Sampath Bank records Rs 5.1 Bn PAT for 2012 with a growth of 51.6%

Sampath Bank continued with the growth momentum in 2012, by posting impressive results in many key areas over the last year, amidst many challenges which included a regulatory credit ceiling and pressure on interest margins, resulting from shifting of funds from low cost to high cost deposits in the high interest rate scenario which prevailed in the market. The Bank’s pre-tax profit which rose to Rs. 7,265 Mn in 2012, reflected an increase of Rs. 2,271.4 Mn or 45.5% over the pre-tax profit of Rs. 4,993.6 Mn for the year ended 2011.

Aravinda Perera	Dhammika Perera

The post – tax profit of the Bank recorded a growth of 51.6 % over the same period of last year, rising from Rs. 3,387.2 Mn in 2011 to Rs. 5,136.4 Mn in 2012.

Pre-Tax Profit of the Group, which consists of Sampath Bank and the four subsidiary companies amounted to Rs .7,517.5 Mn. for the year ended 2012, reflecting a growth of Rs. 2,141.9 Mn or 39.8%, over the pre-tax profit of Rs. 5,375.5Mn for 2011. Sampath Bank, as the main entity of the Group contributed bulk (96.1%) of the profit. The post - tax profit of the Group amounted to Rs. 5,346.0Mn, recording a growth of Rs. 1,640.5 Mn or 44.3%, over the post-tax profit of Rs. 3,705.4 Mn for the last year. The lower PAT growth rate of 44.3% at the group level was mainly due to the drop in profits of the Stock Brokering subsidiary, SC Securities Company, arising from the market conditions which prevailed 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 8,943.3 Mn in 2011 to Rs 11,612.6 Mn in 2012, recording a significant growth of 29.8%.

This significant growth in NII was largely due to the high growth rates recorded by the Bank in key business volumes, namely 21.63% in customer advances, 24.93% in total assets and 24.34% in deposits during the year ended 2012. It was also possible to improve the Net Interest Margin (NIM), by 0.10% over the previous year, despite the increase in cost of funds, mainly due to timely re-pricing of products and better managing non-interest earning assets.

Commission & Fee based income of the Bank recorded a growth of Rs.338.4 Mn or 18.69% in 2012 over the previous year, as a result of increased economic activity in the market and the rapid growth achieved by the Bank in its lending activities.

Other income of the bank increased by Rs. 289.75Mn to Rs. 4,107.8Mn in 2012 compared to Rs. 3,818.1Mn. in 2011. Bulk of the other income comprised of exchange income which rose from Rs. 963.8 Mn in 2011 to Rs. 2,149.4 Mn in 2012, recording a growth of Rs.1,185.5 Mn or 123.0%. 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 the sharp depreciation of Rupee against the US Dollar in 2012 (from Rs. 113.9 as at 31st Dec 2011 to Rs. 127.65 as at 31st December 2012) and the substantial increase in the Dealing Rooms trading Profits.

Net trading income decreased by Rs. 307.7 Mn. mainly due to the recognition of a capital gain in 2011 amounting to Rs.376.8 Mn. by selling the Visa/Master shares held by the Bank, which were received free of charge.

Operating expenses of the Bank which stood at Rs. 8,058.8 Mn in 2011, rose to Rs. 9,396.8 Mn in 2012, recording an increase of Rs. 1,338.0 Mn or 16.6%. This growth in operating expenses was largely due to the incremental cost incurred in connection with the opening of 35 & 3 new branches in 2011& 2012 respectively and the increase in 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, the effect of salary increments during the year and the inflation in the economy too contributed in increasing operating expenses over the previous year.

The requirement on the impairment provision decreased by Rs 553.14 Mn, mainly due to the charge for loan impairment decreasing by Rs 291.95 Mn in 2012 compared to the previous year. In addition, impairment provision on Financial Investments recorded a significant reversal amounting to Rs. 261.19Mn, compared to 2011. This was largely due to mark to market gain on Bank’s Treasury bill portfolio (amounting to Rs. 386.05Mn), nullifying the effect of the increased mark to market loss on the trading portfolio of shares held (amounting to Rs.124.86Mn.).

The growth rates in deposits and total assets in 2012 amounted to 24.34% and 24.93 % respectively and compared well with the industry’s growth rates of 17.1% and 20.9%, during the period. In addition, the growth rate in customer advances during the year 2012 amounted to 21.63%, as against the industry average of 20.9% during the period. The bank was able to exceed the permitted credit growth of 18% due to its ability in raising foreign currency funding totaling to US $ 62.5Mn.

The Bank has one of the lowest impairment ratios in the industry at 1.9%. This was mainly due to prudent credit disbursements and excellence in credit quality management. The total impairment provisions cover as at end 2012 was 68.1% which is a decrease compared to 77.0% as at end 2011, largely due to recoveries made. The improved profits paved the way for most of the key financial ratios of the Bank to record significant improvements over the previous year.