The post-tax profit of the Group for Q1 2015 was Rs. 1,579 m, a growth of 23.7% as compared to Rs 1,277 m achieved in the corresponding period in 2014.
Sampath Bank, as the main entity of the Group, also achieved a significant pre-tax profit growth of 28.5% in the 1st quarter of 2015, amounting to Rs. 2,143 m compared with Rs. 1,668 m recorded in the first quarter of 2014. The post-tax profit of the bank during Q1 2015 was Rs. 1,431 m, as compared to Rs. 1,200 m achieved in the corresponding period in 2014.
“Proactive strategies adopted by the bank in driving fee based income, prudent credit control and effective assets and liability management helped to deliver these results,” Sampath Bank said in a statement.
Continuous shrinking of Net Interest Margin (NIM) very adversely impacted on the Net Interest Income (NII) of the banking industry and Sampath Bank was no exception to this trend.
Nevertheless, NII of the bank recorded a marginal increase of Rs. 79 m during the period under review from Rs. 3,968 m in Q1 2014 to Rs. 4,047 m in Q1 2015, aided by the significant expansion of the fund-base of the bank since Q1 2014.
The bank’s net fee and commission income for the quarter stood at Rs. 892 m, which was a growth of 19% compared to the first quarter of 2014. Growth of business volume such as card operations and trade related services were the main contributory factors.
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 quarter were the main reasons for the negative growth of Rs. 611 m reported in Net Trading Income.
However, the bank achieved a remarkable growth in Other Operating Income, which recorded an increase of Rs. 841 m from Rs. 401 m in the first quarter of 2014 to Rs. 1,242 m in the first quarter of 2015. The major contributory factors for this increase were exchange gains from revaluation and charges recovered.
Operating expenses of the bank which stood at Rs. 2,769 m for the first quarter of 2014 increased to Rs. 3,190 m in 2015, reflecting a growth of 15%. This was mainly due to general price increases and increase in staff numbers coupled with salary increments given to the staff members during the second quarter of the previous year.
The bank’s continuous efforts to reduce its exposure to gold backed loans (pawning) in order to manage risk related to adverse fluctuations in gold prices in the international markets was the main reason for the reduction in collective impairment provision by Rs. 390 m.
Further, the bank’s continuous effort to improve the credit quality of the loan portfolio which was evidenced by improvement in the gross non-performing ratio to 1.84% as at 31 March 2015 as against 2.38% as at 31 March 2014 and 1.93% as at 31 December 2014, also resulted in a lesser charge of individually significant impairment, which amounted to Rs. 107 m in Q1 2015, compared to Rs. 283 m in Q 1 2014.
Business growth: Total deposits recorded a growth of 2.3% from Rs. 342 b as at end 2014 to Rs. 350 b as at 31 March 2015. The bank’s total gross advances also increased marginally by 2.2% from Rs. 311 b as at 31 December 2014 to Rs. 317 b as at quarter end. Total assets which stood at Rs. 439 b as at 31 March 2015 too reflected a similar trend by recording a 1.5% growth over the figure reported as at end of 2014.
Performance ratios: The strong financial performance in Q1 2015 enabled the bank to post healthy improvements in key performance indicators. Accordingly, ROA (after tax) and ROE (after tax) improved to 1.33% and 18.73% respectively in 1Q 2015 compared to1.28% and 16.78% in Q1 2014.
Earnings per share for Q1 2015, which stood at Rs. 8.52, was a growth of 19%, compared to Rs. 7.15 for the corresponding quarter in 2014. Statutory liquid asset ratio stood at 22.83% which was above the mandatory requirement of 20%. The CASA ratio exceeded 48% in March 2015, compared to 47% in December 2014.
Capital adequacy ratios: The bank managed to maintain its capital adequacy ratios, Tier 1 (8.27%) and Total (12.78%) well above the minimum regulatory requirements of 5% and 10% respectively, However Tier I and Total capital adequacy ratios have dropped by 0.56% & 0.84% respectively compared to 31 December 2014, mainly due to the credit growth mentioned above and cash dividend payment of Rs. 840 m in respect of 2014.
Sampath Bank will continue to improve its service quality with improved efficiency coupled with innovation. Further, as a premier responsible corporate citizen in Sri Lanka, Sampath Bank is continuing to focus and invest in development projects in vital areas of the country’s economy, such as education, environment, community based developments, etc.
Sampath Bank has been honoured with the ‘Technology Development and Application through Local Partnerships Award’ in recognition of online corporate financial platform for its in-house developed ‘Sampath Vishwa Corporate’ at the National Awards for Science and Technology Achievements (NASTA). Further, Sampath Bank was awarded the Runner Up in the Banking Sector at the ACCA Sustainability Reporting Awards 2014, organised by the Association of Chartered Certified Accountants (ACCA).
In the rating assessment for 2014, considering the healthy asset quality, better compliance, transparency, capital adequacy, internal control systems and processes of the bank, Fitch Rating Lanka Ltd. reaffirmed Sampath Bank PLC’s long term rating as ‘AA-(lka)’, with stable outlook and Lanka Rating Agency reaffirmed ‘AA’ rating with stable outlook. Further Fitch Rating Lanka Ltd. has assigned a credit rating of ‘A + (lka)’ to Sampath Bank’s Debentures issued in December 2014.
Courtesy: Daily Financial Times 18 May 2015