Banks

SriLanka CreditAnalysis

Hatton National Bank PLC

RatingRationale

AA(lka) A+(lka)

Ratings
National
LongTerm Rating Subordinated Debt

The ratings of Hatton National Bank PLC (HNB) reflect its sustained profile in terms of its good profitability, asset quality and capitalisation among the local commercial banks. Loan growth was 9% in FY08 (after including money market loans to corporates), but declined by 5% in the first quarter of 2009, similar to its peers. The overall loan mix remained the same at FYE08, with a shift to consumer lending accounting for 43% of loans (39% at FYE07); the balance comprised corporate loans and loans to SMEs. Credit concentrations remained high at FYE08, as the fivelargest total exposures accounted for 10% of loans and 75% of equity, including related party exposures to the Stassen group at 4% of loans and 30% of equity. Subsequent to the more stringent NPL classification after May 2008 particularly for instalment type loans NPLs/loans deteriorated to 8.3% at Q109 from 6.8% at FYE08 (6.0% at FYE07) similar to peers. Adjusting for this classification change, HNBs NPLs/loans figure would have been 5.8% at FYE08 and 7.0% at Q109. Consequent to the asset quality deterioration, the bank curtailed lending and focussed more heavily on the recovery of defaults, emerging from a preceding period of high interest rates and high inflation rates. Fitch Ratings notes that the current low interest rate regime could ease the pressure of further deterioration. Aided by the higher yielding retail/consumer book, HNBs net interest margins continued on the increasing trend which began in FY04 (3.99%) and reached 6.00% at H109. Pretax ROA was 2.8% in H109, up from 2.5% in FY08 (FY07: 2.6%). However, increased taxation reduced ROA more dramatically to just 1.28% in H109 (1.15% in FY08, 1.43% in FY07). Effective taxes were 54% in H109 and FY08, up from the 44%45% band in FY06 and FY07. HNBs core and total capital adequacy ratios (CARs) under the Basel II framework were 9.25% and 11.40%, respectively at FYE08. Equity/assets held at 8.9% at FYE08 (8.9% at FYE07). These ratios compared well with peers. HNB recorded deposit growth of 6.3% in FY08, with loans/deposits and short term borrowings at 93% in FY08. HNBs statutory liquid assets ratio remained healthy throughout FY08. In late 2008, HNB implemented a new corebanking system, and strengthened risk management practices, particularly credit risk management. Given HNBs high systemic importance as the fourthlargest licensed commercial bank (LCB) in Sri Lanka, Fitch believes that state support is a possibility.

Sovereign Risk
ForeignCurrency LongTerm IDR LocalCurrency LongTerm IDR B+ B+

Outlooks
National LongTerm Rating Sovereign ForeignCurrency LongTerm IDR Sovereign LocalCurrency LongTerm IDR Stable Negative Negative

FinancialData
HattonNational BankPLC
30 Jun 09 unaudited Total assets (USDm) Total assets (LKRm) Equity (LKRm)a Net income (LKRm) a ROA (%) ROE (%) Equity/assets (%)
a

31 Dec 08

2,385 2,316 274,101 261,990 24,264 23,269 1,716 2,886 b 1.28 1.15 b 14.44 12.89 8.85 8.88

Includes Minority Interest b Annualised

Analysts
Gerard Wickrema +94 11 254 1900 gerard.wickrema@fitchratings.lk

Rukshana Thalgodapitiya +94 11 254 1900 rukshana.thalgodapitiya@fitchratings.lk

Disclaimer
HNB owns 1.78% of the shares in Fitch Ratings Lanka Limited. No shareholder, other than Fitch Ratings Limited of the UK, is involved in the daytoday operations of, or credit rating reviews undertaken by Fitch Ratings Lanka Limited

Support

KeyRatingDrivers
A sustained deterioration of HNBs credit profile (including the banks inability to reverse its deteriorating asset quality) may result in a downgrade.

