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Sampath Bank nearly doubles profit in 1Q; credit quality shows signs of improvement

13 May 2021 03:23 am - 0     - {{hitsCtrl.values.hits}}

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Sampath Bank PLC delivered some robust profits for the three months ended in March 2021 (1Q21) as the bank saw its credit quality improving, resulting in much lower impairments than what it provided a year ago and opened its lending spigots generating more revenues.

 
Sri Lanka’s third largest private lender by assets reported earnings of Rs.4.46 a share or Rs.5.1 billion in total earnings for the January-March quarter, up 90.7 percent from Rs.2.34 a share or Rs.2.7 billion in earnings in the year ago period. 


The bank provided Rs.1.6 billion for possible losses from loan defaults and other financial assets during the quarter under review compared to Rs.5.2 billion provided in the same period a year ago, as uncertainties mounted on borrowers’ capacity to service their loans when the economy was shut down for nearly two months, last year. 
“However, commencing from the latter part of year 2020, the bank saw an improvement in credit quality among the customers who did not obtain the moratorium,

 which is reflected in the decrease of stage 3 loans by 4.4 percent. This factor also contributed to the decrease in the impairment provision compared to 1Q 2020,” Sampath Bank said in a statement. The gross non-performing loans ratio improved to 5.92 percent by March end from 6.30 percent in December 2020. 


Last year, the banking sector made material provisions including for loans under moratoriums, exercising extra-prudence should such loans fall bad once the moratorium Phase II expired on March 31, 2021.


While Sampath Bank has used the same models and assumptions that it used for measuring impairments for the March 2021 quarter, without making any compromises due to the developing scenario of disruptions to businesses and broader economic activities from the virus resurgence, the bank also continued to apply higher loss rate on government securities denominated in foreign currency, although the Central Bank permitted a lower rate. 


The bank gave Rs.20.3 billion in fresh credit during the three months under review, logging 2.7 percent growth in the loan book, which translates into little under 11 percent growth when annualised. Loans across business, housing, import and export, overdrafts, pawning and credit cards saw increases. 


“Resilient performance of all business lines along with the improved credit quality helped bolster Sampath Bank performance in the first quarter of 2021,” the bank said.


The bank saw its deposits rising by Rs.27.9 billion in three months. The bank in April raised Rs.6.0 billion in a Tier II equivalent debenture to bolster its capital aimed at expanding its assets growth. 


The bank reported a net interest income of Rs.10.2 billion in the three months compared to Rs.10.8 billion in the year earlier period as loans grew in a resurgent economy while interest rates declined. As a result of new loans, the bank managed to improve its net interest margin to 3.35 percent from 3.30 percent in December 2020. 


The fee and commission income rose by a robust 23.5 percent to Rs.2.9 billion from a year ago in reflection of the growth in loans, cards, trade and electronic channel based incomes.Depreciation of the rupee enabled the bank to report a net other operating income of Rs.2.9 billion compared to Rs.2.4 billion a year ago. Dhammika Perera controlled Vallibel One PLC has 14.95 percent stake in Sampath Bank while the Employees’ Provident Fund has 9.97 percent stake being its second largest shareholder.  


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