HNB drives growth amid Sri Lanka's economic odds

Banks in Sri Lanka faced macro-economic led challenges, including high inflationary pressures, managing asset quality and growth. Despite difficult circumstances, Hatton National Bank (HNB) managed a notable performance in its retail banking business in 2023. 

Sanjay Wijemanne, deputy general manager of retail banking group at HNB shared the bank’s business performance in 2023 and key strategic initiatives to support their customers.

He stated: “In the current economic environment, liquidity is paramount. We focused strategically on deposit mobilisation and liquidity management. The bank’s total deposits grew to LKR 1.5 trillion ($4.8 billion) from LKR 1 trillion ($3.2 billion) in just 10 quarters, while our retail deposits grew to LKR 936 billion ($3 billion) at a CAGR of 15% in the last four years. Meanwhile, our customer base grew to 2.9 million in September 2023 compared to 2.7 million a year back.” 

He highlighted the key initiatives to bring inflows including the ‘major and minor investment plan’ that supports customers to plan their long-term investments and ‘HNB Teen’. The bank has focused on wider segmentation and differentiation of products across age groups. 

Wijemanne claimed: “We have a much larger product basket than peers. Our plans start right from the time a kid is born in the hospital, we have products for minors, teens and various adult age groups to meet their needs in each stage of their life cycle. We focus on the cross sell on new accounts from day one and monitor that for 12 months.”

On the lending side, banks need to be careful given the current environment of higher taxes, and cost of living. He added: “We have been very cautious in lending, prioritising credit quality while simultaneously expanding our deposit base.”

He shared that the two exceptionally performing lending products in 2023 were gold backed loans that grew by 31.5% and credit cards that grew by 8.3%. 

Wijemanne mentioned that several initiatives helped the bank to grow its lending business. He explained: “We have strong tie ups with corporate customers that are big developers, facilitating home mortgages and property purchases. Alongside we have tie ups with the leading car distributers that helped grow the vehicle loan facilities. For greater liquidity to customers, we offer ‘HNB Easy Draft’ allowing working capital against the vehicles. In home mortgages we introduced ‘High Five’ that offers five different repayment options for housing loan repayment based on cash flows.” 

The impact of these various initiatives is visible on the bank’s bottom-line. “Our total revenue increased by 35% YOY up to September 2023, predominantly by the solid deposit growth, especially on CASA and fee income. In addition, the bank contained the cost to income ratio due to various digital interventions”, shared Wijemanne. 

Currently the fee income contributes to about 30% of retail revenue. The bank supported the government initiative to use formal channels for inward remittance and revamped ‘HNB Adhishtana’ with value added features like micro finance, housing loans, financial literacy and minimum saving behaviour. 

Sharing digitalisation initiatives, he shared that 80% of fixed deposits are now from digital channels. The 799 island-wide self-service machines for deposits and withdrawals contribute to 90% of all withdrawals. The bank’s digital banking app has 855,000 subscribers with 69% active users, a year-on-year jump in revenue of 39%. Bank’s digital wallet ‘SOLO’ allows peer to peer transfers, split bill services, withdrawals and cashback offers, and money transfers and the QR payment facilitation is among the top platforms in merchant acquiring in Sri Lanka. It now has LKR 1 billion ($12 million) monthly volume with 55% of its customers being non HNBs. 

Towards future proofing the business, Wijemanne shared that the bank introduced customer 360 that provides full a portfolio view of customer activities to front line staff. The bank is focusing on process reengineering and completed eight robotic process automation (RPA) in 2023, including in high volume operation like insurance renewal process. Bank continues to focus on customer journeys.  

He added: “We worked with a fintech to reduce the account onboarding time from 20 minutes to seven minutes. Now we are planning to launch the fully digital non face-to-face KYC onboarding of new to bank customers within next few weeks.”