HNB’s 1Q profit jumps 49% on lower interest costs

Hatton National Bank (HNB) saw its earnings climb in the first quarter of 2025, with group profit after tax rising 49 percent year-on-year to Rs 11.1 billion. The bank’s standalone profit grew even faster, up 64 percent to Rs. 10.2 billion, supported by lower interest expenses and improved margins.

Net interest income rose 7.7 percent to Rs 23.7 billion, even though overall interest income fell 14.4 percent as market rates eased. 

The decline in interest expenses, which dropped 27.1 percent, helped offset the impact, thanks to continued growth in low-cost current and savings account (CASA) deposits. The bank’s loan portfolio grew by Rs. 159 billion compared to a year ago.

Net fee and commission income experienced a 17.0 percent YoY increase, largely driven by higher card usage and a surge in digital transactions, underscoring HNB’s continued commitment to promoting a cashless economy. 

Additionally, other income comprising largely of exchange income surged to Rs. 2.3 billion, mainly due to the depreciation of the Sri Lankan rupee, from a loss of Rs 2.1 billion recorded in the corresponding period of 2024. 

The bank also witnessed a positive movement in its stage 3 portfolio resulting in a total impairment reversal of Rs. 379.7 million, compared to a charge of Rs. 1.4 billion in the corresponding period last year. Accordingly, the Net Stage 3 ratio improved to 1.82 percent, from 1.88 percent in December 2024, while the Stage 3 coverage ratio strengthened to 75.12 percent. The total operating expenses rose by 13.5 percent YoY primarily driven by the increase in staff cost as a result of the realignment of compensation and the performance-based pay structure. 

During the first quarter of 2025, the bank’s asset base surpassed Rs. 2.1 trillion, reflecting a 3.4 percent expansion up to March 2025. Total gross loans and advances grew by Rs. 14.4 billion during the quarter, in contrast to the Rs. 26.5 billion contraction recorded in 1Q 2024. Additionally, the bank’s deposit base grew by Rs. 7.8 billion, reaching Rs. 1.72 trillion. 

During the quarter, the bank completed the acquisition of the remaining 50 percent stake in HNB Investment Bank from DFCC PLC and took part in HNB Finance PLC’s rights issue—further solidifying its standing as the most diversified financial services conglomerate in the country. 

Despite these strategic investments, the bank maintained strong capital buffers with Tier 1 and Total Capital Adequacy ratios at 17.60 percent and 21.89 percent, respectively, well above the minimum statutory requirements of 9.5 percent and 13.5 percent. Additionally, the bank maintained a strong liquidity position, with an all currency Liquidity Coverage Ratio of 364.49 percent, well above the regulatory minimum requirement of 100 percent.