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

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% Trading Gain/Loss (1.2) (2.8) 55.3% Net Gain from Financial 0.2 0.2 7.0% Investments 23.3% 2.8 Other Operating Income 3.4 3

Expenses & Profits - Bank 9 M 2018 9 M 2017 Growth (Rs Bn) (Rs Bn) % Impairment (3.6) (2.3) 57.3% Net Operating Income 18.2% 33.7 39.8 Operating Expenses (16.0) (14.6) 10.0% VAT & NBT (4.5) (3.7) 21.0% PBT 19.3 15.4 25.4% (6.2) (4.5) Income Tax 37.0% 10.9 PAT 13.1 20.6% 4

Net Operating Income - Group 9 M 2018 9 M 2017 Growth (Rs Bn) (Rs Bn) % Interest Income 84.7 77.1 9.8% Interest Expenses 6.4% (43.2) (46.0) NII 38.7 33.9 14.1% Net Fee Income 7.3 6.7 9.3% Trading Gain/Loss (1.3) (2.7) 54.1% Net Gain from Financial 0.3 0.2 35.5% Investments Net Insurance Premium 5.5 4.6 17.9% Other Operating Income 2.5 42.1% 3.6 5

Expenses & Profits - Group 9 M 2018 9 M 2017 Growth (Rs Bn) (Rs Bn) % Impairment (4.2) (2.9) 43.6% Net Operating Income 17.9% 42.3 49.9 Operating Expenses (23.7) (21.6) 9.7% VAT & NBT (4.8) (4.0) 19.4% PBT 21.5 16.8 28.1% (4.5) (3.2) Income Tax 41.1% PAT 14.5 11.8 22.7% Profit Attributable to 11.3 22.7% 13.9 Shareholders 6

Financial Performance – Bank Rs Bn 20.0 +1021.4% +57.3% +10.0% +10.8% 18.0 1.3 2.2 +15.5% +29.8% 1.5 16.0 0.7 +20.6% 2.4 14.0 4.6 12.0 10.0 8.0 13.1 6.0 10.9 4.0 2.0 - PAT 09M 17 NII Net Fee Other Income Impairment Opex Taxes PAT 09M 18 Income 7

Financial Performance – Group Rs Bn 25.0 +43.6% +73.0% +9.7% 20.0 1.3 +31.3% 3.5 +9.3% 2.1 +14.1% 0.6 +21.8% +22.7% 2.8 15.0 0.1 4.8 10.0 13.9 11.3 5.0 - PAS 09M 17 NII Net Fee Other Impairment Opex Taxes Minority PAS 09M 18 Income Income Interest 8

Profitable Balance Sheet Growth Asset Growth Loans & Deposits Rs Bn YoY Rs Bn YoY Bank & Group Loans 14.8% 800 CAGR 8.6% Deposits 10.9% CAGR Loans 17.3% 1,000 Bank 18.6% 700 Deposits 18.7% Group 19.1% 600 800 500 600 400 300 400 200 200 100 Bank Advances - - Group 2014 2015 2016 2017 09M 09M 2014 2015 2016 2017 09M 09M Deposits 17 18 17 18  09 month loan growth of 12.3%, Deposits up 10.7%  Group & Bank balance sheets above a  Bank lending book surpasses Rs 700 Bn in 3Q Trillion 9

Profitable Balance Sheet Growth  Bank NIM up by 25 bps during quarter, Group by 23 bps  Exposure to higher yielding segments NII Growth (Rs Bn) Lending Mix 15 Bank 16.0% YoY 13 Group 14.8% YoY 11 44% Large Corporates 9 56% Retail & MSME 7 Bank 5 Q3 Q4 Q1 Q2 Q3 Group 2017 2017 2018 2018 2018 LKR Deposit Mix NIM Growth 6.0% 5.5% Bank 5.31% 36% 5.0% Group 5.74% Other 64% 4.5% CASA 4.0% 3.5% Bank 3.0% Q3 Q4 Q1 Q2 Q3 Group 2017 2017 2018 2018 2018 10

