HNB March quarter profit weighed by higher provisions, trading losses

Damith Pallewatta - CEO

Hatton National Bank PLC provided substantially higher provisions for possible loan losses in the three months ended in March 2026 due to fears of the deteriorating economic conditions from the Iran war fallout that could weaken their borrower profiles.

The bank provided Rs.3.08 billion for possible loan losses in the three months compared to provision reversals of Rs.194.31 million in the same period in 2025.

“Incorporating prevailing economic conditions, the bank adopted a prudent and forward-looking credit risk management approach”, the bank said in an earnings release.

The bank gave loans worth Rs.113.78 billion in the three months, expanding the gross loan book by 7.5 percent.

This helped the bank, on a standalone basis, to cross the Rs.2.5 trillion asset base in the March quarter.

The bank reported a Stage 3 loans ratio of 1.18 percent, slightly up from 1.09 percent in December 2025.

Under these circumstances, the bank reported a net interest income of Rs.32.54 billion, up 16.6 percent from a year ago as the increase in the interest income outstripped the growth in the interest expenses.

The bank’s net interest margin, as a result, slightly expanded to 4.45 percent from 4.26 percent in December 2025.

The net fee and commission income also grew by a robust 34.4 percent to Rs.7.19 billion. The bank attributed the higher fee incomes to the general growth in the loan book, improved card performance and higher transaction banking activity, including increased adoption of digital banking solutions.

The fast rising fee incomes and its outsize nature from a bank’s total incomes have become a contentious issue recently and there have been calls by many from the Central Bank to clamp down on some of the extremely unfair fees they charge from their customers.

Under this backdrop, the bank reported earnings of Rs.17.64 a share or Rs.10.09 billion for the January – March quarter compared to Rs.18.71 a share or Rs.10.69 billion in the year earlier period.

Besides the higher provisions, the earnings were weighed by trading losses of Rs.2.15 billion for the period, compared to trading gains of Rs.712.83 million in the year earlier period.

However the bank reported higher net other operating income of Rs.4.17 billion, up substantially from the Rs.1.62 billion in the same period last year.

Ceylon Steel Corporation Limited has 9.99 percent stake in Hatton National Bank being its single largest shareholder while Employees Provident Fund has 9.75 percent stake.