Sampath Group recorded an outstanding financial performance with a pre-tax profit of Rs. 7.5 billion, for the nine months ended 30 September, achieving a growth of 42% over the previous year’s corresponding period’s pre-tax profit of Rs. 5.3 billion.
The profit after tax for the first nine months in 2015 crossed the Rs. 5.0 billion mark and stood at Rs. 5.1 billion, which reflected an increase of 29.4% over the first nine months in 2014.
The bank too recorded a pre-tax profit of Rs. 7.0 billion during the first nine months of 2015, compared to Rs. 4.9 billion recorded in the corresponding period of 2014, achieving a growth of 41.3%. The post–tax profit for the nine months ended 30 September of the bank also improved by 27.8%, from Rs. 3.7 billion in 2014 to Rs. 4.7 billion in 2015.
The Group and the bank posted a lower growth rate in post-tax profits compared to the respective pre-tax profits due to reversal of certain tax over provisions of the previous years in 2014, upon finalisation of the relevant tax returns.
Core banking income
Net Interest Income (NII), which is the main source of income from the fund based operations and representing over 67% of the total operating income of the bank increased by Rs. 1.3 billion during the first nine months of 2015, as compared to the corresponding period in 2014. This amounted to a challenging growth of 11.1% in NII, despite the drop of Net Interest Margin (NIM) by 0.29%during the period, from 4.04% to 3.75% in 2015 and the low credit demand that prevailed in early parts of the year.
The drop in NIM in 2015 was due to the falling market interest rates and drop in the higher yielding pawning portfolio in the bank’s asset-mix, which was done as a risk management measure. Despite these challenges, the Bank managed to achieve this growth in NII due to the significant growth in the fund base and effective fund management and reprising strategies adopted. In addition, the bank’s success in mobilising low cost funds and the improvement of the CASA up to 48.7% by 3Q2015 also contributed to this growth in NII.
Non fund based income
Net fee and Commission income of the bank for the nine months ended 30 September 2015 increased to Rs. 4.4 billion as opposed to Rs. 3.4 billion earned in the corresponding period in 2014 indicating a steady growth of 28.8%. This growth was achieved through leveraging on non-fund based income sources such as credit and debit card operations, trade related services and other banking services.
Mark to market losses incurred on foreign currency (FCY) forward contract revaluation due to rupee depreciation against US dollar, mark to market losses sustained on the existing portfolio of Treasury Bills due to the increase in market interest rates and drop in share prices in the Colombo Stock Exchange during the latter part of the quarter, were the main reasons for the negative figure of Rs. 381.2 million, reported under the Net Trading Income.
On the other hand, a significant growth of 139% was recorded in other operating income for the period under review, compared to the corresponding period in 2014. The bank managed to post an increase in other operating income exceeding Rs. 1.4 billion from Rs. 1.0 billion up to Q3 2014 to Rs. 2.4 billion in the first nine months of this year. Realised exchange income and exchange gains on revaluation of FCY reserves as a result of the depreciation of the local currency against the US Dollar were the main contributory factors for the improvement in other operating income. Further, increase of exchange income on currency note operations also contributed positively towards the growth of this income.
Impairment loss on loan and receivables
Reduction in impairment provision against pawning advances was the main reason for the reduction in collective impairment charges by Rs. 0.9 billion during the period under review. The bank’s total pawning advances as at 30 September represented only 4.2% of the total advances portfolio. Further, success of the credit risk mitigation efforts taken in the past contributed to improve the quality of the loan book and reduce the impairment provision.
Operating expenses
Operating expenses of the bank which stood at Rs. 8.8 billion for the nine months ended 30 September 2014 increased to Rs. 10.0 billion in the corresponding period of 2015, reflecting an increase of 13.3%. This variance was mainly due to the salary increments given to staff members, increase in credit card acquiring charges and increase in business promotional expenses.