Profile
Incorporated in its present form in 1970, HNB is Sri Lankas fourthlargest LCB. Entities related to the Stassen group and the Browns group held 26% and 15% of voting equity at FYE08 respectively.

www.fitchratings.com

24 August 2009

Banks
Profile
HNB commenced in 1888 as a bank catering to the plantation industry. It was incorporated in its present form in 1970. HNB has grown rapidly, both organically and through acquisitions, to be Sri Lankas secondlargest private sector bank; at FYE08, it commanded a market share of 10% in terms of banking system assets. HNB provides a broad range of services, including corporate banking, trade finance, retail and consumer banking, leasing, and also syndications and project finance. Through subsidiaries, the bank is also involved in stock broking (HNB Stock Brokers), insurance (HNB Assurance), and property development (Sithma Development primarily renting of the head office building to HNB). The bank also has an investment banking unit through a joint venture with DFCC Bank (rated AA(lka)). The banks franchise in the retail and SME segments is particularly strong compared with its peers, and is well supported by its 178 customer centres and 275 ATMs (at H109), which are located throughout the island. HNB has a presence in India and the Pakistan via two representative offices. The bank handles a large share of foreign remittances from migrant workers; this is a major source of foreign exchange to the domestic economy, and also provides the bank with a stable commission stream and a sizable foreign currency deposit base (the thirdlargest amongst all banks in the market). Loan growth was 9% in FY08 (after including money market loans to corporates), but declined by 5% in the first half 2009, similar to its peers. The overall loan mix remained the same at FYE08, with a slight shift to consumer lending accounting for 43% of loans (39% at FYE07); the balance comprised corporate loans and loans to SMEs. In late 2008, HNB implemented a new corebanking system, replacing the Globus corebanking system. The rollout of the system is still ongoing; however, the branches with the largest volumes of transactions have already been connected and are online. HNB has strengthened its risk management practices especially in the area of credit risk management by utilising a risk scoring model targeting each productloan segment. This risk scoring model has been backtested and is now mandatory for pricing of loans. In addition, the bank has improved treasury management practices. HNB is listed, and its main shareholders are the Stassens Group and the Brown & Co. Ltd Group, which held approximately 26% and 15% of the voting equity of HNB respectively at FYE08, with the balance held by the public.

Table 1: HNB and Peers

(LKRm) Total assets Loans and advances Deposits Borrowings Equity Net income (%) Net interest margin Return on assets Cost/income Equity/assets Net NPL/equity Loan loss reserves/NPLs NPL/gross loans HNB 2008 261,990 181,050 186,615 25,050 23,269 2,831 5.7 1.1 58.4 8.9 22.4 66.2 6.8 2007 241,003 160,895 175,567 18,257 21,519 3,150 5.5 1.4 57.5 8.9 14.4 75.5 6.0 BOC 2008 491,749 287,856 318,178 131,080 25,547 3,870 3.5 0.8 59.0 5.2 24.0 55.4 5.2 PB 2008 416,674 283,557 323,034 51,010 19,460 3,428 5.9 0.8 57.5 4.7 28.1 66.4 6.7 CB 2008 281,567 185,152 199,865 43,015 26,253 4,119 5.1 1.5 40.0 9.3 22.3 35.5 5.2 Seylan 2008 166,389 117,909 110,157 32,982 9,322 164 5.1 0.2 80.9 5.6 125.5 30.4 15.9 Sampath 2008 142,279 97,824 106,892 17,697 10,820 1,495 5.3 1.1 49.5 7.7 27.3 66.5 7.6 NDB 2008 83,280 55,766 31,091 34,993 13,230 1,605 5.2 2.1 43.8 15.9 1.4 115.4 2.3

BOC Bank of Ceylon (AA(lka)); PB Peoples Bank (A(lka)); CB Commercial Bank of Ceylon Plc (AA+(lka)); Seylan Seylan Bank PLC (BBB+(lka)); Sampath Sampath Bank PLC (AA(lka));NDB National Development Bank PLC (AA(lka)) Source: Published financials, Fitch

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Performance
Loan growth was 9% in FY08 (after including money market loans to corporates), but declined by 5% in the first half 2009 similar to its peers. Fitch expects loan growth to remain relatively low in FY09 as HNB adopts a more selective stance towards lending, due to continuing concern over potential further asset quality deterioration. New development projects in the north of the country, subsequent to the end of the separatist war, may present opportunities for loan growth; however, policy frameworks and structural reforms to facilitate this would take some time. As such, Fitch expects overall loan growth to be somewhat muted in H209. Pretax ROA was 2.8% in H109, up from 2.5% in FY08 (FY07: 2.6%). However, increased taxation reduced ROA more dramatically to just 1.28% in H109 (1.15% in FY08, 1.43% in FY07). Effective taxes were 54% in H109 and FY08, up from the 44% 45% band in FY06 and FY07.

