(Rs Bn)

Growth%

VAT & NBT (1.2)(1.4) 15.8%

PBT 5.16.3 23.6%

Income Tax (1.5)(1.8) 26.5%

PAT 3.74.5 22.5%

3

Impairment (0.5)(1.1)122.0%

Net Operating Income

11.312.8 13.4%

Net Operating

Income

Interest Income 24.427.0 10.7%

1Q 2017 (Rs Bn)

1Q 2018(Rs Bn)

Growth%

Net Gain from Financial Investments

0.20.2 13.1%

Interest Expenses (13.7)(14.9) 8.6%

NII 10.712.2 13.4%

Fee Income 2.22.4 11.6%

Trading Gain/Loss 0.5(0.3) 151.6%

Net Insurance Premium

1.51.8 17.0%

4

Other Operating Income

(0.3)0.9

Expenses & Profits

Operating Expenses

(7.2)(7.1) 1.1%

1Q 2017 (Rs Bn)

1Q 2018(Rs Bn)

Growth%

Profit Attributable to Shareholders

3.84.6

VAT & NBT (1.4)(1.5) 12.2%

PBT 5.87.2 24.7%

Income Tax (1.8)(2.2) 25.4%

PAT 4.05.0 24.3%

20.6%

5

Impairment (0.4)(1.3) 186.7%

Net Operating Income

14.415.9 10.5%

6

3.7

4.5

1.4 0.2

0.5 0.6

0.1 0.6

-

1.0

2.0

3.0

4.0

5.0

6.0

7.0

PAT 1Q 17 NII Net FeeIncome

OtherIncome

ImpairmentCharges

OperatingExpenses

Taxes PAT 1Q 18

+15.1%

+11.6% +97.4%

Rs Bn

+122.0% +2.1%+21.6%

+22.5%

7

3.83

1.43 0.25

0.66 0.82

(0.08) 0.62

0.19

-

1.0

2.0

3.0

4.0

5.0

6.0

7.0

PAS 1Q 17 NII Net FeeIncome

OtherIncome

ImpairmentCharges

OperatingExpenses

Taxes MinorityInterest

PAT 1Q 18

4.62

+13.4%

+13.4% +33.7% +186.7% -1.1%

+19.6% +91.7% +20.6%

Rs Bn

Rs Bn

Quarterly Loan Growth of 5.3%

Group Assets up by Rs 37 Bn

Bank loan book at Rs 673 Bn

Deposit base of Bank grows to Rs 721 Bn by 2.7%

8

-

200

400

600

800

1,000

1,200

2014 2015 2016 2017 Q12017

Q12018

Asset Growth

Bank

Group

YoYBank 9.8%

Group 10.4%CAGR

Bank 18.6%Group 19.1%

-

100

200

300

400

500

600

700

800

2014 2015 2016 2017 Q12017

Q12018

Loans & Deposits

Loans

Deposits

Rs BnYoY

Loans 9.6%Deposit 13%

CAGRLoans 17.3%

Deposit 18.7%

90%

10%

Market Share - Loans

Industry

HNB

91%

9%

Market Share - Deposits

Rs BnBank 4.9%Group 5.4%Industry 4.1%

Bank 15.1% YoYGroup 13.4% YoY

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 2017 to 38% (LKR CASA at 39%)

9

2.0%

2.5%

3.0%

3.5%

4.0%

4.5%

5.0%

5.5%

6.0%

Q12017

Q22017

Q32017

Q42017

Q12018

NIM

Bank

Group

Industry

5

6

7

8

9

10

11

12

13

Q12017

Q22017

Q32017

Q42017

Q12018

NII Growth

Bank

Group

47%

32%

21%

Lending Mix

Corporate

SME & Micro

Retail

38%

62%

Deposit Mix

CASA

Other Deposits

Bank Cost to Income improves from 41.9% in Q1 2017 to 36.3%.

