#1HNB YOUR PARTNER IN PROGRESS#2Investor Update 18th August 2021#3Financial Highlights 1H 2021#4Fund Based income Rs Bn 1H 2021 1H 2020 % change Interest Income 52.7 58.5 (10.0) Interest Expenses 26.0 32.7 (20.4) NII 26.7 25.9 3.2 Private Credit Growth&AWPLR (%) 2000 6421 14 12 10 Jan-20 Pvt Credit Growth AWPLR (R) Mar-20 May-20 Jul-20 Sep-20 Nov-20 Jan-21 Mar-21 May-21 1,100 12 1,000 10 8 900 642 800 700 600 500 Gross Loans & Deposits (Rs Bn) 2017 2018 2019 2020 Mar-21 Jun-21 Significant improvement in Q2 NIM Pvt Credit growth - 10.5% YOY AWPLR drops by nearly 300 bps from 1H20 to 1H 21 Loan book grows 3% in 1H; 8.6% YoY 2nd Private LCB to cross Rs 1 Trn Deposits; 6.7% growth in 1H 2021 CASA expands to Rs 406 Bn; Ratio at 39%, 5.7% growth in 1H NIM & NII (Rs Bn) 50% 5.0% 45% 4.5% 4.52% 16 4.12% 4.0% 40% 3.5% Gross Loans 3.0% 35% 2.5% Deposits 2.0% 30% CASA (R) 1.5% 1.0% 25% 0.5% 0.0% 122006420 Q2 20 Q3 20 Q4 20 Q1 21 Q2 21 Bank NII - R 8 Group NII - R Bank Group#5Non-Fund Based income Rs Bn 1H 2021 1H 2020 % change Net Fee & Commission Income 4.8 3.7 30.3 Exchange Gains 3.4 1.5 127.6 Insurance Premium 4.9 3.9 26.1 5 5 LO 4 4 3 3 Fee & Commission (Rs Bn) 2 1H 20 1H 21 15 13 11 9 ■ Bank ■Group 7 Strong growth in fees from Cards, Trade and Digital Channels Lower Swap volumes and LKR depreciation boost exchange gains Insurance accounts for 35% of non fund income; high diversity in non fund sources Total Non Fund Income (Rs Bn) Composition of Non Fund Income Others 5% Fees 35% 5 LO 3 Bank ■Group 1H 20 1H 21 Insurance 35% Exchange Gains 25%#6Impairment & Asset Quality (Bank) Rs Bn Loans Other Total Impairment 1H 2021 1H 2020 % change 6.7 8.5 (20.9) 0.09 0.8 (88.9) 6.8 9.3 (26.8) NPA Ratios 6.0% 5.0% 4.0% 4.25% 3.0% 2.0% 1.0% 0.64% 0.0% 2017 2018 2019 2020 Mar-21 Jun-21 Best NPA ratios among peers Higher charges in 1H 20 o/a of rising NPA's and sovereign downgrade Management Overlay improved further in 1H 21 Impairment against NPA base over 100% Diversified Exposure Health Care& Tourism. 6% Support Services 17% Agri & Related 7% Others 10% Gross NPA Net NPA Financial Services 7% Manufacturing 11% Construction & Infrastructure Consumption 12% 14% Wholesale & Retail Trade 16%#7Operational Expenses Rs Bn 1H 2021 1H 2020 % change Personnel expenses 7.6 6.9 10.0 Insurance Costs 4.5 3.3 38.7 Other expenses 6.9 6.9 (0.6) Total operating expenses 19.0 17.1 11.2 Bank level TOI vs. Cost 3322225 50.0% 30 45.0% 40.3% 20 40.0% ΙΤΟΙ 37.4% 15 OpEx 35.0% 10 Cost/Income (R) 30.0% 25.0% 2525 40 35 30 25 20 15 10 1H 20 1H 21 Bank OpEx rise contained to 5.2% YoY despite low base effect from 1H 20 OpEx dropping 6% YoY 290 bps improvement in Bank Cost to Income to 37.4% Group records 120 bps improvement in cost vs. income 39% increase in insurance claims and benefits Group level TOI vs. Cost 50.0% 48.3% 48.0% 47.1% 46.0% 44.0% 42.0% ΤΟΙ 40.0% OpEx 38.0% 36.0% Cost/Income (R) 34.0% 32.0% 30.0% 1H 20 1H 21#8Taxation & Profitability Rs Bn 1H 2021 1H 2020 % change Tax on Financial Services 2.6 1.9 42.4 Profit before income tax 12.0 7.4 62.6 Income tax expense 2.2 1.9 15.6 Income Tax charge revised to 24% from 28%; Same applied to Deferred