Net Interest Income

Aided by the higher yielding retail/consumer book, HNBs net interest margins continued on an increasing trend which began in FY04 (3.99%) and reached 6.00% at H209. Spreads have been resilient, despite an increase in funding costs on account of the shift in the deposit profile towards highercost time deposits, as yields were increased due to the expectation of higher credit costs. Fitch believes that net interest margins could come under some pressure in FY09 as HNB continues to sustain low and selective loan growth, but are likely to be cushioned by the downward revision of deposit interest rates, in line with reducing overall interest rates. Negative spreads could occur in the unlikely event deposits mobilised are invested in treasury assets with no viable lending opportunity present; however, in such cases, the bank would reduce interest rates on deposits further and thus counter this scenario. As such, competition for lowcost deposits will stiffen. Exposure to high yield products such as pawning is significant for HNB and accounted for a sizable share of loan growth in FY08; this would, to some extent, cushion a decrease in overall yields.

NonInterest Income
Noninterest income accounted for 32% of total income in FY08, which was on par with the sector. Fee and commission income, derived mainly from trade activities and electronic banking, has been the main contributor to noninterest income, accounting for 41% of noninterest in FY08. Foreign exchange income contributed 20% to noninterest income in FY08 (mainly translation gains). Income from recoveries of bad debts accounted for 5% of noninterest income in FY08 while investment income accounted for 9% of noninterest income. Fitch believes that growth in noninterest income in FY09 will be constrained by lower trading activity, due to the slowdown in the economy.

Operating Expenses
Historically, cost management at HNB has been challenging on account of its high cost structure, partly due to its lag in terms of technology visvis its more efficient peers. Operating costs to average assets rose from 3.64% at FY04 to 4.28% at FY08, and was above the sector ratio. In addition, the cost/income ratio increased to 58.4% in FY08 from 57.5% in FY07, due to a 19% increase in operating expenses. Typical of the sector, HNBs personnel expenses continue to be the single largest cost component, accounting for 43% of total operating expenses in FY08. Provisions for staff retirement benefits have increased to reduce the funding gap in the defined benefit scheme. As per HNBs 2008 annual report, unfunded pension liabilities were LKR1.4bn, which the bank expects to resolve over time through increased annual contributions.
Hatton National Bank PLC August 2009

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RiskManagement
Ultimate responsibility for risk management lies with the board of directors; it is carried out through the board integrated risk management committee, and in turn supported by the Risk and Compliance department.

Credit Risk
HNB further strengthened its credit Table 2: Loan Segmentation by risk management in late 2008 with Sector four separate risk scoring models, developed for different (%) 2007 2008 segments/products. The scoring Export, Import, Trade 33 33 Housing & Property dev. 19 20 models have been backtested and Consumption 10 10 parameters developed to capture the Leases 12 9 inherent risks of each product Financial sector 7 8 segment. Although still early in Agriculture 6 7 Industrial 6 7 implementation, the models have Services 2 3 been made mandatory for riskbased Tourism 2 2 pricing of loans In addition, all Others 2 2 branches will be connected to the Total portfolio 100 100 core banking system, with delegation Source: HNB limits and sector limits hardcoded to the system, thereby reducing leeway and discretion in the banks lending practices. Typical of most banks in the system, HNBs largest credit exposure was to the export, import and trade segment, which accounted for 33% of loans at FYE08 and FYE07. As such, the current slow down in trade raises concerns. However, the bank has made sufficient progress in risk management practices to mitigate risks in this segment; furthermore, it has been through several business cycles since inception. In this analysis, housing loans and pawn broking loans are included under the credit sectors: Housing and Property Development and Consumption respectively. As can be seen in Table 2, other than these two credit segments, HNBs credit exposures were diversified. It should be noted that the credit exposure to Tourism is primarily through a related party Aitken Spence PLC (AA(lka)) with the exposure being mainly to resort hotels based in the Maldives.