Best among Peers

Group Cost to Income improves from 48.5% to 41.5% over the 12 months

Group Operating Expenses decline YoY by 1%

YoYTOI 17.8%Expenses 2.1%

1020%

25%

30%

35%

40%

45%

50%

55%

2014 2015 2016 2017 Q1 2018

Cost to Income Ratio

Bank

Group

Industry

-

5

10

15

20

10

15

20

25

30

35

40

45

50

55

2014 2015 2016 2017 Q1 2017 Q1 2018

Income vs. Expenses

TOI

Operating Expenses

CAGRTOI 15.3%

Expenses 8.3%

Rs Bn Rs Bn

HNB gross NPA slid slightly from Dec 2017 as industry is still witnessing weather related constraints on borrower capacities

Well Diversified across sectors – Low concentration risk

11

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

2013 2014 2015 2016 2017 Mar-18

NPA Ratio

Bank

Industry

9%12%

7%

2%22%19%

13%

16%

Diversified Loan BookAgri & Fishing

MANUFACTURING

TOURISM

Transport

Construction

Traders

Financial&Buisness Services

Others

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

12

1.0%

1.2%

1.4%

1.6%

1.8%

2.0%

2.2%

2014 2015 2016 2017 Q1 2018

ROA

Bank

Group

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

2014 2015 2016 2017 Q1 2018

ROE

-

2

4

6

8

10

0

5

10

15

20

25

30

20

14

20

15

20

16

20

17

Q1

20

17

Q1

20

18

Bank Operating Profit & PAT (Rs Bn)

Operating Profit PAT

CAGROP 22.9%PAT 22.3%

0

2

4

6

8

0

5

10

15

20

25

30

20

14

20

15

20

16

20

17

Q1

20

17

Q1

20

18

Group Operating Profit & PAT (Rs Bn)

Operating Profit PAS

YoYOP 24.5%PAS 20.6%

CAGROP 22.2%PAS 17.5%

YoYOP 22.1%PAT 22.5%

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

13

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

2014 2015 2016 2017 Q1 2018

Total Tier I Capital

Bank

Minimum

BASEL III ratios reported since 2017

5.0%

7.0%

9.0%

11.0%

13.0%

15.0%

17.0%

2014 2015 2016 2017 Q1 2018

Total Capital

Bank

Industry

BASEL III ratios reported since 2017

Higher minimums owing to BASEL III

Higher minimums owing to BASEL III

ROE

16.43% (18.78%)

ROA

1.84% (1.66%)

NII

4.40% (4.22%)

Other income

1.29% (1.12%)

Impairment

0.44% (0.22%)

Operating Costs

2.06%(2.23%)

Taxation

1.35% (1.22%)

Leverage Multiplier

8.93x (11.32x)

- 2018- 2017

14

ROE

15.05% (16.63%)

ROA

1.96% (1.75%)

NII

4.74% (4.64%)

Other income

1.95% (1.78%)

Impairment

0.49% (0.19%)

Operating Costs

2.77%(3.11%)

Taxation

1.47% (1.37%)

Leverage Multiplier

8.36x (10.03x)

- 2018- 2017

15

Growth : Voting share4.8% growth vs.(1.2%) in ASPI

Growth : Non Voting share (2.4%)DPS (Rs) Rs 8.50Cash DPS Rs 6.50EPS (Rs) Rs 37.52BVPS (Rs) Rs 250.79PBV (X) 0.96PE (X) 6.42Total Shareholder ReturnVoting 8.5%Total Shareholder Return Non Voting 2.0%

16

100

120

140

160

180

200

220

240

260

280

4/2

8/2

017

5/2

8/2

017

6/2

8/2

017

7/2

8/2

017

8/2

8/2

017

9/2

8/2

017

10

/28

/20

17

11

/28

/20

17

12

/28

/20

17

1/2

8/2

018

2/2

8/2

018

3/3

1/2

018

Price - 12 Months

(N)

(X)

‘Best Retail Bank in Sri Lanka’ for the 10th 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 2017

‘Top 1000 Banks in the World’ by The Banker

Highest ranked bank in Sri Lanka by LMD and Business Today

5th Most valued Brand in Sri Lanka by Interbrand

Emerging Technologies Led Innovation award – HNB FIT account (mid-size bank category) by Infosys India

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