HNB clinches top position in K Seeds Investments’ ranking report

K Seeds Investments has identified HNB as the best-performing bank under the 1st category among the 14 banks in Sri Lanka through a ranking carried out based on their financial performance for the year ended 2023. 

In the report, Licenced banks (excluding NSB) have been categorised based on the Banking Act Directions No. 10 of 2019 issued by the Central Bank of Sri Lanka, which replaces the previous directions where the banks were categorised only based on the size of the asset base. 

The new direction requires the banks to be categorised based on a number of criteria, including size, interconnectedness, substitutability/financial institution infrastructure, complexity, which ranks them in their respective categories among their peers based on nine financial metrics, which are calculated from the annual and quarterly reports. 

K Seeds Investment said HNB topped the overall spectrum by belonging to “Category 1” (Domestic systematically important banks). Categories 2A and 2B represent the banks having an asset base more than Rs. 250 billion and less than 250 billion.

During the year under review, from 1 January to 31 December 2023, the operating environment continued to be challenging due to macroeconomic pressures stemming from the country’s external financing position. The Central Bank of Sri Lanka and Government of Sri Lanka undertook significant policy measures to curtail inflation, manage interest rates and support the currency. 

Additionally, both direct and indirect tax rates were increased along with fuel pricing adjustments and electricity tariffs. The Sri Lankan Rupee appreciated against the USD during 2023 with the easing of pressure on foreign exchange liquidity. This was aided by inflows from the IMF Extended Fund Facility, Asian Development Bank, World Bank, and a notable pickup in tourism and remittances. The first phase of the debt restructuring process, the Domestic Debt Optimisation, supported the upward revision of the sovereign credit rating and a decrease in domestic market rupee interest rates. However, uncertainty occurred with the restructuring of external debt, including anticipated a possible haircut of the international sovereign bonds (ISBs).Overall, during this period, Sri Lanka’s banking sector displayed a commendable level of adaptability and resilience, despite the various hurdles posed by the economic crisis and its cascading effects.

However, despite all these factors, HNB managed to maintain its top rank in the series of ranking reports released by K Seeds Investments on the banking sector of Sri Lanka. The report ranks the banks according to their financial results released through annual and quarterly reports on the Colombo Stock Exchange across nine key performance indicators (KPIs) – cost to Income ratio, return on equity, return on assets credit to deposits, net interest margin, impaired loans (stage 3), impairment to interest earnings assets, CASA and loan growth. These 9 KPIs are weighted equally and an overall ranking is arrived at based on the aggregate score for each category.

K Seeds Investments is a boutique investment banking firm, specialising in mergers and acquisitions, balance sheet restructuring, equity/debt placements, treasury management, corporate restructuring and talent management.