Table 3: Loan Segmentation

(%) Leasing Residential housing loans Credit cards Pawn broking loans Other consumer loans Total retail/consumer loans SME loans Corporate loans Total portfolio FYE08 Total 6.5 10.6 1.2 12.3 12.0 42.6 33.4 24.0 100.0 NPL 5.9 6.5 7.8 0.1 10.7 5.8 9.5 8.4 7.6 FYE07 Total 8.2 10.1 1.0 10.3 9.7 39.3 36.4 24.4 100.0 NPL 4.3 3.2 7.8 0.2 9.6 4.3 7.8 8.0 6.5

Note: the percentages provided in this table are based on loan figures provided by HNB which include interest. Consequently, the NPL ratios in the table do not correspond to Fitchs ratios Source: HNB, Fitch

HNBs loan segmentation (see Table 3) reflects the impact of the new classification rules on instalment loans, with a marked increase in NPLs in the housing loan book (32% of housing loan NPLs at FYE08, 45% of housing loan NPLs in Q109). HNBs corporate book has fullyprovided NPLs stemming from 2003 and 2005, which accounted for over 80% of the corporate loan NPLs at FYE08. HNBs portfolio mix reflects its consumer/retail positioning over the last five years, which has resulted in high yields and more granularity in the overall portfolio. That
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said, HNB has significant customer credit concentrations, with the fivelargest total exposures accounting for 10% of loans and 75% of equity at FYE08 (including related party exposures to the Stassens group at 4% of loans and 30% of equity).

NonPerforming Loans and Loan Loss Reserves

Subsequent to the more stringent NPL classification after May 2008, particularly for instalment type loans, NPLs/loans deteriorated to 8.3% at Q109 from 6.1% at FYE08 (6.0% at FYE07) similar to peers. Approximately 50% of the increase in NPLs was due to housing loan NPLs, with the balance widely distributed among the other loan segments. In analysing this trend, it was found that the new classification rules, in concert with the preceding period of high interest rates and high inflation, contributed to a significant portion of the NPL increase. Adjusting for this classification change, HNBs NPLs/loans figure would have been 5.1% at FYE08 and 7.0% at Q109. Due to the decline in asset quality, net NPL/equity deteriorated to 30% at Q109 from 18% at FYE08 (11% at FYE07), which was on par with the trends and ratios of similar peers at Q109. Excluding the rise in NPLs, due to the more stringent NPL classification, the net NPL/equity ratio was 17% at Q109 and 10% at FYE08. HNBs NPL ageing indicates that the proportion of NPLs in the doubtful and loss categories (ie those more than 12 and 18 months in arrears) decreased to 48% of the total at FYE08, from 54% at FYE07. This was primarily due to the increase in new NPLs in the advances in arrears for three to six months (specialmention) category. Specific NPL provision coverage decreased to 66% at FYE08 from 76% at FYE07. The specific NPL provision coverage declined more sharply in Q109 to 57%, on account of earlyaged NPLs (advances in arrears for three to six months) not carrying any regulatory provisioning requirements. Fitch believes that the bank may need to take a conservative position on the new NPLs accreted in H109 and increase loan loss reserves to provide a cushion against further slippage of these NPLs to higher aged buckets. However, Fitch expects the current low interest rate regime, combined with policy mechanisms aimed at improving business prospects (subsequent to the end of the separatist war), will support a reversal in this asset quality trend.

Market Risk
Interest rate risk from the loan book is largely mitigated as the majority of loans are priced on a floatingrate basis. In addition, the bank has leeway to adjust/reprice fixed rate loans if required. In late 2008, HNB strengthened its treasury management with increased controls, and changed its reporting structure for the treasury operations (to facilitate increased control of treasury functions). In the new structure, the FrontOffice is responsible for business development and generating profits; it reports to the Head of Treasury. The BackOffice handles settlements and operations, reporting to the Head of Correspondent Banking and International Operations. The MiddleOffice undertakes validation and control checks, with reporting lines to the Head of Risk and Compliance. Foreign currency exposures are fairly wellmatched, as foreign currency deposits fund foreign currency loans. Foreign exchange risk exposures are controlled through regulatory position limits. In addition, the regulator Central Bank of Sri Lankas International Operations Department monitors systemwide open forex positions on a daily basis. Commitments and contingencies represented 26% of the HNBs assets at FYE08 (24% at FYE07). Forward exchange contracts accounted for 24% of total commitments and contingencies at FYE08, followed by guarantees at 29% of the total.

