Sampath Bank records Rs. 699 m profit in first half

Sampath Bank group, which consists of the Bank, its subsidiary and associate companies recorded a post tax profit of Rs. 699.7 million for the first half of 2008, as against Rs. 592.0 for the corresponding period in 2007.

This represented a growth of Rs. 107.7 mn or 18.2 per cent. The bank too recorded a post-tax profit of Rs. 639.1 million for the period under review, compared to Rs. 544.7 million for the first half of 2007, which reflected a growth of Rs. 94.4 million or 17.3 per cent.

However, corporate taxes of the group and bank for the first half of 2007 in the comparative columns were restated as Rs. 815.2 million and Rs. 809.5 million respectively, due to reversal of the Deferred Tax Asset recognised on the Statutory General Provision on loan losses, made as per the new provisioning requirement of the Central Bank.

The pre-tax profit of both the group and the bank for the first half of 2008 recorded decreases of 6.1 per cent and 7.4 per cent respectively, as compared to the corresponding period in 2007.

This was largely due the drop in exchange profit by 67.4 per cent, which in turn is primarily attributed to the drop in revaluation gains on the FCBU’s retained profits kept in US Dollars, resulting from the appreciation of Sri Lankan Rupee against the US Dollar.

However, it is significant to note, that despite the adverse effect of this factor, both the group and the bank have recorded impressive growth in pre-tax profits in the second quarter of 2008, over the corresponding period in 2007, which amounted to 24.5 per cent and 18.0 per cent respectively.

The above results were achieved despite the increase in the charge on Financial VAT in 2008, arising from a change in the method of calculation of this tax.

The main contributory factor for the above improvement in financial results was the increase in net interest income from the fund based operations of the bank, which recorded a growth of 14.8 per cent, as compared to the previous year.

Despite a moderate growth of 3.1 per cent in total deposits and 4.5 per cent in total advances during the half year period under review, which was very much in line with the industry trends during the period, this significant improvement in net interest income was achieved mainly through better management of interest margins in a volatile market.