Sampath Group posts Rs. 9.8 b in pre-tax profit

Sampath Group’s performance for 2015 demonstrated very clear signs of financial excellence. The Group recorded a pre-tax profit of Rs. 9.8 b for the year ended 31 December 2015, achieving a remarkable YOY growth of 35.1% over the previous year’s pre-tax profit of Rs. 7.2 b, despite very challenging market conditions.  The Group also recorded a profit after tax of Rs. 6.6 b for the year 2015, which reflected a YoY increase of 25.8%.

Improved performance of all key business pillars of the bank contributed to register a pre-tax profit of Rs. 9.1 b for the year 2015, compared to Rs. 6.7 b recorded in the year 2014, achieving an impressive YoY growth of 35.3%.

The pre-tax profit growth rate outperformed the post-tax profit growth rate mainly because the tax figure for 2014 included Rs. 365 m worth of reversals on account of over provisions made in the previous years. As such, post-tax profit for the year rose by 24.8%, from Rs. 4.9 b in 2014 to Rs. 6.1 b in 2015.

Net Interest Income (NII), which is the main source of income from the fund based operations and representing over 69% of the total operating income, increased from Rs. 15.7 b in 2014 to Rs. 17.4 b in 2015, recording a growth of 10.7%, despite the drop in Net Interest Margin (NIM) by 0.31%, from 3.95% in 2014 to 3.64% in 2015. The drop in NIM in 2015 was due to the falling market interest rates and drop in the higher yielding pawning portfolio in the asset-mix, which was done as part of the ongoing risk management strategy to achieve a healthier asset-mix. 

Despite these challenges, the bank managed to achieve the growth in NII through effective volume driven strategies, fund management strategies and reprising strategies. In addition, the bank’s success in mobilising low cost funds and improvement in CASA, which accounted for 47.6% of the total deposit base as at 31 December 2015also contributed to this growth in NII.

Net fee and Commission income of the bank for the year ended 31 December 2015 increased to Rs. 5.3 b as opposed to Rs. 4.2 b earned in the year 2014, indicating a steady growth of 26.2%. 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. The bank introduced a number of unique value additions to the Sampath card holders which further boosted the popularity for Sampath cards in the local market. 

Mark to market losses incurred on FCY forward contract revaluation due to the 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 on new bills and drop in share prices in the Colombo Stock Exchange during the latter part of the year, were the main reasons for the negative figure of Rs. 341.3 m, reported under the net trading income for the year 2015.

On the other hand, a significant YoY growth of 175% was recorded in other operating income for year 2015. The bank managed to post an increase in other operating income from Rs. 1.1 b in 2014 to Rs. 2.9 b in 2015 partly due to higher exchange gains during the year. This was to some extent supported by the exchange revaluation gains, arising from currency depreciation that took place since September 2015. Further increase in exchange income on currency notes operations also contributed to the aforesaid increase.

Operating expenses, which stood at Rs. 11.7 b in 2014, increased to Rs. 13.3 b in 2015, reflecting a YoY increase of 13.7%. This variance is mainly due to the salary increments given to staff members, increase in credit/debit card acquisition charges and increase in business promotional expenses. However, this increase in operating expenses was well below the 18.2% growth recorded in net operating income in 2015. Further, the cost to income ratio without VAT and NBT on financial services has improved to 52.7% in 2015, from 54.8% recorded for the year 2014.

The bank was able to bring down the total impairment charge from Rs. 1,401.4 m in 2014 to Rs. 943.6 m in 2015, an impressive YoY decline of 32.7%. The bank’s ongoing risk management strategy to reduce the exposure to pawning has contributed towards this improvement. Further, the success of the credit risk mitigation efforts taken during the year contributed to grow the loan book without compromising its credit quality and thus resulted in a lower impairment provision requirement.

The bank’s total asset base crossed the Rs. 500 b mark during this year. With that Sampath Bank became one of the three private sector commercial banks to achieve this milestone and also the bank that has reached it with in the shortest period of time. The bank’s total gross advances which stood at Rs. 311 b as at 31 December 2014 increased to Rs. 386 b as at 31 December 2015, recording a healthy YoY growth of 24%. The total deposits recorded a YoY growth of 20% increasing from Rs. 342 b as at end of 2014 to Rs. 409 b in 2015. 

As at the reporting date, the bank’s network comprised of 225 branches (including 12 super branches) and 370 ATMs. Further, the bank invested in the expansion of the automated cash deposit kiosks across the island, with the commissioning of 38 new machines in 2015. This evidenced the bank’s continuous commitment to provide innovative banking solutions to improve all spheres of banking.

ROE (after tax) improved to 18.42% at the 31 December 2015 as compared to 16.35% recorded as of 31 December 2014, while ROA (after tax) stood at 1.28% as at 31 December2015, improving from 1.23% recorded as at 31 December 2014. The Basic earnings per share (group) for the year 2015 improved to Rs. 38.44, compared to Rs. 30.55 recorded for the year 2014, which was a growth of 26%. Statuary liquid asset ratio stood at 22.05% and was above the mandatory requirement of 20%. The bank’s NPL ratio declined from 1.93% recorded as at 31 December 2014 to 1.64% as at 31 December 2015, demonstrating the improving trend in credit quality.

The Core Capital (Tier I) and Total capital (Tier I+ Tier II) adequacy ratios as at 31 December 2015 were 7.9% and 12.26% respectively and the two ratios are well above the minimum regulatory requirement of 5% for Tier I Capital and 10% for Total Capital. With the objective of optimising capital utilisation, while maintaining an adequate capital buffer to support future business expansion and to safeguard an acceptable risk profile, the bank issued debentures amounting to Rs. 7.0 b during the last quarter of 2015. 

The Board of Directors of the Bank has recommended the payment of a final dividend of Rs. 13 per share for the year ended 31 December 2015, a distribution of approximately Rs. 2,240 m. This will be paid Rs. 6 in the form of cash dividend and the balance Rs. 7 in the form of scrip dividend. Further, this dividend is to be approved by the shareholders at the Annual General Meeting to be held on 31 March 2016.

Year 2015 continued to be a rewarding year for the bank. It won a large number of awards during the year for several aspects of banking and corporate excellence. Most significantly, Sampath Bank regained the prestigious title of ‘Sri Lanka’s Bank of the Year for 2015’ after winning the globally-recognised ‘Banker Award’ conferred by the London-based ‘The Banker’ magazine owned by the prestigious Financial Times Group. 

The bank also clinched the highly coveted ‘Overall Best Corporate Citizen Award for 2015’ at the Sustainability Awards conducted by the Ceylon Chamber of Commerce, to recognise corporates who have been able to show “higher state of corporate excellence” in advancing the triple bottom line.