Sampath Bank 1H post-tax profit surpasses Rs. 5 b mark

Sampath Bank has further extended its growth momentum in the second quarter of the year by increasing its first half post-tax profit by 35.1% to Rs. 5.7 billion.

Profit Before Tax (PBT) too grew by 36.6% to Rs. 7.8 billion by 30 June 2017.

The Sampath Group, which comprises of Sampath Bank and four fully owned subsidiary companies, also posted a growth of 36.8% and 35.0% at PBT and PAT levels respectively.

Fund Based 

Income (FBI)

Net Interest Income (NII), which is the main source of income representing almost 70% of the total operating income of the bank, recorded an increase of Rs. 3 billion (29.0%) during the period under review. Accordingly, the bank recorded Rs. 13.1 billion as NII for the first half of 2017, as against Rs. 10.2 billion recorded for the corresponding period in 2016.

The above achievement was made possible due to the robust growth recorded in the bank’s fund base, as indicated by 11% (annualised 22%) growth in deposits and 12% (annualised 24%) growth in advances. The timely re-pricing of asset and liability products and other fund management strategies adopted by the bank too played a pivotal role in achieving the 29% growth in NII.

Non Fund Based Income (NFBI)

Net fee and commission income, which largely comprises of credit, trade, card and electronic channel related fees increased to Rs. 3.8 billion during the period under review, as opposed to Rs. 3 billion recorded during the corresponding period in 2016. This income source too has posted an impressive YoY growth of 26.3% largely due to the robust growth recorded in advances, expansion of credit card operations and the successful launching of innovative value additions through electronic channel offerings.

The bank’s other operating income, net trading income and gains from financial investments too recorded an increase of 43% during the period under review. Increase in realised exchange income and dividend income from financial assets have contributed to the said increase in other operating income. Consequently, other operating income for the first half of 2017 stood at Rs. 2 billion, as opposed to Rs. 1.4 billion reported during the corresponding period in 2016.

Operating expenses 

Operating expenses of the bank which stood at Rs. 7.2 billion during the first half of 2016, increased to Rs. 7.9 billion during the period under review, reflecting a YoY increase of 9.5%. This increase was mainly due to increase in personnel expenses triggered by annual salary increments. Other overhead expenses too increased due to general price hikes and indirect tax increases. However, the Cost to Income ratio excluding VAT & NBT on financial services improved to 41.6% in the first half of the year from 49.3% reported in the same period in 2016. This records an improvement of 770 basis points, which is a significant achievement particularly in view of Sampath Bank having one of the youngest branch networks compared to its closest competitors.

Impairment charges on loans and receivables

Impairment charges amounting to Rs. 1.35 billion recorded for the first half of 2017 showed an increase of Rs. 794 million over the comparative period’s charge of Rs. 561 million. Impairment provision of already impaired individually significant customers was further increased during the first half of 2017 after considering the current status of the recovery process. Consequently, impairment charge on account of individually significant loans increased by 39% during the period under review. On the other hand, collective impairment charge increased by Rs. 545 million predominantly due to the growth in the loan portfolio. Marginal increase in NPA ratio from 1.61% in December 2016 to 1.77% in June 2017 too has contributed to the above increase in collective impairment. However, the bank’s NPA is still the lowest among industry peers and stands well below its closest competitors. This provides an indication of the quality of the loan book and the unique and efficient recovery measures implemented by the bank.

Business growth

Sampath Bank’s total asset base surpassed Rs. 700 billion mark in 2017. Asset base grew by 10.1% (annualised 20.2%) during the first half of 2017 to reach Rs. 725.3 billion against Rs. 658.5 billion reported as at 31 December 2016.Gross loans and receivables grew by 12% (annualised 24%) during the period and moved up to Rs. 524.6 billion (up by Rs. 56 b) as at 30th June 2017. Total deposit base too increased by Rs. 57.7 billion, recording a growth of 11% (annualised 22%) during this period and stood at Rs. 574 billion as at the reporting date. However, the CASA ratio (36.3%) decreased slightly compared to 31 December 2016 (38.4%).

Performance ratios 

ROE (after tax) marginally increased from 23.47% as at 31stDecember 2016 to 24.29% as at 30 June 2017. ROA (before tax) too has increased to 2.27% from 2.14% as at 31 December 2016. The Basic Earnings Per Share for the first half of 2017 has improved significantly and stood at Rs. 30.64 as against Rs. 22.68 recorded during the corresponding period in the previous year. This was an impressive YoY growth of 35.1%. Statutory Liquid Asset Ratio (SLAR) as at 30 June 2017 stood at 22.40% which is well above the mandatory requirement of 20%.

Capital adequacy  

The Core Capital (Tier I) and Total Capital (Tier I + Tier II) Adequacy ratios which stood at 8.31% and 12.87% respectively as at 31 December 2016 have shown a marginal drop during the period, mainly due to increase in risk weighted assets triggered by growth in the advances portfolio. Decrease in capital due to payment of cash dividends for the year ended 31 December 2016 too contributed to the drop in capital adequacy ratios of the bank. Accordingly, Core Capital and Total Capital Adequacy ratios as at 30 June 2017 stood at 8.21% and 12.17% respectively. Despite the slight drop, both ratios were maintained well above the minimum regulatory requirement of 5% and 10% for Core Capital and Total Capital respectively.

Other information

2017 is an important year for Sampath Bank, where the bank celebrates its 30th anniversary. Since its establishment in 1987, the bank has progressively developed in all spheres of its operations and today, is positioned as the third largest private sector commercial bank in Sri Lanka. The bank is renowned for its innovative banking solutions and excellent customer service during the past three decades.

Once again, Sampath Bank was awarded the ‘Best Bank in Sri Lanka – 2017’, a recognition given to top performing financial institutions, by the prestigious Business Magazine ‘The Euromoney’. The bank has now been endowed with this prestigious title for four years; 2017, 2016, 2014 and 2013.