Tax Assets SLDB interest income exemptions Total Group PAT 9.8 5.5 79.0 Profit attributable to SH 9.5 5.2 83.3 Bank Profits (Rs Bn) Group Profits (Rs Bn) 12 50.0% 10.93 14 50.0% 12.01 10 10 9.08 45.0% 12 41.0% 45.0% 40.8% 9.80 10 8 40.0% 40.0% PAT 5.86 8 7.39 PAT 35.0% 4.46 PBT 5.48 35.0% 32.6% 6 33.1% PBT 4 30.0% Total Effective Tax 30.0% Total Effective Tax 4 2 25.0% 2 25.0% 20.0% I 20.0% 1H 20 1H 21 1H 20 1H 21#9DuPont Analysis - Group ROE 11.98% (7.00%) ROA 1.41% (0.90%) Minority Interest 0.05% (0.05%) Leverage Multiplier 8.81x (8.26x) NII 3.83% (4.24%) Other income 1.98% (1.60%) Impairment 0.97% (1.52%) Operating Costs 2.73% (2.80%) Taxation 0.70% (0.62%) + 1H 2021 1H 2020#10Soundness Indicators Capital Adequacy 21% 19% 17% 15% 13% 11% 9% 7% 5% 2017 2018 2019 2020 Mar-21 Jun-21 Tier I Total Tier I Req Total Req HNB continued to be among the best capitalized in the industry CAR Tier I : 15.3% CAR Total: 18.4% Inclusion of Rs 7Bn Sub debt raised in July will boost Tier II capital further LCR (All Currency) - 274% Loan to Deposit Liquidity (SLAR) 100% 96.46% 95.30% 95% 92.59% 45% 90% 40% 85% 84.16% 35% 81.15% 81.24% 80% 30% 75% 25% 70% 20% 65% 15% 60% 10% 55% 5% 50% 0% 2017 2018 2019 2020 Mar-21 Jun-21 2017 2018 2019 2020 Mar-21 Jun-21 Liquidity Req Min#11Our Response to the COVID 19 Pandemic Uninterrupted services through branches, digital channels and 24×7 contact centre Financial assistance 15% of loan book on Moratoriam, Working capital loans of over Rs 23Bn, MF grant to 200 customers Digital payment solutions such as SOLO, MoMo, Appigo, IPG ■ Health and safety measures (PPE, transport etc.) ■ No pay cuts ■ No staff lay offs ■ WFH Learning and development through virtual channels. ■Recruitments, progression through digital platforms Improved returns to shareholders through higher ROAS and ROES ■ Best NPA & capital among peers Strong provision coverage ■Liquidity levels well above statutory levels Mobile ATMs across the country during Lockdown Support to IDH - medical equipment, training centre Medical equipment to teaching hospitals including Cancer Hospital, Castle Hospital for women PPE to 26 hospitals/MOH offices across the country Customers Employees Investors Community#12Key Recent Awards • Top 1000 World Bank by the UK based The Banker magazine • Best Managed Bank during COVID - Asian Banker Magazine 2020 50th Anniversary TOP 1000 WORLD BANKS 2020 THE ASIAN BANKER STRATEGIC BUSINESS INTELLIGENCE FOR THE FINANCIAL SERVICES COMMUNITY • ⚫ Best Retail Bank in Sri Lanka for the 11th time in 2020 by Asian Banker Magazine • •No 3 Company in Sri Lanka in the 'Business Today' Top 30 Rankings 'Most admired companies in Sri Lanka - by CIMA and ICCSL for the 3rd consecutive year ⚫ LMD - Most Awarded Companies in Sri Lanka • • Best Sub-Custodian Bank in Sri Lanka at Global Finance Awards 2020 ⚫ Market Leader and Best Service Bank in Trade Finance' - Euromoney • 'Top 10 Best Integrated Report' by CMA for the 4th consecutive year BUSINESS TODAY NOVEMBER 2020 Business Today TOP 30 2019-2020 CIMA ICC SRI LANKA INTERNATIONAL CHAMBER OF COMMERCE The world business organization LMD THE VOICE OF BUSINESS 12#13Thank you