Sampath Bank reports solid 2Q with growth in loans and net income

Harsha Amarasekera - Chairman

Ayodhya Iddawela Perera – MD

Sampath Bank PLC reported some robust top and bottom-line performance on the back of prudent management of assets and liability re-pricing in its second quarter (2Q24). Growth was also seen in new loans which was however outpaced by the growth in deposits.  

The performance was also buttressed by a massive gain on trading during the quarter which recorded at Rs.2.16 billion compared to a loss of Rs.3.1 million in the year earlier period.

The bank reported a net interest income of Rs. 21.8 billion for the three months through June 2024, up 31.3 percent from a year earlier period.

This was possible from a sharp decline in the net interest expense which far outweighed the decline in the interest income for the period. This is despite the Rs.114.4 billion growth in rupee deposits during the period, and the Rs.85.5 billion total deposits which included foreign currency denominated deposits.

It is clear that the bank has substantially cut down what they offer for their existing and new deposits, far outpacing the reduction of the rates they charge for their loans while the slump in foreign currency deposits is boding favourably.

The bank’s net interest margin, the gap between what is charged from borrowers and what is paid to depositors, slightly expanded to 5.18 percent from 5.16 percent six months ago.The bank’s total outstanding gross loans and advances rose by Rs.30.5 billion to Rs.907.9 billion. 

Sampath Bank set aside Rs.1.74 billion for possible bad loans in the quarter, multiple times higher than the Rs.382.2 million it provided for the same purpose in the same period in 2023.

The bank however has taken into account the improvement in the economic conditions and thereby improving debt serviceability of the borrowers when estimating potential losses.

Sampath Bank appears to have not made any additional provisions against other financial assets such as the international sovereign bonds during the quarter after it provided a net Rs.1.0 billion for the same instrument during the March quarter. The bank has made little progress on their Stage 3 loans ratio which slid to 5.70 percent by the end of June 2024 from 5.87 percent at the start of the year.

The bank reported earnings of Rs.6.88 a share or Rs.8.07 billion in the April – June quarter, its fiscal second compared to Rs.3.95 a share or Rs.4.63 billion in the same period in 2023.

The investors cheered the results sending its share higher by 1.09 percent yesterday to settle at Rs.74.50.
The net fee and commission incomes were however slid 2.5 percent to Rs.4.39 billion during the quarter which the bank attributed to low trade related income such as commission rates on import transactions and also the impact came from the rupee strength.

“However, fees generated from other channels, including credit, electronic, cards and remittance-related activities, showed growth compared to the same period of the previous year”, the bank said in an earnings release.