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FundingandLiquidity
HNBs overall funding structure (see Table 4) has remained fairly stable, with deposits accounting for a major source of funding (71% at FYE08). This was in line with the sector. Similar to peers, the composition of deposits has shifted, as time deposits constituted 40% of the total funding at FYE08, compared with 31% at FYE04, This secular shift is not expected to reverse, as depositors in Sri Lanka become more savvy with rate differentials offered by competing banks. As such, the expectation is that the trend would continue.

Table 4: Funding
(%) Total deposits Demand Savings Time Total borrowings Borrowings Subordinated debt Equity Other Total funding
Source: HNB, Fitch

2004 73.2 6.9 35.3 31.0 13.2 9.5 3.7 5.6 8.1 100.0

2005 73.2 7.6 35.2 30.4 12.6 9.2 3.4 6.5 7.7 100.0

2006 71.4 6.7 31.1 33.6 15.7 12.3 3.4 6.3 6.6 100.0

2007 72.8 5.7 28.8 38.4 9.9 7.6 2.3 8.9 8.4 100.0

2008 71.2 5.4 26.2 39.6 11.0 9.6 1.4 8.9 8.9 100.0

HNBs deposit growth was stifled at 6.3% in FY08 (19.1% in FY07) due to the reduction of discretionary income of the saving population (a result of high inflation rates prevalent since 2006). In H208 and Q109, LCB deposit growth was boosted by a flight to quality, with depositors shifting deposits away from the nonbanking financial sector due to perceived risks, on account of the collapse of a unregulated entity that spuriously mobilised deposits. Leverage, as indicated by loans/customer and shortterm funding, remained high at 93% at FYE08. However, HNBs statutory liquid assets ratio remained healthy throughout FY08 in both the DBU and FCBU operations. The progressive reduction in the Statutory Required Reserve held at the Central Bank of Sri Lanka, to 7% from 10% through Q408 and Q109, further bolstered liquidity. Ratesensitive assets (RSA)/ratesensitive liabilities (RSL) maturing within one year accounted for 78% at FYE08 (72% at FYE09). This is typical of large banks in the system. The bulk of HNBs RSL are deposits, which have a high renewal rate. Furthermore, on account of the flight to quality, LCBs have been able to mobilise sizable deposits away from nonbank financial institutions.

Capital
HNBs core and total capital adequacy ratios (CARs) under the Basel II framework were 9.25% and 11.40%, respectively at FYE08. Equity/assets held at 8.9% at FYE08 (8.9% at FYE07). These ratios compared well with peers. HNB paid out 35% of net income as dividends and is likely to maintain the same level in FY09. The bank had room to issue approximately a further LKR11.2bn in subordinated debt (about 8% of riskweighted assets) as at December 2008, based on the regulatory threshold for subordinated debt.

