Sampath Bank has achieved an impressive profit after tax (PAT) of Rs. 6.7 billion for the first nine months of 2016, up by 41.2% from a year earlier.
The bank also achieved Rs. 8.9 billion in profit before tax (PBT), recording a growth of 28.2%, as against Rs. 7.0 billion earned in the comparative period of the previous year.
The main reason for higher PAT growth compared to the PBT growth is the reversal of excess income tax provisions made in the previous years. Sampath Group, which comprises Sampath Bank and four subsidiary companies, also recorded a notable group PBT of Rs. 9.4 billion during the period under review. The Group’s PAT achievement for the period was Rs. 6.9 billion.
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 managed to achieve considerable growth in all key business pillars.
Fund-based income (FBI)
Net Interest Income (NII), which is the main source of income representing more than 70% of the total operating income of the bank, has recorded an increase of Rs. 3.2 billion (24.3%) during the period under review. Accordingly, the bank managed to record an NII of Rs. 16.1 billion for the first nine months of 2016, as against Rs. 13.0 billion recorded in the corresponding period of 2015.
The above achievement was made possible by the strong growth recorded in the bank’s fund base, as indicated by a more than 20% growth in deposits and nearly 15% growth in advances, coupled with timely re-pricing of asset and liability products and other fund management strategies adopted by the bank.
Non fund-based income (NFBI)
Net fee and commission income, which largely comprises credit, trade, card and electronic channel-related fees, has increased to Rs. 4.7 billion in the first nine months of 2016, as opposed to Rs. 3.8 billion recorded in the same period of 2015.
This important income source too has posted an impressive growth of 22.7%. Leveraging on credit- and trade-related segments, expansion of the credit card operation and the successful launch of innovative value additions through electronic channel offerings have considerably contributed to this growth in NFBI.
Net trading income has recorded a gain of Rs. 293.0 million for the first nine months of 2016, as against the loss of Rs. 366.9 million reported during the same period of the previous year. This was 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 recorded a contraction of 20.4% (Rs. 472.8 million) during the first three quarters of 2016, as against the corresponding period of the previous year.
This was mainly due to a decrease in exchange income on FCY reserves revaluation and a decrease in realised exchange income.
The main reason for the above is attributable to the slower depreciation of the rupee against the dollar in 2016 viz a viz 2015. Accordingly, other operating income by the end of the first nine months of 2016 stood at Rs 1.8 billion, as against Rs. 2.3 billion recorded for the same period of the previous year.
Operating expenses
The operating expenses of the bank, which stood at Rs. 9.4 billion for the first three quarters of 2015, moved up to Rs. 11.3 billion during the period under review, reflecting an increase of 19.3%. This was mainly due to the rise in personnel expenses triggered by salary increments and general price hikes, etc. However, the Cost to Income ratio excluding VAT and NBT on financial services has improved by more than 100 basis points to 49.1% during the period from 50.4% recorded in the comparative period of 2015. The achievement of a Cost to Income ratio below 50%, in spite of having one of the youngest branch networks compared to its closest competitors, is an important milestone.
Impairment charge on loans and receivables
Impairment charge amounting to Rs. 906.8 million recorded for the first nine months of 2016 showed an increase of Rs. 141.0 million over the previous year’s charge of Rs. 765.8 million for the same period. Impairment charge against the individually significant customers has increased by Rs. 445.1 million due to a conscious decision taken to increase the provision cover against doubtful loans.
The collective impairment charge stood at Rs. 160.8 million for the period, which is a decline of Rs. 304.1 million compared to the charge of Rs. 464.9 million recorded for the corresponding period of 2015, due to decreased loss rates resulting from the improving credit quality of the loan book.
Business growth
Sampath Bank, which surpassed the Rs. 600 billion mark in total assets during the period, reported a total asset base of Rs. 617.4 billion as at 30 September 2016, recording a growth of 17.5% (annualised 23.3%) over the total assets that prevailed as at 31 December 2015 (Rs. 525.3 billion).
Gross loans and receivables grew by 14.5% during this period (annualised 19.3%) and moved up to Rs. 442.2 billion as at 30 September 2016. The total deposit base too increased by Rs. 83.0 billion, recording a notable growth of 20.3% (annualised 27.1%) and reached Rs. 492.4 billion as at the reporting date. Higher growth in the deposit base was mainly triggered by an increase in term deposits (TDs). CASA ratio recorded a decline from 47.3% as at 31 December 2015 to 39.8% as at 30 September 2016.
Performance ratios
ROE (after tax) substantially improved and stood at 23.9% as at 30 September 2016 when compared to 18.4% recorded as at 31 December 2015, while ROA (before tax) improved to 2.1% by the end of the first nine months of 2016, as against 1.9% recorded on 31 December 2015.
The Basic Earnings per share (group) for the first three quarters of 2016 has substantially improved and stood at Rs. 39.21 as against Rs. 28.75 recorded for the corresponding period in the previous year. This was an impressive growth of 36.4%. Statutory liquid asset ratio (SLAR) as at 30 September 2016 stood at 22.35%, showing a marginal improvement against the ratio recorded as at 31 December 2015 (22.05%). The bank managed to maintain SLAR well above the mandatory requirement of 20% throughout the period. The bank’s gross NPL ratio (1.67%) however has fractionally increased from 1.64%, recorded as at 31 December 2015.
Capital adequacy
The Core Capital (Tier I) and Total Capital (Tier I + Tier II) adequacy ratios, which stood at 7.90% and 12.26% respectively as at 31 December 2015, have shown a drop during the period, as a result of increase in risk weighted assets accompanied by growth in advance portfolio and dividend paid in 2016. Accordingly, Core Capital and Total Capital adequacy ratios as at 30 September 2016 stood at 7.68% and 11.92% respectively.
Despite the slight drop, both ratios were maintained well above the minimum regulatory requirement of 5% for Core Capital and 10% for Total Capital. With the objective of strengthening capital adequacy, the bank issued subordinated debentures amounting to Rs. 6.0 billion in June 2016 and the issue was oversubscribed on the day of opening. -
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