Sunday Nov 16, 2025
Sunday Nov 16, 2025
Friday, 26 September 2025 00:26 - - {{hitsCtrl.values.hits}}
By Devan Daniel
Nations Trust Bank PLC (NTB) shares closed up 22.72% yesterday, up Rs. 72.25 to Rs. 390.25, following Wednesday’s announcement of the bank’s proposed Rs. 18 billion acquisition of Hongkong and Shanghai Banking Corporation’s (HSBC) Sri Lanka retail banking business, which marks one of the largest portfolio transfers in recent years and reflects the broader retreat of global banks from consumer segments in Asia.
NTB Director and Chief Executive Officer Hemantha D. Gunetilleke yesterday told the Daily FT that the Rs. 18 billion acquisition of HSBC’s Sri Lanka retail banking business reflects a wider shift in global finance as multinational banks scale back. He argued local institutions that invest in technology and people are now better positioned to unlock value for shareholders, while offering more relevant services to customers.
For NTB, the acquisition is both a growth catalyst and a test of execution, bringing with it around 200,000 customers, seven branches, and a large credit card and Premier banking franchise. For investors, customers, and policymakers, it signals that Sri Lanka’s local banks are positioned to absorb scale, protect client service, and maintain earnings momentum.
The Rs. 18 billion price tag, with taxes applicable on top, was set on forward profitability models. While book values remain confidential, Gunetilleke said the portfolio is value positive. NTB had built up a capital “war chest” to act on such opportunities, and though this deal will draw on reserves, capital ratios will remain strong.
For shareholders, the bank expects the acquisition to be earnings accretive. Return on equity (ROE), which recently exceeded 20%, is forecast to normalise mostly due to market interest rates impacting net interest margins (NIMs), still maintaining a six-point premium to the industry average with one of the best NIMs in the industry, Gunetilleke said.
The market has already signalled confidence, with NTB’s share price reacting positively to the announcement.
From a business perspective, the acquisition strengthens NTB’s positioning in profitable niches. The transfer of HSBC’s credit card base will give NTB a significant market share.
Gunetilleke acknowledged overlaps but said the result would be a commanding position in the card industry. HSBC Premier clients will be transitioned into NTB’s private banking arm, a segment the bank has cultivated since its inception 25 years ago. The overlap in customer proposition is high, he noted, with continuity assured through the retention of relationship managers and product parity.
HSBC branches will remain open until the transition and then be rebranded with rationalisation only where overlap is unavoidable. Customers will be issued NTB-branded cards after the transition in the first half of 2026. Gunetilleke stressed that the cultural fit between the two institutions was as important as financial metrics.
“We are buying a whole business, not just assets. Retaining people and preserving culture are central to ensuring that customers stay. We believe this fit was a major reason why HSBC selected us,” he said.
For customers accustomed to a global franchise, questions remain about the loss of international connectivity. Gunetilleke argued that in practice, the difference is limited. With cross-border flows already limited, NTB can offer a wider onshore product suite, particularly in fixed income wealth management, bancassurance, and structured lending. “Apart from the global brand, clients will gain more choice here than they had before,” he said.
The significance for Sri Lanka’s banking sector extends beyond NTB. HSBC’s exit from retail is part of a global retrenchment that includes several Asian markets. This shift creates space for local institutions to consolidate. In Singapore, DBS Bank has emerged as the dominant player; in Sri Lanka, local banks are now filling the same role.
Gunetilleke said the transition demonstrates that domestic lenders have built the scale, systems, and governance required to manage complex portfolios. For the economy, it signals resilience that a major international franchise can transfer operations to a local counterparty without loss of service.
Technology is central to the strategy. NTB operates proprietary consumer platforms developed in-house, allowing faster adaptation to customer needs than global banks running centralised systems. That agility has reshaped how NTB uses its branch network. It is now focused on establishing larger hubs to focus on advisory conversations rather than cash transactions.
“If we see a queue today, we ask why that customer is not using digital. Branches are becoming spaces for engagement, not basic transactions,” Gunetilleke said.
The bank will maintain its three-tier retail structure. Private banking serves high-net-worth clients, the “Inner Circle” focuses on salaried customers with relationship management and card propositions, and “Nation’s Nova” is a digital-first platform designed for younger demographics.
NTB intentionally avoids competing as a mass-market full-service bank, preferring to concentrate resources on segments where it can achieve depth and profitability.
On the corporate side, the bank continues to prioritise exporters, value-added manufacturers, and financial institutions. Conservative underwriting has kept non-performing loans at around 1.2%, the lowest in the market, supporting NIMs that rank at the top of the industry.
The wider macro context is broadly supportive. Gunetilleke said interest rates are close to their trough, the currency is stable, inflation is trending lower, and tax collections are strong. Investment sentiment is improving, helped by political stability and gradual recovery in foreign direct investment.
He cautioned, however, that external risks remain. Oil prices or a global shock could destabilise Sri Lanka’s narrow recovery path, making continued discipline on reforms essential.
According to Gunetilleke, for investors, the deal represents growth without dilution, backed by prudent capital planning and with upside from a larger earnings base. For customers, it promises continuity of service, branch presence, and product choice with minimal disruption. For the public, it marks a milestone in the localisation of Sri Lanka’s banking sector, showing that domestic institutions have the scale and systems to take over where global franchises retrench.
“The hard work starts now,” Gunetilleke said. “But this is an opportunity we could not miss. It is a milestone in our 25-year journey and a vote of confidence in NTB and the strength of local banking.”