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HATTON NATIONAL BANK PLC Balance Sheet Analysis
30Ju n 09 Year E nd USDm A. LOAN S 1. Custom er Loans 2. Oth er Loan s 3. (Loan Lo ss Reserves) 4. (Inte rest in Suspen se) TOTAL A B. OTHE R EARN ING ASSETS 1. Dep osits wi th Banks 2. T reasury Bills 3. Oth er Securities 4. Equ ity Inve stme nts TOTAL B C. TOTAL EARNING ASSETS (A+B) D. FIXED ASSETS E. NON E ARNING ASSETS 1. Cash and Due from Banks 2. Stat utory Deposit w ith Central Ban k 3. Oth er TOTAL E F. TOTAL A SSETS G. CUSTOM ER AND SHORT TERM FUND IN G 1. Dem and Deposits 2. Sav ings Dep osits 3. T ime Deposits 4. Oth er TOTAL G H. OTHER FU ND ING 1. B orrow ings 2. Subordinated Debt 3. H ybrid Cap ital TOTAL H I. OTHER (N oni nt. bearing) J. TOTAL LIA BILITIES K. E QUITY L. MIN ORITY INTEREST M. TOTAL L IABILITIES & E QUITY Exchange Rate 193.3 229.7 2,174.2 208.2 2.9 2,385.3 USD1 = LKR 22, 211.5 26, 400.5 249, 836.9 23, 925.3 338.5 274, 100.7 113.14 8.1 9.6 91.1 8.7 0.1 100.0 25,498.3 24,860.9 244,278.9 23,423.3 343.2 268,045.3 28,785. 1 23,321. 3 238,720. 9 22,921. 3 347. 8 261,990. 0 USD1 = LK R 11.0 8.9 91.1 8.7 0.1 100.0 108.72 23,783. 2 20,133. 4 219,483. 2 21,299. 7 219. 7 241,002. 5 USD1 = LK R 9.9 8.4 91.1 8.8 0.1 100.0 107.71 32,442.8 13,617.9 193,524.0 12,915.6 180.3 206,619.9 USD1 = LK R 15.7 6.6 93.7 6.3 0.1 100.0 102.12 160.6 32.7 18, 454.2 3, 757.2 6.7 1.4 21,752.2 3,746.0 25,050. 2 3,734. 9 9.6 1.4 18,257. 3 5,525. 9 7.6 2.3 25,359.4 7,083.5 12.3 3.4 1,751.1 201, 224.9 73.4 193,919.7 186,614. 5 71.2 175,566. 6 72.8 147,463.2 71.4 114.7 627.4 1,009.1 13, 177.9 72, 092.7 115, 954.3 4.8 26.3 42.3 13,694.3 70,405.5 109,819.9 14,210. 7 68,718. 3 103,685. 5 5.4 26.2 39.6 13,803. 2 69,336. 5 92,426. 9 5.7 28.8 38.4 13,776.7 64,283.7 69,402.9 6.7 31.1 33.6 33.3 97.0 100.9 231.2 2,385.3 3, 823.6 11, 145.9 11, 599.1 26, 568.6 274, 100.7 1.4 4.1 4.2 9.7 100.0 3,675.9 11,503.9 10,313.3 25,493.2 268,045.3 3,528. 3 11,862. 0 9,027. 5 24,417. 7 261,990. 0 1.3 4.5 3.4 9.3 100.0 2,913. 5 13,405. 9 7,002. 6 23,321. 9 241,002. 5 1.2 5.6 2.9 9.7 100.0 2,034.4 12,016.5 5,479.6 19,530.5 206,619.9 1.0 5.8 2.7 9.5 100.0 280.5 308.5 23.9 613.0 2,031.0 123.1 1,504.7 (73.4) (13.3) 1,418.0 172, 912.1 (8, 435.2) (1, 527.5) 162, 949.3 32, 235.0 35, 455.4 2, 744.4 70, 434.8 233, 384.1 14, 148.0 11.8 12.9 1.0 25.7 85.1 5.2 26,133.3 31,513.7 553.3 2,397.9 60,598.3 228,527.6 14,024.5 20,031. 7 27,572. 1 1,106. 6 2,051. 4 50,761. 7 223,671. 2 13,901. 0 7.6 10.5 0.4 0.8 19.4 85.4 5.3 21,562. 6 25,856. 6 1,137. 2 2,113. 4 50,669. 8 204,242. 8 13,437. 8 8.9 10.7 0.5 0.9 21.0 84.7 5.6 21,821.2 28,001.1 1,341.5 1,147.4 52,311.2 179,703.8 7,385.6 10.6 13.6 0.6 0.6 25.3 87.0 3.6 (3.1) (0.6) 59.4 63.1 174,226.3 3,380.0 (8,287.9) (1,389.1) 167,929.4 175,540. 6 6,760. 1 (8,140. 5) (1,250. 7) 172,909. 5 67.0 2.6 (3.1) (0.5) 66.0 156,071. 0 5,748. 3 (7,321. 7) (924. 6) 153,573. 0 64.8 2.4 (3.0) (0.4) 63.7 130,362.0 4,818.4 (6,937.1) (850.7) 127,392.6 63.1 2.3 (3.4) (0.4) 61.7 Year End LKRm As % of Assets Averag e LKRm 31Dec08 Ye ar End LKRm As % o f Assets 31De c 07 Year End LKRm As % o f Asset s 31 Dec06 Year End L KRm As % of Assets

