Hatton national bank: Aiding economic growth

Q: What are some of the issues confronting the banks at present?
A: The flip side of being a better-performing industry in the public eye has been the high incidence of taxation. It has been mentioned in many forums that over 60 percent of our profits being taxed has a significant impact on profit retention and indeed future capacity-building efforts.
Industry growth continues to be hampered by a lack of consolidation. This is an area that requires urgent attention from the regulators, as scale is a necessary prerequisite to becoming regionally competitive.
Q: How do you assess the post-war business environment?
A: Clearly, the macroeconomic indicators are on the right track, with single-digit interest rates, low inflation and a strong local currency expected to continue in the short to medium term; not surprisingly, business confidence is improving in leaps and bounds.
Globally, the position is not that sound, with Western economies still not out of recession. The uneasy relationship between the US and China is likely to impact our exports in traditional markets, as well as FDIs.
Q: So, how is HNB faring under these macroeconomic conditions?
A: We are uniquely placed to capture the growth potential of the country with our extensive branch and ATM networks, and a suite of products that caters to all segments of society. After a relatively slow start in the first half, we have experienced unprecedented levels of loan growth across all sectors in the third quarter - and we expect this trend to continue, to finish the year particularly well.
We have seen a flight from high to low-cost deposits, which will assist in protecting our net interest margins. Asset quality continues to improve, and centralisation and productivity initiatives are benefiting cost-income ratios - all of which will make a positive contribution to the bottom line.
Q: Where does future growth potential lie?
A: We strongly believe that nurturing micro and SME entrepreneurs will be critical for the next phase of growth in this country. In this context, our investments in mobile-phone banking, refocusing our delivery of microfinance and assisting in entrepreneur development initiatives will be key priorities for the future.
We recognise the rural economy as the engine of growth, and this is reflected in our branch openings in rural communities significantly outpacing urban areas in the last two years. HNB remains the private bank with the largest presence in the north-east, having opened eight branches this year. We expect to double our presence by 2011.
Our intention is to build on our strengths in the remittance business, with a view to becoming a regional remittance player.
And we will continue to strengthen our network in the Middle East and other key remittance markets.
Q: How important is CSR to your bank?
A: Corporate Social Responsibility is fully ingrained in our business strategy. For our business model succeed, financial inclusion, rural economic development, and effective partnering between corporate and micro entrepreneurs are imperatives.
Our CSR strategy is represented by five pillars: water and sanitation, health, education, entrepreneur development and environment. Under each of these pillars, KPIs have been defined to measure our progress over time.
An example of this approach is to measure our paper usage in terms of trees felled each year - and to take steps to reduce paper consumption, by encouraging email communication among staff and customers.
Our Annual Sustainability Report is the principal mode of communication with our stakeholders. Last year, we set-up a CSR Trust with a view to further improving transparency and project continuity.
Q: In business terms, what are the current priorities?
A: Today, Sri Lanka is one of the most exciting prospects in Asia to achieve transformational growth over the next few years, and we are mindful of the role we have to play to assist in the exhilarating journey ahead.
We will focus on assisting significantly unbanked and under-banked segments through the provision of appropriate financial services and cost-effective delivery channels; encourage small and medium-scale businesses in their entrepreneurial efforts; and assist the state and the private sector in much needed infrastructure developments, including highways and inner roads, water and sanitation, and renewable energy.
"We recognise the rural economy as the engine of growth.....
Courtesy: The LMD 50 - 2009/10