Business growth
Total deposits recorded a growth of 12.1% from Rs. 342 billion as at the end of 2014 to Rs. 383 billion as at 30 September. The bank’s total gross advances which stood at Rs. 311 billion as at 31 December 2014, increased to Rs. 354 billion as at 30 September 2015, reflecting a growth of13.8%. This growth was achieved despite the drop in pawning advances by Rs. 9.8 billion during the period. As at 30 September 2015, the bank’s total asset base reached Rs. 489 billion, achieving a growth of 13.3% compared to the total asset base of 31 December 2014, which amounted to Rs. 432 billion.
As at the reporting date, the bank’s network comprised of 224 branches (including 12 super branches) and 356 ATMs. The bank opened four new branches and 30 new ATMs during the period under review. Further, Sampath Vishwa, the virtual banking product made further inroads in to the IT savvy customer segments.
Performance ratios
ROE (after tax) improved to 19.4% in 2015 as compared to 16.35% recorded in 31 December 2014, while ROA (before tax) stood at 2.02% as at 30 September 2015 improving from 1.69% recorded as at 31 December 2014.Earnings per share for the nine months ended 30 September 2015 improved to Rs. 27.55, compared to Rs. 21.56 for the corresponding period of 2014, which was a growth of 27.8%. Statuary liquid asset ratio stood at 21.4% which was above the mandatory requirement of 20%. The Gross Non-Performing Advances Ratio (Net of interest in suspense) which remained at 1.93% as at 31 December 2014 was further improved to 1.7% as of 30 September 2015.
Capital adequacy ratios
The Core Capital (Tier I) and Total capital (Tier I+ Tier II ) adequacy ratios as at 30 September 2015 have dropped by 0.88% and 1.5% respectively compared to 31 December 2014, mainly due to the credit growth and resultant increase of risk weighted assets, as result in the drop in pawning portfolio in the lending-mix. The Core Capital and Total Capital adequacy ratios as of 30th September 2015 were 7.95% and 12.12% respectively, well above the required levels. In addition, the recently announced Debenture issue, amounting to Rs. 7.0 billion which was oversubscribed on the opening day itself will further enhance the Tier II and the total capital of the bank.
The bank continued to adopt a policy of leveraging its capital to an optimum level, but will ensure to maintain a capital buffer adequate enough to support its future business expansion and risk profile.
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The profit after tax for the first nine months in 2015 crossed the Rs. 5.0 billion mark and stood at Rs. 5.1 billion, which reflected an increase of 29.4% over the first nine months in 2014.
The bank too recorded a pre-tax profit of Rs. 7.0 billion during the first nine months of 2015, compared to Rs. 4.9 billion recorded in the corresponding period of 2014, achieving a growth of 41.3%. The post–tax profit for the nine months ended 30 September of the bank also improved by 27.8%, from Rs. 3.7 billion in 2014 to Rs. 4.7 billion in 2015.
The Group and the bank posted a lower growth rate in post-tax profits compared to the respective pre-tax profits due to reversal of certain tax over provisions of the previous years in 2014, upon finalisation of the relevant tax returns.
Core banking income
Net Interest Income (NII), which is the main source of income from the fund based operations and representing over 67% of the total operating income of the bank increased by Rs. 1.3 billion during the first nine months of 2015, as compared to the corresponding period in 2014. This amounted to a challenging growth of 11.1% in NII, despite the drop of Net Interest Margin (NIM) by 0.29%during the period, from 4.04% to 3.75% in 2015 and the low credit demand that prevailed in early parts of the year.
The drop in NIM in 2015 was due to the falling market interest rates and drop in the higher yielding pawning portfolio in the bank’s asset-mix, which was done as a risk management measure. Despite these challenges, the Bank managed to achieve this growth in NII due to the significant growth in the fund base and effective fund management and reprising strategies adopted. In addition, the bank’s success in mobilising low cost funds and the improvement of the CASA up to 48.7% by 3Q2015 also contributed to this growth in NII.
Non fund based income
Net fee and Commission income of the bank for the nine months ended 30 September 2015 increased to Rs. 4.4 billion as opposed to Rs. 3.4 billion earned in the corresponding period in 2014 indicating a steady growth of 28.8%. This growth was achieved through leveraging on non-fund based income sources such as credit and debit card operations, trade related services and other banking services.
