Sri Lanka’s third largest private lender by assets, Sampath Bank PLC, which was recently included in the MSCI Frontier Market 100 Index, says the bank is ready to launch the first-ever blockchain-based product in Sri Lanka, this year.
Speaking to the reporters of a few selected media organisations, this week, Sampath Bank Managing Director Nanda Fernando said, “We have lined up new products in the blockchain platform and blockchain will be used to deliver our products very soon. We have already laid the foundation.”
While revealing that the product is ready to be launched, he said Sampath Bank is now waiting for the right time window.
Fernando asserted that blockchain would be the future foundation of Sri Lanka’s banking sector.
He said the products based on blockchain would have the following features: lower cost, ability to use them to suit the lifestyles of the customers, high convenience and mass usage.
When queried whether Sri Lankans would be able embrace blockchain-based products, he noted that if something is easier to access, cheaper and affordable, people would prefer to use it.
Fernando stated that Sampath Bank has lined up the marketing and advertising strategy for the product.
He highlighted that the design, formation and implementation of this product are absolutely home-grown, carried out by the Sampath Bank staff.
Fernando pointed out that the recently launched slip-less transaction product has been a success, attracting 70,000 customers initially.
Fernando said Sampath Bank is focusing on the increasing number of customers by reaching out to the underbanked and unbanked communities in Sri Lanka.
“We want people to enjoy the banking facilities in the most convenient way. We want to reach the SME sector especially and provide them with access to banking facilities at a lower cost. That’s a main purpose of the digitalisation—making banking affordable to the unbanked and underbanked communities.”
Commenting on the recent inclusion of Sampath Bank in the MSCI Frontier Market 100 Index, Fernando stressed that addition of more local banks and companies in the index would enable Sri Lanka to attract large amounts of foreign direct investment (FDI).
“We would like to see more and more Sri Lankan companies and banks come into this index. Because the more companies are in the index, Sri Lanka will be noticed more and more within the global community. As a result of it, FDI will flow into the country, strengthening the economy,” he said.
Fernando noted that Sampath Bank’s three-year ‘paradigm shift’ project, which was launched last year, helped the bank to be included in the index.
He said that the project helped to improve the tradability and liquidity of the bank’s shares, while the recent beefing up of the bank’s capital base and its stringent governance procedures also helped Sampath Bank to be included in the MSCI Frontier Market 100 Index.
“Best of the results are yet to come. We have only seen the tip of the iceberg,” Fernando said.
He noted that Sampath Bank’s share prices at the Colombo Stock Exchange soared by 33 percent in 2017, from Rs.260.40 in 2016, to Rs.315.70 in 2017, despite the volatile market conditions. (NF)
Fitch Ratings has affirmed the national long-term rating of Sampath Bank PLC at ‘A+(lka)’ and revised the outlook to ‘Stable’ from ‘Negative’. Fitch has also affirmed Sampath’s subordinated debentures
“The revision in the outlook reflects Fitch’s expectation that the bank would be able to sustain higher capital buffers as it continues to focus on capital management and earnings retention while expanding its market share.
Sampath’s rating also reflects its higher risk appetite, growing franchise and satisfactory asset quality,” Fitch said.
The rating agency expects the bank to maintain adequate buffers above regulatory requirements even though its Tier I ratio could temporarily fall to around 11 percent by end-2018, due to the continued rapid growth.
This compares to a minimum required Tier I ratio of 10 percent, which includes an additional end-point 1.5 percent buffer for domestic systemically important banks (D-SIB) from January 1, 2019.
Sampath is now required to maintain a minimum Tier I ratio of 8.875 percent, which includes a one percent D-SIB buffer.
Fitch estimates Sampath’s Tier I ratio was 12 percent in April 2018, after it raised Rs.12.5 billion in April 2018 and Rs.7.6 billion in December 2017, via rights issuances and retained its 2017 profit of Rs.12.7 billion through a scrip dividend.
The bank’s total capital ratio improved to 14.3 percent by end-March 2018 (2016: 12.9 percent) after issuing Rs.13.5 billion of Basel III-compliant subordinated debt over the last 12 months.
The bank is required to maintain a minimum total capital ratio of 14 percent from the start of 2019, compared with the current requirement of 12.875 percent. The loan growth is projected to remain strong in 2018 after a 7.5 percent expansion in 1Q18 since December 2017 that outpaced the sector’s 4.6 percent growth.
“Sampath’s high risk appetite is evident in its loan book’s CAGR of 22 percent over 2016-2017, exceeding the industry’s 16.8 percent expansion and the loan book’s concentration in the consumer, retail and SME/mid-sized corporate segments.
We believe the management may slow the loan growth to maintain the capital buffers in the absence of further capital infusion,” Fitch noted.
In line with the rising non-performing loans (NPLs) in Sri Lanka, Sampath’s NPL ratio increased to 1.95 percent by end-1Q18 from 1.64 percent at end-2017 but the ratio remains low compared with those of its peers.
“The bank’s rapid growth and increased exposure to more-vulnerable segments raises the risk of asset-quality deterioration in the event of a significant economic downturn, although this is not our base case,” the rating agency said.
Fitch expects the overall operating environment to remain challenging.
“Total allowances rose to 10.5 percent of pre-provision profit in 2017 from 8.7 percent in 2016. We believe the impairment charges could rise further due to the potential asset-quality pressures, as well as the implementation of SLFRS 9,” Fitch noted.
Sampath’s ROAA improved to 1.7 percent in 2017 from 1.6 percent in 2016 and 1.4 percent in 2015, aided by higher business volumes.
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