HNB posted a PATMI of LKR 7.2bn in 3Q 2024 (-19% YoY) which translated to an EPS of LKR 12.63. NII fell by 5% YoY to LKR 25.9bn amidst the drop in interest rates. Although impairment provisions fell by 58% YoY to LKR 1.8bn, higher operating expenses weighed down earnings. Looking ahead, we expect credit demand to accelerate amidst positive macroeconomic developments, with HNB well-positioned to capitalize on its strong market presence. Continued asset quality improvements should keep impairments lower, while a potential sovereign rating upgrade following successful ISB restructuring is likely to re-rate the banking sector to higher valuations. We value HNB at a forward fair value (2025E) of LKR 364.50 for voting shares and LKR 291.50 for non-voting shares, maintaining a BUY recommendation.