COLOMBO (EconomyNext) – Sri Lanka’s Hatton National Bank is planning 20 percent loan growth in 2014, helped by a stronger focus in small and medium enterprises and personal banking, officials said.
"This year what we expect is for SME’s to take off," Chief Executive Jonathan Alles told an investor forum. "There are opportunities in micro finance. There is opportunity for personal banking with disposable income increasing – personal loans and housing loans."
It already had a SME portfolio of 125 billion rupees, Alles said.
Under a regulator driven consolidation plan, HNB has also acquired Prime Grameen, which had a focus on micro-finance. HNB on its own was also strong in the sector.
Alles said large corporates were turning to bond markets but there were plans to increase fee based income by expanding the clients even if the fee based business was competitive.
Loan growth which was slack in the first half of 2014 after a credit bubble ended in 2012 with a balance of payments crisis, has started to pick in the second half.
HNB ended 2014 with a 14 percent loan growth. Though there may be some slowdown in the first quarter with elections, the bank is expecting 20 percent growth in 2015.
Alles said they are not expecting interest and exchange rates move too much and it had to operate in a low interest rate environment with stable exchange rates.
"At a macro level we think the status quo will continue, you will see marginal rises in interest rates," he said.
Some analysts however have warned that a fundamental structural deterioration had occurred in state finances with a steep hike in public sector salaries this year, the consequences of which are yet to be felt by the broader economy.
HNB says it is prepared for a spike in domestic interest rates with most of its loans on floating rates and with a deposit base that is largely fixed to current rates.
Officials say the bank has a problem when rates peak, when term deposits make deposit rates rigid and loans are adjusted downwards.
The bank was also not exposed to long term bonds, with a focus on the shorter end gilts, Alles said.
In 2014 the firm posted profits of 9.8 billion rupees up 28 percent from a year earlier, partly helped by reversals of general loan loss provisions.
Officials said the general provisions were changed with more historical data being available which helped reverse the provisions.
Alles said after expanding its branch network by 60 from 2011 to make it 250, the group would focus on developing alternative channels using mobile, internet and teller machines.
Corrected – 2015 year first paragraph and 2011 year last paragraph