3 August 2018 02:54 pm Views - 2689
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 recordedRs 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 thefirst 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 3.8Bn recorded during the corresponding period in 2017. This income source too has posted animpressiveYoY growth of 24.3% largely due tothe healthy growth recorded in the advances portfolio andexpansion of credit card operations.
The Bank's other operating income, net trading income and net gains from financial investmentstoo recorded anincrease of 18%during the period under review.Increase in realized exchange income has contributed to the saidincrease in other operating income. Consequently, other operating incomefor the first half of 2018stood at Rs 2.3 Bn, as opposed to Rs 1.8Bn reportedduring thecorresponding 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 aYoY increase of 20.4%. This increase was mainly due to the increase in personnel expenses triggered by annual salary increments.Other overhead expensestoo increased due to general price hikes. However, the Cost to Income ratio excluding VAT & NBT on financial services improved from 41.6% reported in thefirst 6 months of 2017 to 38.4% in the first half of 2018. This recordsan improvement of320 basis points,which is a significant achievementparticularly in view ofSampath Bank having one of the youngest branch network compared to its closest competitors.
Impairment Chargeson Loans and Receivables
Impairment charges amounting to Rs 2.8 Bn recorded for the first half of 2018witnessed 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 0.5Bn 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 2017stood at Rs 795.1 Bn. Gross loans & receivables grew by 10.0% (annualized 20.0%) to reachRs 629.1 Bn as at 30thJune 2018, recording a growth of Rs 57.6 Bnfor the period under review. Total deposit base too increased by Rs 46.6 Bnfor 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 30thJune 2018 showed a slight decline compared to the 34.9% registered at 31stDecember 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 31stDecember 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 2018was 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.