Sampath Bank ups 1H post-tax profit by 41% to Rs. 4.2 b

Sampath Bank posted a profit after tax of Rs. 4.2 b for the first half of 2016, a 41% growth over the corresponding period in 2015.

The bank also managed to cross the Rs. 5 b mark in pre-tax profit to reach Rs. 5.7 b by the end of the period, recording a growth of 29.4% against Rs. 4.4 b achieved in the corresponding period in the previous financial year. The main reason for the higher post-tax profit growth compared to the pre-tax profit growth is the reversal of excess provisions made in previous years. 

Sampath Group, which comprises Sampath Bank and four subsidiary companies, too recorded an impressive group pre-tax profit of Rs. 5.9 b during the period under review. 

The Group’s post-tax profit achievement for the first half in 2016 was at Rs. 4.3 b. 

Amidst several challenges such as low liquidity, higher cost of funds, volatile margins and unstable currency rates posed by the external market forces, the bank’s strong commitment to achieve a sustainable growth in all key business pillars has improved almost all core banking income sources, such as net interest income and net fee and commission income. 

Net Interest Income (NII) which is the main source of income from fund based operations and accounts for more than 70% of the total operating income of the bank continued to suffer adversely due to sharp increase in cost of funds during the period. However, the strong growth recorded in the bank’s fund –base, as indicated by more than 10% growth both in deposits and advances, coupled with timely re-pricing of asset and liability products and other fund management strategies adopted by the bank helped to record a notable increase of Rs. 1.7 b (20.5%) in NII during the 1H 2016. Accordingly, the bank recorded a NII of Rs. 10.2 b during the period under review as against Rs. 8.4 b earned in the corresponding period in 2015.

Net fee and commission income, which mostly comprises of credit, trade, credit card and electronic channel related fees has increased to Rs. 3 b in the first 1H 2016 as opposed to Rs. 2.4 b recorded in the comparative period in 2015, reflecting an impressive growth of 23.1%. Leveraging on credit and trade related segments, further expanding the credit card operation and successful launching of innovative value additions through electronic channel offerings have considerably contributed to the growth in NFBI.

Net trading income has recorded a positive figure of Rs. 144.8 m in the 1H 2016 as against the loss of Rs. 124.1 m recorded during the same period of the previous year. This was mainly due to the gain on forward exchange contracts revaluation. 

The bank also recorded a marginal growth of 1.7% in other operating income during this period. Other operating income earned during the 1H 2016 amounted to Rs. 1,241.6 m, compared to Rs. 1,220.6 m in the 1H 2015. Exchange income gains on revaluation of FCY reserves resulting from depreciation of the LKR against the USD and income from currency note operations have contributed towards the positive variance in this income source. 

Operating expenses of the bank which stood at Rs. 6.2 b for 1H 2015, increased to Rs. 7.2 b in the period under review, reflecting an increase of 15.1%. This increase was mainly due to increase in personnel expenses triggered by salary increments and general price increases, etc. However, the Cost to Income ratio without VAT and NBT on financial services has improved to 49.3% in the 1H 2016 from 52.0% in the 1H in 2015. In spite of having one of the youngest branch networks compared to close competitors, maintaining the Cost to Income ratio below 50% is an important achievement. 

Impairment charge amounting to Rs. 561 m recorded an increase of Rs. 195 m over the previous year’s charge of Rs. 366 m. Impairment charge on individually significant customers has increased by Rs. 353.3 m due to prudential provision increases made against impaired customers. However, the Bank’s collective impairment charge recorded a decrease of Rs. 158.5 m compared to the 1H 2015 charge of Rs. 243 m, due to decrease in loss rates resulting from improving credit quality of the loan book.

Sampath’s total asset base grew by 11.1% during the 1H 2016 (annualised 22.3%) and stood at Rs. 584 b as at 30 June 2016. Gross loans and receivables grew by 10% during the first six months of 2016 (annualised 19.8%) and moved up to reached to Rs. 423 b by 30 June 2016. Total deposit base too increased by Rs. 43 b, recording a growth of 10.5% during this period (annualised 21.0%) and surpassed Rs. 450 b as at the reporting date. The CASA ratio as at 30 June 2016 decreased to 44.0% from 47.6% as of end December 2015, due to customers shifting their funds to high yielding products mainly triggered by high interest rates offered by term deposits.

ROE (after tax) substantially improved and stood at 23.4% as at 30 June 2016 when compared to 18.4% recorded as at 31 December 2015, while ROA (before tax) improved to 2.07% as at end of the half year period, as against 1.90% recorded as at 31 December 2015. The Basic Earnings per share (group) for the first half of the year 2016 has substantially improved and stood at Rs. 24.56 as against Rs. 18.12 recorded for the corresponding period in the previous year. This was an impressive growth of 35.6%. Statutory liquid asset ratio (20.7%) was maintained above the mandatory requirement of 20%. Though the bank’s gross NPL ratio (1.8%) has fractionally increased from 1.64% recorded as at 31 December 2015, this ratio still remains as one of the best in the industry. 

The Core Capital (Tier I) and Total capital (Tier I + Tier II) adequacy ratios as at 30 June 2016 have marginally improved and stood at 7.97% and 12.35% respectively, as against 7.90% and 12.26% recorded as at 31 December 2015. The two ratios were well above the minimum regulatory requirement of 5% for Tier I Capital and 10% for Total Capital. With the objective of further strengthening capital adequacy, the bank issued subordinated debentures amounting to Rs. 6 b during June 2016 and the issue was oversubscribed on the day of opening. 

Year 2016 proved to be another rewarding year for Sampath Bank. The bank won three of the most prominent international awards during the period under review. Sampath Bank regained the ‘Best Bank in Sri Lanka – 2016’ award which is given to top performing financial institutions by the prestigious Business Magazine ‘The Euromoney’. The bank is now endowed with this prestigious title for three years; 2016, 2014 and 2013. 

Sampath Bank was once again adjudged as the ‘Best Commercial Bank 2016’ and ‘Best Retail Bank 2016’ in Sri Lanka for the third consecutive year by the UK based World Finance Magazine in recognition of the Bank’s excellence in various spheres including overall performance, financial ratios, variety and clarity of products and services, corporate governance, etc. 

Sampath Bank became the first bank to launch Visa payWave in Sri Lanka, which is the fastest and the most convenient way of effecting payments by simply tapping the credit card on a POS machine at a check-out counter, instead of swiping or inserting it.