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HATTON NATIONAL BANK PLC Income Statement Analysis
30Jun09 Income As % of Total AV Expenses LKRm 1. In terest Income 2. In terest Expense 3. NET INTEREST REVENUE 4. Fore x Income 5. Oth er Ope rating In come 6. TOTAL INCOME 7. Provision for Loan Losses 8. Provision Oth ers 9. Pe rsonnel Expe nse s 10. Othe r N on Int. Expe nse s 11. TOTAL EXPENSES 12. OPERA TI NG PROFIT 13. Associate Co 14. PRE TAX PROFIT 15. Taxe s 16. Min ority Interest 17. NET PROFIT * Figures annualised 17, 866. 3 10, 834. 4 7, 031. 8 477. 9 2, 322. 9 9, 832. 6 237. 3 3. 5 2, 515. 9 3, 343. 6 6, 100. 3 3, 732. 3 4. 2 3, 736. 5 2, 020. 2 8. 1 1, 708. 2 Ea rning Assets* 15.6 9.5 6.2 0.4 2.0 8.6 0.2 2.2 2.9 5.3 3.3 3.3 1.8 1.5 Expenses LKRm 32,829.5 20,287.2 12,542.3 1,169.1 4,726.8 18,438.2 1,159.2 259.5 4,626.7 6,133.1 12,178.6 6,259.5 (6.4) 6,253.1 3,367.3 55.3 2,830.5 31Dec 08 Income As % of Total AV Earning Assets 15. 3 9. 5 5. 9 0. 5 2. 2 8. 6 0. 5 0. 1 2. 2 2. 9 5. 7 2. 9 2. 9 1. 6 1. 3 Expenses LKRm 27,014.2 16,130.1 10,884.1 1,115.5 3,736.8 15,736.4 909.3 2.0 3,887.4 5,161.1 9,959.8 5,776.6 16.2 5,792.8 2,593.0 49.3 3,150.5 31Dec07 Income As % of Total AV Earning Assets 14.1 8.4 5.7 0.6 1.9 8.2 0.5 2.0 2.7 5.2 3.0 3.0 1.4 1.6 Expenses LKRm 19,321.2 10,788.3 8,532.9 773.2 2,995.2 12,301.4 942.6 9.5 3,295.3 3,999.7 8,247.1 4,054.3 13.6 4,067.9 1,792.2 36.5 2,239.1 31Dec06 I ncome As % of Total AV Earning Assets 11.7 6.5 5.2 0.5 1.8 7.4 0.6 2.0 2.4 5.0 2.4 2.5 1.1 1.4

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HATTON NATIONAL BANK PLC Ratio Analysis
30J un09 I. PROFITABILITY LEVEL 1. Net Inte rest Margin 2. Pretax Profit/Total Asse ts (av.) 3. Net Income/Equity (av.) 4. Net Income/Total Assets (av.) 5. Total Non Int. Expense ( excl.pro v.)/ N et Int. Rev.+ Other Operating Income 6. Net Int. Inc. / Opp. Income 7. Non Int. Inc./ Opp. Income 8. Net I nte rest Re v./Total Asse ts (av.) II. CAPITAL ADEQ UACY (yea r end) 1. Equ ity/Total Assets 2. Equ ity/Loans 3. Capital/Risks Tier 1 4. Capital/Risks Total 5. Net N PLs/Equ ity III . L IQUIDITY ( year end) 1. Liqu id Asse ts/Cu stome r & Sho rt Te rm Funding % 2. Loans/Cu stome r & Short Te rm Funding IV. ASSET QUALI TY 1. Loan Loss Provisions/Loans (av. ) 2. Loan Loss Reserve s/Loans 3. Speci fic Loan Loss Re serves/NPLs 4. Loan Loss Reserve s/NP Ls 5. Non Performing Loan s/Gross Lo an s % % % % % 0.1 4.9 47.1 55.8 8.8 0.7 4.5 55.3 66.2 6.8 0.6 4.6 66.7 75.5 6.0 0.8 5.2 66.8 72.8 7.1 % 35.1 81.7 26.9 92.6 30.3 89.5 31.6 86.5 % % % % % 8.9 14.2 8.5 10.6 31.3 8.9 12.9 9.3 11.4 22.4 8.9 13.4 10.2 12.0 14.4 6.3 9.7 10.2 11.4 23.2 % % % 71.5 28.5 5.2 68.0 32.0 5.0 69.2 30.8 4.9 69.4 30.6 4.5 % % % % % 6.0 2.8 14.4 1.3 59.6 5.7 2.5 12.9 1.1 58.4 5.5 2.6 18.5 1.4 57.5 5.0 2.1 18.6 1.2 59.3 31D ec08 31Dec07 31Dec 06

Hatton National Bank PLC August 2009

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Hatton National Bank PLC August 2009

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