Sampath Bank 2Q net up 54% over strong growth in loans; margins intact

3 August 2016 12:00 am - 0     - {{hitsCtrl.values.hits}}

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Sampath Bank PLC, third largest private sector commercial bank by assets recorded a net profit of Rs. 2.5 billion for the quarter ended June 30, 2016 (2Q16), up 53.9 percent from the same period last year over strong credit growth though the bank managed to maintain the margins despite higher interest rates, the interim results released to the Colombo Stock Exchange showed. 


The earnings per share improved to Rs.14.16 against Rs.9.20 a share year ago. 


The bank’s share closed Rs.10.70 or 4.59 percent higher at Rs.243.80 at yesterday’s trading close. 


The bank on a standalone basis recorded a significant growth in gross loans and advances of Rs. 38.3 billion or 10 percent during the first six months to June 30 (1H16) to Rs. 423.0 billion. 
The growth in loans has been totally financed by the customer deposits which grew by a satisfactory 11 percent or Rs. 44.5 billion during the 1H16 to Rs.450.8 billion but the bank’s low cost deposits measured through current and savings account (CASA) ratio declined to 44 percent from 47.6 percent in December 2015. 


This was due to the savers opting for higher interest earning fixed deposits in an increasing interest rate market. 
However, the bank managed to maintain the margins at 3.69 percent, slightly up from 3.64 percent in December 2015. 
The net interest income grew by 24.2 percent yoy to Rs. 5.84 billion. 


However the interest cost was seen rising by 58 percent yoy during the period against the 41.5 percent yoy increase in interest income reflecting the fast increasing deposit cost as a result of re-pricing. 
Meanwhile, the fee and commission based incomes also rose by 26.8 percent yoy to Rs. 1.58 billion on account of the, “credit, trade, credit card and electronic channel related fees,” the bank said in a note on the results. 
Further the net trading income – realized and unrealized gains of the bank’s trading financial assets, which includes government securities – increased by 136.3 percent yoy to Rs. 284.5 million. 
Gain on forward exchange contract revaluation also composed of the larger share of this gain. 


The other operating income rose by 10.3 percent yoy to Rs.508.3 million. 
“Exchange income gains on revaluation of foreign currency reserves resulting from depreciation of the Rupee against the US dollar and income from currency note operations have contributed towards the positive variance in this income source,” the bank said. 


Provisions made for possible bad loans rose due to increase in impairments made for individual customers but the collective impairments saw a provision reversal demonstrating the better quality of the loan book. 
Bank’s gross non-performing loan ratio showed a slight uptick to 1.80 percent by the end of 1H16 from 1.64 percent in December 2015 but the ratio is the lowest in the industry. 
The cost-to-income ratio, key efficiency ratio in the banking sector stood at 49.3 percent by the end of 1H16. 


Meanwhile, the banking group for the six months ended June 30, 2016 posted a net profit of Rs.4.3 billion with an earnings per share of Rs.24.56 recording an increase of 35.6 percent from the same period last year. 
The bank’s capital adequacy has now become a limiting factor for aggressive growth, despite the bank’s potential as both Tier I and Tier II are at 7.97 percent and 12.35 percent, respectively, against the regulatory minimums of 5 percent and 10 percent each. 


As of June 30, 2016, Dhammika Perera controlled Vallibel One PLC held 14.95 percent stake in the bank while the state controlled private sector pension fund, Employees’ Provident Fund held 9.97 percent stake being the third largest shareholder. 

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