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 Sources of Fees Rs Bn Fee Income Growth 10.0 Loans YoY CAGR 9.0 Bank 10.8% Bank 19.4% Group 9.3% 7% 8.0 Cards 11% Group 21.1% 7.0 18% 11% 6.0 Trade and 5.0 remittances 31% 22% 4.0 Deposits 3.0 2.0 Guarantees 1.0 - Others Bank 2014 2015 2016 2017 09M 09M 17 18 Group 11

Operational Excellence Efficiency Rs Mn Rs Mn Cost to Income 60.0% 70.0 6.0 55.0% 60.0 5.0 50.0 50.0% 4.0 40.0 45.0% 3.0 30.0 40.0% 2.0 20.0 35.0% 1.0 10.0 30.0% - - 25.0% 2014 2015 2016 2017 09M 18 Bank 20.0% Profit/Branch Profit/Staff (RHS) 2014 2015 2016 2017 09M 18 Group  100% of retail applications processed  centrally Group Cost to Income improves nearly 400 bps YoY to 43.9%  Centralized Disbursements  Bank’s Cost to Income better by 360 bps  Central Security Repository YoY to 36.9%  Paperless Office Systems 12

Risk and Compliance Quarterly Gross NPA Gross NPA 4.0% 5.0% 3.0% 4.0% 3.10% 2.0% 3.0% 1.0% 2.0% 0.0% 1.0% 0.0% 2014 2015 2016 2017 09M 18 Diversified Loan Book Agriculture  Specialization via Centralized Credit Underwriting 7% 9% Manufacturing 12%  11% Centralized Collection System Tourism 6% 9%  Cyber & Information Security, Data Loss Construction & Infrastructure Prevention/Data Classification 10% Trade 18%  Financial Services Gross NPA slid from Dec 2017 with collections 18% Health Care & Support Services across industry coming under pressure from Consumption sluggish growth & volatile weather Others 13

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 Total Capital Total Tier I Capital Rs Bn Surge in FY 17 due to Rights 20.0% 140 correcting on loan growth 14.0% 120 15.0% 12.0% 100 10.0% 80 10.0% 8.0% 60 6.0% Higher 40 5.0% 4.0% minimum of 20 8.75% owing 2.0% to BASEL III 0.0% - 0.0% 2014 2015 2016 2017 09M 18 2014 2015 2016 2017 09M 18 Capital (RHS) Total Capital Ratio Reg Min HNB Reg Min 14

Profitability ROE ROA 30.0% 2.00% 25.0% 1.80% 20.0% 15.0% 1.60% 10.0% 1.40% 5.0% 1.20% 0.0% 2014 2015 2016 2017 09M 18 1.00% Bank Group 2014 2015 2016 2017 09M 18 Bank Group  Higher capital and resulting lower leverage  Bank ROA up 16 bps YoY to 1.76%. impacts ROE marginally; Reported at Group by 19 bps to 1.84%. 15.57%  Group ROE up 23 bps YoY to 14.62%. 15

DuPont Analysis – Bank NII 4.58% (4.36%) ROA 1.76% (1.60%) ROE Other income 15.57% 1.23% (0.93%) (16.12%) Leverage Impairment Multiplier 0.48% (0.34%) 8.85x (10.06x) Operating Costs 2.15% (2.14%) Taxation 1.43% (1.21%) 09M 2018 09M 2017 16

DuPont Analysis – Group NII 4.92% (4.74%) ROA 1.84% (1.65%) ROE Other income 14.62% 1.97% (1.60%) (14.39%) Leverage Impairment Multiplier 0.53% (0.41%) 8.28x (9.09x) Operating Costs 3.02% (3.03%) Taxation 1.50% (1.26%) 09M 2018 09M 2017 17

Shareholder Return – 12 Months to Nov 2 2018 12 Month share Prices (Rs) 300 EPS (Rs) 37.67 250 BVPS (Rs) 266.39 200 PBV (X) 0.83 150 PE (X) 5.84 Voting 100 DPS (Rs) 8.50 Non Voting Dividend Yield (%) 3.9 (N) & 5.2 (X) 50 Voting 09M TSR(%) (8.2) 0 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 Non Voting 09M TSR (11.5) (%) ASPI (%) (8.0) 18

Awards & Accolades 2018 • 'No . 1 Bank in Sri Lanka’ in Banker Global Top 1000 ranking • ‘Best Retail Bank in Sri Lanka’ for the 10 th 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