Sampath Bank records Rs.5.45 bn pre-tax profit

Sampath Bank continued with the growth momentum in the first nine months of 2012, by posting impressive results in many key areas over the last year same period, amidst increasing interest rates and shifting of funds towards high cost financing due to the prevailing market conditions. The Bank’s pre-tax profit which rose to Rs. 5,453.7 million in the First Nine Months 2012, reflected an increase of Rs. 1,047.9 million or 23.8 % over the pre-tax profit of Rs. 4,405.8 million for the first nine months of 2011. The post –tax profit of the bank recorded a growth of 23.5 % over the same period of last year, rising from Rs. 3,060.5 million in 2011 to Rs.3,778.6 million in 2012.

Aravinda Perera

Dhammika Perera

Pre-Tax Profit of the Group, which consists of Sampath Bank and the four subsidiary companies amounted to Rs.5,620.7 million for the first nine Months in 2012, reflecting a growth of Rs. 950.3 million or 20.3 %, over the pre-tax profit of Rs. 4,670.4 million for the corresponding period in 2011. Sampath Bank, as the main entity of the Group contributing bulk (97.0%) of the profit. The post - tax profit of the Group amounted to Rs. 3,900.5million , recording a growth of Rs. 615.2 million or 18.7%, over the post-tax profit of Rs. 3,285.3 million for the same period of the last year. The lower PAT growth rate of 18.7 % at the group level was mainly due to the drop in profits of the Stock Brokering subsidiary, SC Securities Company, arising from the current situation in the Colombo Stock market. NII, which is the main source of income from the fund based operations and representing over 50 % of the total operating income, rose from Rs 6,585.6 million in the first nine months 2011 to Rs 8,358.3 million in the First Nine Months 2012, recording a significant growth of 26.9 %. This increase was achieved despite the Net Interest Margin (NIM), which stood at 4.17 % in first nine months 2011dropping to 4.10 % in the first nine months 2012, as a result of cost of funds increasing at a faster rate than the rise in average yield rates of both the customer advances and government securities held.

Hence, this significant growth in NII was largely due to the high growth rates recorded by the bank in key business volumes, namely 29.7% in customer advances, 27.6% in total assets and 25.0% deposits during the one year period ended 30.09.2012.

The exchange income rose from Rs.437.0 Mn in the First Nine Months 2011 to Rs.2,165.7 Mn in the First Nine Months 2012, recording a growth of Rs.1,728.7 Mn or 395.6%. This was facilitated mainly by the increase in the revaluation gains on the foreign currency reserves held in the Bank’s FCBU, as a result of sharp depreciation of Rupee against the US Dollar in 2012 ( from Rs. 113.9 as at 31st Dec 2011 to Rs. 129.48 as at 30th September 2012) and the substantial increase in the Dealing Room’s trading Profits.

Other income of the Bank, bulk of which is Commission and Fee-Based income, too recorded a growth of Rs.221.5 Mn or 10.7% in First Nine Months 2012 over the same period in 2011 as a result of Increased economic activity in the market and the rapid growth achieved by the Bank in its lending activities. The only source of other income, which recorded a negative growth (100%) in First Nine Months 2012 was capital gain on share trading, where the Bank realized capital gain of Rs.413.8 Mn & Rs.364.57 Mn in 2011by selling part of scrip dividend received from Lanka Bangla Finance Ltd and by selling the Visa/Master shares held by the Bank, which was received free of charge during First Nine Months 2011.

Operating expenses of the Bank which stood at Rs. 5,749.8 Mn in the First Nine Months 2011, rose to Rs. 6,815.1 Mn in the First Nine Months 2012, recording an increase of Rs. 1,065.3 Mn or 18.5%. This growth in operating expenses was largely due to the incremental cost incurred in connection with the opening of 28 new branches in the First Nine Months 2011and the increase of the staff cadre, which too was due to the expansion drive.

The Bank anticipates that the cost increase rate would be somewhat lower in years to come, in view of the moderation expected in the branch expansion program, given the fact that Bank’s branch network has now adequately covered most of the potential locations of the country. Apart from that, effect of salary increment during the year and the inflation in the economy also resulted in increasing operating expenses over the previous year same period.

Though, the Provision Cover recorded a marginal decline and stood at 71.23 % at the end of the First Nine Months 2012, due to the recoveries made against the underlining NPLs, the specific Provision Cover still remained at a high level compared to the industry average of 50.9% on 30.09.2012. Together with the general provisions, the total Provision Coverage Ratio of the bank stood at 86.41 % as at 30.09.2012.

Similarly, NPL Ratio too came down to 2.27% as at 30.09.2012 from 2.65% as at 31.12.2011. However, the regulatory general provision made against performing advances had to be increased due to significant credit growth recorded in the First Nine Months2012.

A gain of Rs. 93.4 Mn arose in the First Nine Months of 2012, due to the reversal of previous mark to market losses, arising from the appreciation of market value in Treasury Bill portfolio held, which off-set the mark to market losses on the trading portfolio of shares. The previous year’s gain of Rs.72.1 Mn arose due to a reversal of an impairment provision of Rs. 275.9 Mn made against the share investment in the Union Bank.

The growth rates in deposits and total assets during the First Nine Months of 2012 amounted to 17.3% and 18.2 % respectively and compared well with the industry’s growth rates of 12.8% and 15.6%, during the period. In addition, the growth rate in customer advances during the First Nine Months of 2012 amounted to 19.8%, as against the industry average of 16.6% during the period.

Though the NPL volumes marginally rose by Rs. 91.5. Mn in the First Nine Months 2012, the NPL Ratio of the Bank dropped to 2.27% as at 30.09.2012, from 2.65% as at 31.12.2011, which also compared well with the industry average of 4.0% as at 30 September 2012.