The Bank has reported significant growth in its financial metrics for the first quarter of 2026, with total deposits surpassing Rs 2 trillion and gross loans and advances exceeding Rs 1.6 trillion. The bank’s asset quality has remained consistent, evidenced by a Net Stage 3 ratio of 1.18%. Furthermore, the institution has maintained robust liquidity and capital positions that are well above regulatory requirements.
In a climate marked by economic uncertainty, the Bank achieved a Profit After Tax (PAT) of Rs 9.95 billion for Q1 2026, demonstrating effective balance sheet management and ongoing improvements in asset quality. At the Group level, PAT reached Rs 10.35 billion during the same period.
The Bank’s interest income saw a year-over-year growth of 10% in the first quarter of 2026. Although interest expenses rose, the increase in interest income was greater than the uptick in funding costs, leading to a Net Interest Income (NII) of Rs 26.9 billion. The quarter also highlighted margin improvements, with the Net Interest Margin (NIM) growing from 4.26% to 4.45% and NII expanding by 13.5% from the previous year. This was attributed to disciplined growth in the loan portfolio, supported by a solid deposit base and a largely stable funding mix.
Additionally, net fee and commission income climbed to Rs 6.8 billion, marking a 40.9% increase compared to Rs 4.8 billion in Q1 2025. This growth was fueled by strong performance in the leasing sector, an expanding loan book, enhanced card performance, and increased transaction banking activities, including a rise in the use of advanced digital solutions. Exchange income also improved by 6% year-over-year, reaching Rs 1.6 billion, driven by heightened customer engagement and better trade flows.
The Bank’s Total Operating Income for the first quarter of 2026 increased to Rs 36.1 billion, up from Rs 30.8 billion in the same quarter of the previous year, representing a year-over-year growth of 17.2%. Total operating expenses rose by 19.6% due to elevated customer activity levels, such as increased card usage and higher loan originations, which contributed to an uptick in routine operational costs and mandatory levies for priority sector and agricultural lending. The cost-to-income ratio was effectively managed at 37.15% in Q1 2026, remaining relatively stable compared to 36.41% in Q1 2025.
In response to current economic conditions, the Bank has implemented a cautious and forward-looking credit risk management strategy, resulting in impairment provisions of Rs 2.6 billion for Q1 2026, a shift from a reversal of Rs 379.7 million in Q1 2025. This reflects a prudent risk approach in the face of economic challenges and global uncertainties.
Despite the increase in provisions, asset quality metrics remained stable, with the net Stage 3 ratio slightly rising by 9 basis points to 1.18% as of March 2026, compared to December 2025. The Stage 3 provision coverage remained strong at 73.29%, ensuring adequate buffers and reinforcing overall balance sheet strength.
Mr. Damith Pallewatte, Managing Director and CEO of HNB PLC, commented on the quarter’s performance, noting the operating environment was characterized by significant uncertainty driven by global geopolitical events and their impact on local economic conditions. He emphasized the Bank’s commitment to being responsive to the needs of customers across various segments, including Retail, SMEs, Corporates, and Microfinance, particularly as they navigate cost pressures and funding challenges.
Mr. Pallewatte also highlighted the Bank’s focus on responsible lending, digital solutions, and fostering financial inclusion, especially for communities facing economic and climate-related challenges. He reaffirmed the importance of balancing customer support with prudent risk management and maintaining a resilient balance sheet while pursuing sustainable growth and long-term partnerships.
With total assets exceeding Rs 2.5 trillion, the Bank recorded robust growth in the quarter, with gross loans and advances increasing by Rs 113.8 billion and deposits rising by Rs 61.7 billion, reflecting strong customer confidence and effective balance sheet oversight.
The Bank’s capital and liquidity positions are also strong, with a Tier I capital ratio of 15.03%, a total capital ratio of 18.07%, and an all-currency Liquidity Coverage Ratio (LCR) of 194.44%, providing substantial regulatory flexibility.
The Board and Management expressed gratitude to Mr. K. V. Nihal Jayawardena, PC, for his contributions during his tenure and extended best wishes to Mr. Suresh Shah on his new appointment as Chairman.
HNB, which holds an AA-(lka) rating from Fitch Ratings Lanka Ltd., continues to establish itself in Sri Lanka’s financial landscape, having been recognized as the Best Retail Bank in Sri Lanka for the 16th time by The Asian Banker. The Bank also received accolades from Global Business Magazine as the Best Retail Bank and Best SME Bank for 2026, along with other honors such as Best Bank in Sri Lanka by The Banker (UK) and Sri Lanka’s Strongest Bank by The Asian Banker.
Photo: Damith Pallewatte, Managing Director / CEO, HNB
Financial Chronicle Biz English | Sri Lanka Business News.
