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NII, which is the main source of income from the fund-based operations and representing over 66% of the total operating income, increased from Rs. 11,267 m for the nine months ended 30 September 2013 to Rs. 11,686 m for the nine months ended 30 September 2014, recording a modest growth of 3.7%.
This modest growth was mainly due to reasons such as reduction in net interest margin (NIM), lower credit growth in customer advances during the period under review and the bank being compelled by the market factors to invest excess funds in low-yielding fixed income securities.
Net fee and commission income of the bank amounted to Rs. 2,231 m for the nine months ended 30 September 2014, which was a 20.8% increase over the same period in 2013. This growth was mainly in line with growth of business volumes in the card operations, inward remittances and commission income from other banking services.
Other operating income of the bank was Rs. 2,659 m for the nine months ended 30 September 2014, which was an increase of Rs. 979 m compared to the same period in 2013. The major contributory factors for this increase were higher bad debt recoveries and exchange income from currency notes operations.
Operating expenses of the bank which stood at Rs. 7,768 m for the nine month period ended 30 September 2013 rose to Rs. 8,849 m during the same period in 2014, recording an increase of Rs. 1,081 m. This growth in operating expenses was largely due to increase in staff cadre coupled with salary increments given to the staff with effect from 1 April 2014.
Previously, interest losses incurred at pawning auctions were charged against the interest income on pawning advances. However, with a view to better presentation of Financial Statements, the bank has decided to report such losses under the ‘Charge for collective impairment’ in the Income Statement.
It is also to be mentioned that continuous efforts were taken by the bank to reduce the exposure to the pawning advances in view of the volatility in gold prices which affected the entire financial services sector since April 2013. Consequently, the bank’s pawning advances which stood at 19.72% of the total advances as at 31 December 2013, dropped to 10.56% as at 30 September 2014.
Business growth
Total deposits as at 30 September 2014 stood at Rs. 330 b with a growth rate of 8.9% compared to total deposits as at 31 December 2013. The bank’s total assets and total advances as at 30 September 2014 stood at Rs. 396 b and Rs. 268 b respectively registering growth rates of 3.7% and 3.1% respectively, compared to the figures reported as at 31 December 2013.The modest credit growth of 3.1% was achieved despite the drop in pawning advances, as referred to above. Discounting pawning, the bank achieved a growth of 13.82% in other advances during the nine-month period, amidst the low credit demand in the market.
The bank’s excess liquid had to be invested in financial instruments such as Reverse Repurchase agreements and Sri Lanka development bonds. The main reason for the marginal total assets growth of 3.7% was the settlement of $ 100 m borrowing during the year.
ROA and ROE increased in line with the increase in profits during the nine month period ended 30 September 2014 and these ratios stood at 1.28% and 16.68% respectively. The statuary liquid ratio stood at 26.45% as at 30 September 2014, showed only a slight decrease of 1.17% compared to the position as at 31 December 2013 and this was mainly due to marginal increase in customer advances. The cost to income ratio (without FVAT and NBT) has slightly decreased from 51.95% for the nine months ended 30 September 2013 to 51.33% for the same period in 2014.
The capital adequacy ratios stood at 9.43% (Tier 1) and 12.74% (total) as at 30 September 2014, recording a marginal deterioration compared to the levels as at 31 December 2013, mainly due to the payment of dividend for 2013 and increase of advances other than pawning during the period. Nevertheless, both these ratios remained well above the minimum regulatory requirements of 5% and 10% respectively. The bank has already decided to issue listed, unsecured, fully paid, subordinated, redeemable debentures up to Rs. 7 b to further strengthen the Tier II capital.
Accolades
Sampath Bank has been selected as the ‘Best Bank in Sri Lanka – 2014’ by the prestigious global Business Magazine Euromoney for the second consecutive year. The bank has also been adjudged the ‘Best Commercial and Best Retail Bank in Sri Lanka’ by the World Financing Banking Magazine. The World Financing Banking awards are recognised as the definitive benchmark of banking excellence amongst both the international and local financial fraternities.
Sampath Bank also won the Gold Award for commercial applications and the Bronze Awards for the in-house developed applications (electronic teller system) at the National Best Quality Act Awards 2014. Further, Sampath Bank won the Silver award in the category of CSR Brand of the Year at the SLIM Brand Excellence award ceremony held in October 2014.
External rating
In the rating assessment of 2014, considering the healthy asset quality, better compliance, transparency, capital adequacy, internal control systems and processes of the bank, Fitch Rating Lanka has reaffirmed the National Long Term Rating AA-(lka), with Stable Outlook and Lanka Rating Agency reaffirmed the long-term financial institution ratings as AA with Stable Outlook.
