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Shalini
Shalini
May 14 2026
59- Bank’s Total Deposits crosses Rs 2.0 Tn and Gross Loans and Advances crosses Rs 1.6 Tn in Q1 2026
- Asset quality remains stable, with the Net Stage 3 ratio at 1.18%
- Strong Liquidity and Capital Positions maintained well above regulatory minimums
Against a backdrop of heightened economic volatility, the Bank recorded a Profit After Tax (PAT) of Rs 9.95 Bn in Q1 2026, reflecting disciplined balance sheet expansion and sustained improvements in asset quality. At Group level, performance remained resilient, with PAT reaching Rs 10.35 Bn for the quarter.
During the first quarter of 2026, interest income recorded a year-over-year (YoY) growth of 10.0%. While interest expense increased during the period, the growth in interest income outpaced the rise in funding costs, resulting in Net Interest Income (NII) reaching Rs 26.9 Bn.
Margin expansion was a key highlight for the quarter, with Net Interest Margin (NIM) increasing from 4.26% to 4.45% and NII rising by 13.5% YoY, driven by disciplined balance‑sheet growth as loan expansion was supported by a growing deposit base and a largely stable funding mix, enabling sustained margin enhancement over the period.
Net fee and commission income rose to Rs 6.8 Bn, up 40.9% YoY from Rs 4.8 Bn in Q1 2025, driven by strong momentum in the leasing segment, building on the expansion achieved in the previous year. Growth was further supported by expansion of the loan book, improved card performance, and higher transaction banking activity, including increased adoption of enhanced digital solutions. Exchange income also increased by 6.0% YoY to Rs. 1.6 Bn, reflecting higher customer activity and improved trade flows.
Overall, Total Operating Income for the first quarter of 2026 increased to Rs 36.1 Bn, compared to Rs 30.8 Bn recorded in the corresponding period of 2025, reflecting a YoY growth of 17.2%. Total operating expenses increased by 19.6% YoY, primarily due to higher customer activity levels, including increased card‑related volumes, higher loan originations and credit assessments, contributing to an increase in routine operational expenses, and mandatory levies associated with priority‑sector and agriculture‑related lending. Effective cost management was maintained, with the cost‑to‑income ratio standing at 37.15% in Q1 2026, broadly stable year‑on‑year compared to 36.41% in Q1 2025.
Incorporating prevailing economic conditions, the Bank adopted a prudent and forward‑looking credit risk management approach, with impairment provisions of Rs 2.6 Bn recorded in Q1 2026, compared to a reversal of Rs 379.7 Mn in Q1 2025, reflecting a cautious risk stance amid economic challenges and global uncertainties.
Despite the increase in provisions, asset quality indicators remained stable. The net Stage 3 ratio edged up marginally by 9 bps to 1.18% as at end March 2026, compared to end December 2025. Stage 3 provision coverage remained strong at 73.29%, providing adequate buffers and supporting overall balance sheet resilience.
Commenting on the performance, Mr. Damith Pallewatte, Managing Director / Chief Executive Officer of HNB PLC, stated, “The operating environment during the first quarter of 2026 remained subject to heightened uncertainty, shaped by global geopolitical developments and their spill‑over effects on local economic conditions. During these times, our foremost responsibility is to remain close to our customers and stakeholders across all segments, Retail, SMEs, Corporates, and the Microfinance sector, understanding their evolving needs and standing with them as conditions change.
During the period, we continued to work alongside our customers as they managed cost pressures and funding needs in a volatile environment, while advancing responsible lending, digital solutions, and financial inclusion, particularly for communities most affected by economic and climate‑related challenges.
The Bank maintained a careful balance between customer support and prudence, with continued emphasis on risk discipline and balance sheet resilience. While navigating a cautious operating environment, we remain focused on sustainable growth, long‑term partnerships, and our transformation journey. I extend my sincere gratitude to our customers, employees, and stakeholders for their continued trust and support.”
With Total Assets surpassing Rs 2.5 Tn, the Bank delivered strong growth during the quarter, with gross loans and advances increasing by Rs 113.8 Bn and deposits rising by Rs 61.7 Bn, reflecting continued customer confidence and prudent balance sheet management.
The Bank reported a strong capital and liquidity position, with Tier I at 15.03%, Total Capital at 18.07%, and an all‑currency LCR of 194.44%, providing substantial regulatory headroom.
The Board and the Management wishes to express its appreciation to Mr. K. V. Nihal Jayawardena, PC, for his contribution during his tenure, and extends its best wishes to Mr. Suresh Shah on his appointment as Chairman.
HNB, rated AA‑(lka) by Fitch Ratings Lanka Ltd., continues its strong standing in Sri Lanka’s financial sector, having been named Best Retail Bank in Sri Lanka for the 16th time by The Asian Banker, while Global Business Magazine awarded HNB as Best Retail Bank and Best SME Bank for 2026, alongside further recognition as Best Bank in Sri Lanka by The Banker (UK), Sri Lanka’s Strongest Bank by The Asian Banker, Best Bank for Large Corporates by Euromoney, ranking among the Top 1,000 Banks in the World by The Banker (UK), and Sri Lanka’s Best Corporate Citizen for 2025 by the Ceylon Chamber of Commerce.
Source: Adaderana