Mark to market losses incurred on foreign currency (FCY) forward contract revaluation due to rupee depreciation against US dollar, mark to market losses sustained on the existing portfolio of Treasury Bills due to the increase in market interest rates and drop in share prices in the Colombo Stock Exchange during the latter part of the quarter, were the main reasons for the negative figure of Rs. 381.2 million, reported under the Net Trading Income.
On the other hand, a significant growth of 139% was recorded in other operating income for the period under review, compared to the corresponding period in 2014. The bank managed to post an increase in other operating income exceeding Rs. 1.4 billion from Rs. 1.0 billion up to Q3 2014 to Rs. 2.4 billion in the first nine months of this year. Realised exchange income and exchange gains on revaluation of FCY reserves as a result of the depreciation of the local currency against the US Dollar were the main contributory factors for the improvement in other operating income. Further, increase of exchange income on currency note operations also contributed positively towards the growth of this income.
Impairment loss on loan and receivables
Reduction in impairment provision against pawning advances was the main reason for the reduction in collective impairment charges by Rs. 0.9 billion during the period under review. The bank’s total pawning advances as at 30 September represented only 4.2% of the total advances portfolio. Further, success of the credit risk mitigation efforts taken in the past contributed to improve the quality of the loan book and reduce the impairment provision.
Operating expenses
Operating expenses of the bank which stood at Rs. 8.8 billion for the nine months ended 30 September 2014 increased to Rs. 10.0 billion in the corresponding period of 2015, reflecting an increase of 13.3%. This variance was mainly due to the salary increments given to staff members, increase in credit card acquiring charges and increase in business promotional expenses.
Business growth
Total deposits recorded a growth of 12.1% from Rs. 342 billion as at the end of 2014 to Rs. 383 billion as at 30 September. The bank’s total gross advances which stood at Rs. 311 billion as at 31 December 2014, increased to Rs. 354 billion as at 30 September 2015, reflecting a growth of13.8%. This growth was achieved despite the drop in pawning advances by Rs. 9.8 billion during the period. As at 30 September 2015, the bank’s total asset base reached Rs. 489 billion, achieving a growth of 13.3% compared to the total asset base of 31 December 2014, which amounted to Rs. 432 billion.
As at the reporting date, the bank’s network comprised of 224 branches (including 12 super branches) and 356 ATMs. The bank opened four new branches and 30 new ATMs during the period under review. Further, Sampath Vishwa, the virtual banking product made further inroads in to the IT savvy customer segments.
Performance ratios
ROE (after tax) improved to 19.4% in 2015 as compared to 16.35% recorded in 31 December 2014, while ROA (before tax) stood at 2.02% as at 30 September 2015 improving from 1.69% recorded as at 31 December 2014.Earnings per share for the nine months ended 30 September 2015 improved to Rs. 27.55, compared to Rs. 21.56 for the corresponding period of 2014, which was a growth of 27.8%. Statuary liquid asset ratio stood at 21.4% which was above the mandatory requirement of 20%. The Gross Non-Performing Advances Ratio (Net of interest in suspense) which remained at 1.93% as at 31 December 2014 was further improved to 1.7% as of 30 September 2015.
Capital adequacy ratios
The Core Capital (Tier I) and Total capital (Tier I+ Tier II ) adequacy ratios as at 30 September 2015 have dropped by 0.88% and 1.5% respectively compared to 31 December 2014, mainly due to the credit growth and resultant increase of risk weighted assets, as result in the drop in pawning portfolio in the lending-mix. The Core Capital and Total Capital adequacy ratios as of 30th September 2015 were 7.95% and 12.12% respectively, well above the required levels. In addition, the recently announced Debenture issue, amounting to Rs. 7.0 billion which was oversubscribed on the opening day itself will further enhance the Tier II and the total capital of the bank.
The bank continued to adopt a policy of leveraging its capital to an optimum level, but will ensure to maintain a capital buffer adequate enough to support its future business expansion and risk profile.
www.ft.lk
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