Sampath Bank, the main entity of the Sampath Group, has registered a pre-tax profit of Rs. 2.5 billion for the period ended 31st March 2016, compared to Rs. 2.1 billion recorded in the corresponding period of 2015, achieving a YoY growth of 19.4%. The post–tax profit of the Bank for the period under review has also improved by 21.5%, from Rs. 1.4 billion in Q1 2015 to Rs. 1.7 billion in Q1 2016.
Sampath Group, which consists of Sampath Bank and four subsidiary companies, also recorded an impressive profit before tax of Rs. 2.7 billion for the 1st quarter 2016, achieving a growth of 15.3% over the previous year’s first quarter pre-tax profit of Rs. 2.3 billion. The Group earned a profit after tax of Rs. 1.8 billion for the period then ended, which reflected a YoY increase of 16.6%.
Amidst challenges such as low liquidity, higher funding cost, lower margins etc. posed by the external market forces, the increase in profitability was mainly due to favourable growth in all core banking income sources such as net interest income, net fee and commission income and other operating income.
Fund based income (FBI)
Continuous shrinking of Net Interest Margins (NIM) adversely impacted on the Net Interest Income (NII) of the banking industry and Sampath Bank was no exception to this trend. Nevertheless, NII of the Bank recorded a remarkable increase of Rs. 616 million or 15.2% during the period under review from Rs. 4,041 million in Q1 2015 to Rs. 4,657 million in Q1 2016, aided by the significant expansion of the fund-base of the Bank since Q1 2015, coupled with prudent fund management strategies adopted by the Bank.
Non fund based income (NFBI)
Net fee and Commission income which mostly comprises of credit related, trade related, credit card related and electronic channel related fee income has increased to Rs. 1,463 million as opposed to Rs. 1,217 million earned for the first three months of the year 2015, reflecting a growth of 20.2%. This growth was derived mainly leveraging on the credit related and trade related segments. Further, it is encouraging to note that Electronic channel offerings have now emerged as new sources of generating non-fund based income. The Bank introduced a number of unique value additions to its card holders which further boosted the popularity of “SampathCards” in the local market.
Depreciation of the Rupee against the US dollar continued throughout the first quarter of 2016. This resulted in the losses recorded on forward exchange contract revaluation. In addition, mark to market losses were sustained on the existing portfolio of Treasury Bills due to increase of market interest rates during the period. The above two issues were the main reasons for the Net Trading Income to report a loss of Rs. 140 million for the period under review.
11.0% growth was recorded in other operating income for the period under review as compared to the corresponding period in 2015. Other operating income earned during the first quarter of 2016 amounted to Rs. 728 million whereas Q1 2015 was only Rs. 655 million. The depreciation of LKR against USD, which boosted the exchange income on revaluation of FCY reserves together with income from currency note operation contributed towards the positive variance in other operating income.
Operating expenses of the Bank which stood at Rs. 3.0 billion for the first quarter in 2015, increased to Rs. 3.4 billion during the same period in 2016, reflecting a YoY increase of 12.8%. This increase was mainly due to the increase in personnel expenses that resulted from the salary increments given to the staff members coupled with general price increase. However, the Cost to income ratio without VAT and NBT on financial services in Q1 2016 has improved to 50.8% from 53.2% recorded in the first quarter of the previous year. Maintaining the cost-to-income ratio below 55% despite having one of the youngest branch networks in comparison to its closest competitors is an achievement.
Impairment Loss on Loan and Receivables
Impairment charge on loans and receivables for the first quarter of the year 2016 amounted to Rs. 216 million which is an increase of Rs. 187 million as compared to Rs. 29 million impairment charge recorded for the first quarter of the previous year. The increase of collective impairment provision requirement due to growth of the loan book and prudential provisions made against individually significant impaired customers are the main reasons for the said increase in impairment charge.
The year 2016 exposed the Bank to a challenging environment caused by intense competition, high funding cost coupled with the resultant pressure on NIM and low liquidity. Despite these challenges, the Bank’s total asset base grew by 5.8% during the quarter (annualised 23.2%) and stood at Rs. 556 as at 31st March 2016. The gross loans & receivables increased by 5.0% during the quarter (annualised 20.0%) to Rs. 405 billion as at 31st March 2016.The total deposits showed a growth of 6.7% during the quarter (annualised 26.8%) to surpass Rs. 436 billion as at the Balance Sheet date.
ROE (after tax) improved to 19.78% as at 31st March 2016 compared to 18.42% recorded as of 31st December 2015 while ROA (before tax) stood unchanged at 1.90% compared to 31st December 2015. The Basic Earnings per share (group) for the first quarter of the year 2016 improved to Rs. 10.69 compared to Rs. 9.16 recorded for the corresponding period of the previous year. This records a growth of 16.7%. Statutory liquid asset ratio (21.14%) was above the mandatory requirement of 20%. Though the Bank’s gross NPL ratio (1.67%) fractionally increased by of 0.03%, compared to 1.64% recorded as at 31st December 2015, this ratio remains as one of the best ratios in the industry.
Other relevant information
During the year, Sampath Bank joined LankaPay Common ATM Switch (CAS) availing Sampath Bank customers to access over 3,000 ATMs. This alliance enables all LankaPay CAS member banks’ customers to make withdrawals and check balance inquiries from Sampath Bank ATMs as well.