The year 2016 was yet another successful year for Sampath Bank, wherein the bank managed to achieve its highest-ever Profit After Tax (PAT) amounting to Rs. 9.1 b. This was an impressive YoY growth of 48.8% over Rs. 6.1 b PAT recorded for the previous year.
Profit Before Tax (PBT) too grew by 38.4% to reach Rs. 12.6 b as at the year end, as opposed to Rs. 9.1 b recorded for the comparative year. The main reason for higher PAT growth compared to the PBT growth is the reversal of excess income tax provisions made in previous years.
Sampath Group, which comprises Sampath Bank and four subsidiary companies, has also recorded a growth of 43.3% and 35.0% at PAT and PBT levels respectively.
The bank managed to achieve a substantial growth in all key business pillars during the year 2016, amidst several challenges such as low liquidity, higher cost of funds, volatile margins and unstable currency rates posed by the external market forces.
Fund Based Income (FBI): Net Interest Income (NII), the main source of income of the bank, which accounts for more than 70% of the total operating income, has increased by Rs. 5.4 b during the year, recording a YoY growth of 30.8%.
Accordingly, the NII for the year 2016 was reported as Rs. 22.8 b, as against Rs. 17.4 b recorded in 2015.
Achieving a substantial growth in NII was made possible by the robust growth recorded in the bank’s fund base, as indicated by more than 25% growth in deposits and over 20% growth in advances, coupled with timely re-pricing of asset and liability products and effective fund management strategies adopted by the Bank.
Non Fund Based Income (NFBI): While recording a notable YoY growth of 24.6%, net fee and commission income, which is an important source of income of the bank has increased by Rs. 1.3 b during the year under review to reach Rs. 6.6 b as at the year end. This income source largely comprises of credit, trade, card and electronic channel related fees.
The net trading income reported a gain of Rs. 233.9 m for 2016, as against the loss of Rs. 341.3 m reported for 2015, mainly due to the gain on forward exchange contracts revaluation.
Despite the increase in all other sources of income, the bank’s other operating income registered a marginal contraction of 7.0% (Rs. 199.7 m) during the year, as opposed to the previous year. This was mainly due to the decline in exchange income triggered by greater stability achieved by the Sri Lankan Rupee in 2016 in comparison to 2015. Consequently, other operating income at the end of 2016 stood at Rs. 2.6 b, as against Rs. 2.8 b recorded for the previous year.
Operating expenses: During the period under review, operating expenses grew by 16.0% and stood at Rs. 15.5 b at the end of the year, as opposed to Rs. 13.3 b reported for the previous year. Higher personnel expenses triggered by salary increments and the introduction of the team-based performance bonus scheme and general price hikes, etc. caused the aforesaid increase in operating expenses.
Nevertheless, the Cost to Income ratio excluding VAT and NBT on financial services has improved by nearly 500 basis points during the year to achieve 47.8% as at 31 December 2016 (2015 – 52.7%). Recording a Cost to Income ratio below 50% is considered to be a commendable achievement, particularly in view of the fact that Sampath Bank has one of the youngest branch networks compared to its closest competitors.
Impairment charge on loans and receivables: Impairment charge amounting to Rs. 1,430.3 m recorded for the year under review showed an increase of Rs. 489.1 m (52.0%) over the previous year’s charge of Rs. 941.2 m. Impairment against individually significant customers as well as collective impairment have increased by Rs. 416.7 m and Rs. 72.4 m respectively, partially due to increase in portfolio size and partially due to improvements made to the impairment calculation models.
During the year, the bank revisited the assumptions used in its impairment models in order to ensure they are up-to-date vis-à-vis the changes taking place in the business environment.
Business growth: Total asset base of Sampath Bank surpassed the Rs. 600 b mark during the year and stood at Rs. 658.5 b as at 31 December 2016. This was a YoY growth of 25.4% over the total assets position of Rs. 525.3 b as at 31 December 2015.
Capitalising on the strong credit momentum seen across the industry, the bank managed to achieve a 21.3% YoY growth in gross loans and receivables in 2016 and recorded a total gross loans and receivables portfolio of Rs. 468.5 b as at the year end.
In yet another landmark achievement, Sampath Bank’s deposit base crossed the Rs. 500 b mark for the first time in the bank’s history. Total deposit base grew by 26.1% from Rs. 409.4 b as at end 2015 to Rs. 516.3 b by the year end. Higher growth in the deposit base was mainly triggered by the increase in term deposits. Owing to the higher term deposit growth, CASA ratio declined from 47.3% in 2015 to 38.4% this year.
Performance ratios: ROE (after tax) has substantially improved from 2015 to 2016, whereas ROA (before tax) registered a marginal improvement. Relevant figures reflected as 23.47% (2016) and 18.42% (2015) for ROE, whereas 2.14% (2016) and 1.90% (2015) for ROA.
The Basic Earnings per share (group) for the year 2016 stood at Rs. 53.66 as against Rs 37.42 recorded for the previous year. This was an impressive YoY growth of 43.4%. Statutory Liquid Asset Ratio (SLAR) was at 21.84% as at 31 December 2016 compared to 22.05% as at 31 December 2015.
Despite the pressure on the bank’s SLAR caused by tight liquidity controls imposed by the CBSL, prudent strategies enabled the bank to maintain the liquid asset ratio well above the regulatory minimum level of 20%. Despite the expansion in the loan book, the bank had managed to marginally improve its credit quality, as evidenced by the gross NPL ratio of 1.61% recorded as at 31 December 2016, vis-à-vis 1.64% registered as at 31 December 2015.
Capital adequacy: Core Capital (Tier I) and Total Capital (Tier I and Tier II) adequacy ratios were maintained at 8.31% and 12.87% respectively as at 31 December 2016, a modest improvement from 7.90% and 12.26% reported a year ago. Despite growth in the lending book, which resulted in increase of risk weighted assets during the year, retention of a portion of the dividends declared in 2015 by way of a scrip dividend and profits earned during the year have mainly contributed to this improvement.
Moreover, the Rs. 6 b subordinated debenture issue that concluded in June 2016, also contributed towards strengthening the Total Capital Adequacy ratio for the year. Both ratios were well above the minimum regulatory requirement of 5% for Core Capital and 10% for Total Capital.
Dividend: The Board of Directors declared an interim scrip dividend of Rs. 14 per share on 2 February. As the Articles of Association of the bank requires shareholder approval to pay scrip dividend, an EGM is scheduled to be held on 28 February. Further the Directors declared a final cash dividend of Rs. 4.75 per share on 13 February, subject to shareholder approval at the AGM to be held on 31 March.