Sampath Group pre-tax profit exceeds Rs 10 Bn for the first half of 2018
Sampath Bank’s Group pretax profit for the first half of the year exceeded Rs 10.3 Bn (28.2% growth) while Sampath Bank recorded a pre-tax profit of Rs 9.9 Bn for the same period. This registered a YoY growth of 28.1% in comparison to the first half of 2017. Profit after tax of the Bank too grew by 19.9% and reached Rs 6.8 Bn for the first half of 2018. Sampath Group, also posted a post-tax profit growth of 20.2%.
Fund Based Income (FBI)
Net Interest Income (NII), which is the main source of income representing almost 71% of the total operating income of the Bank, recorded an increase of Rs 4.5 Bn (34.3%) during the period under review. Accordingly, the Bank recorded Rs 17.6Bn as NII for the first half of 2018, as against Rs 13.1Bn recorded for the corresponding period in 2017.
The above achievement was facilitated by healthy growth recorded in the Bank’s fund base. The advance portfolio of the Bank grew by 10.0% (annualized 20.0%) and the deposit portfolio grew by 7.4% (annualized 14.8%) during the first half of 2018. Further the Bank raised funds via a right issue (Rs 12.5 Bn) and a debenture issue (Rs 7.5 Bn) in the first half of 2018. Timely re-pricing of asset and liability products and other fund management strategies adopted by the Bank too played a pivotal role in achieving the 34.3% growth in NII.
Non Fund Based Income (NFBI)
Net fee and commission income, which largely comprises of credit, trade, card and electronic channel related fees increased to Rs 4.7 Bn during the period under review, as opposed to Rs 3.8 Bn recorded during the corresponding period in 2017. This income source too has posted an impressive YoY growth of 24.3% largely due to the healthy growth recorded in the advances portfolio and expansion of credit card operations.
The Bank’s other operating income, net trading income and net gains from financial investments too recorded an increase of 18% during the period under review. Increase in realized exchange income has contributed to the said increase in other operating income. Consequently, other operating income for the first half of 2018 stood at Rs 2.3 Bn, as opposed to Rs 1.8 Bn reported during the corresponding period in 2017.
Operating Expenses
Operating expenses of the Bank which stood at Rs 7.9 Bn during the first half of 2017, increased to Rs 9.5 Bn during the period under review, reflecting a YoY increase of 20.4%. This increase was mainly due to the increase in personnel expenses triggered by annual salary increments. Other overhead expenses too increased due to general price hikes. However, the Cost to Income ratio excluding VAT & NBT on financial services improved from 41.6% reported in the first 6 months of 2017 to 38.4% in the first half of 2018. This records an improvement of 320 basis points, which is a significant achievement particularly in view of Sampath Bank having one of the youngest branch network compared to its closest competitors.
Impairment Charges on Loans and Receivables
Impairment charges amounting to Rs 2.8 Bn recorded for the first half of 2018 witnessed an increase of Rs 1.4 Bn over the comparative period’s charge of Rs 1.4 Bn. The number of customers qualified for individual impairment increased resulting in an increase in individual impairment of Rs 1 Bn. Meanwhile, the collective impairment charge also increased by Rs 0.5 Bn predominantly due to movement of certain customers to higher arrears segments. Following the current industry trend, Bank’s NPA too increased during the first half of 2018 by 1.32% from 1.64% in December 2017 and stood at 2.96% by 30th June 2018. However, the Bank’s NPA ratio continues to be below the industry average.
Business Growth
Sampath Bank’s total asset base grew by 8.9% (annualized 17.8%) during the period under review to reach Rs 865.6 Bn as at 30th June 2018. In comparison, the total asset position as at 31st December 2017 stood at Rs 795.1 Bn. Gross loans & receivables grew by 10.0% (annualized 20.0%) to reach Rs 629.1 Bn as at 30th June 2018, recording a growth of Rs 57.6 Bn for the period under review. Total deposit base too increased by Rs 46.6 Bn for the same period, to reach Rs 677.0 Bn as at the reporting date, a growth of 7.4% (annualized 14.8%). However, the CASA ratio which stood at 33.4% as at 30th June 2018 showed a slight decline compared to the 34.9% registered at 31st December 2017. The decline can be attributed to the higher growth recorded in the fixed deposit base.
Performance Ratios
ROE (after tax) declined from 23.35% as at 31st December 2017 to 19.68% as at the end of the period under review due to increase in average equity base as a result of the Rights Issues in April 2018 (Rs 12.5 Bn) and November 2017 (Rs 7.6 Bn). ROA (before tax) has improved to 2.41% from 2.29% in the same period. Statutory Liquid Asset Ratio (SLAR) as at 30th June 2018 was at 21.64%. The Bank maintained its SLAR well above the mandatory requirement of 20% throughout the period.
Capital Adequacy
CBSL introduced Basel III to the Sri Lankan Banking industry with effect from 1st July 2017. The full implementation would take place in three phases over a period of 18 months and is targeted to be completed by 1st January 2019, at which point Sampath Bank would need to maintain its Tier I Capital Adequacy Ratio (CAR) at 10% and Total CAR at 14%. In order to fall in line with these new regulatory requirements, Sampath Bank raised Rs 12.5 Bn worth of Tier I Capital by way of a Rights Issue in April 2018 and Rs 7.5 Bn worth of Tier II Capital by way of a Basel III Compliant Debenture Issue in March 2018. Sampath Bank maintained its Common Equity Tier I Capital, Tier I Capital and Total Capital Adequacy ratios as at 30th June 2018 at 12.25%, 12.25% and 16.70% levels respectively. All three ratios stood well above the minimum regulatory requirement of 7.375%, 8.875% and 12.875% respectively, applicable as at the reporting date.
