Higher exchange losses hinder Sampath Bank 1Q performance

Sampath Bank PLC reported subdued profits in the March quarter (1Q23), as the exchange losses weighed on its performance as seen with other big lenders in the country. 
The bank with assets of Rs.1.3 trillion reported a net interest income of Rs.18.79 billion in the three months, up 28.8 percent from a year ago although the net interest margin slipped by 6 basis points to 5.60 percent, as the cost of funds rose much faster than what the bank earned from its loans and other interest-bearing assets. 
Rising rates usually benefit banks, as they could earn higher incomes from their assets although the growth could slow. 

The bank set aside Rs.6.82 billion for possible loan and other asset losses in the three months, compared to Rs.12.09 billion a year ago. These consisted of what the bank provided for the dollar-denominated government securities, which the government defaulted last year.
The bank saw its loan book contracting by Rs.22.05 billion to Rs.898.07 billion while the deposits followed suit with a contraction of Rs.31.54 billion to Rs.1,064.55 billion by the end of March. 
The appreciation of the rupee against the dollar by about 11 percent reversed the foreign exchange gains the bank made a year ago and as a result, the bank reported a net other operating loss of Rs.4.24 billion, compared to Rs.8.77 billion gain made in the same period last year. 
However, the bank’s trading gains were reported at Rs.1.67 billion for the quarter compared to a loss of Rs.380.73 million, mainly coming from the forward exchange contract revaluation gains. 
Meanwhile, the bank’s fee incomes rose by 14.9 percent to Rs.5.56 billion, predominantly supported by the trade and remittance-related activities, the bank said in an earnings release. 
Sampath Bank reported earnings of Rs.2.57 a share or Rs.3.01 billion in the January-March 2023 quarter, compared to Rs.4.14 a share or Rs.4.85 billion a year ago, a 38 percent decline. 
The operating costs, which also rose by 18.9 percent, also weighed on the profits. 
The bank’s share closed at Rs.52.00 yesterday, losing 30 cents or 0.57 percent.
Billionaire businessman Dhammika Perera-controlled Vallibel One PLC holds a 14.95 percent stake in Sampath Bank while Ayenka Holdings Private Limited and the EPF hold 9.97 percent each, as the second largest shareholders of the bank.