This is the eighth of the interview series titled ‘Mirror Business S&P SL20 Insights’ conducted in collaboration with the Colombo Stock Exchange (CSE) as an investor relations initiative. The column encourages S&P SL20 companies to talk about the developments in their respective industries, challenges and growth prospects. Following are the excerpts from an interview with Sampath Bank Managing Director Nanda Fernando.
What key milestones has Sampath Bank achieved in 2016?
Sampath Bank’s PBT for the nine-month period ended September 30, 2016 is Rs.8.9 billion, a 28 percent increase against the corresponding period of the previous financial year.
This was supported by strong advances and deposit growth during the first nine months. Sampath Bank led the major private banks in terms of advances growth with 14.7 percent and deposit growth with 20.3 percent compared to end-December 2015.
Despite the high advances growth, Sampath Bank managed to maintain its industry best NPL level at 1.67 as of September 30, 2016, highlighting the high standards maintained while achieving growth.
In recognition of our excellent performance, not only in terms of financials but also in terms of our obligations to all stakeholders, Sampath Bank received a number of prestigious awards during 2016. Best Managed Bank 2016 by Asian Banker, Best Bank in Sri Lanka 2016 by Euromoney, Best Commercial Bank and Retail Bank 2016 by World Finance and Best Innovation in Retail Banking Sri Lanka 2016 and Best Commercial Bank of the Year Sri Lanka 2016 by International Banker Magazine are some of the awards we received during the year 2016.
What does 2017 hold for the bank and what do you see as potential opportunities?
With improved political and economic stability, we expect things to start improving from 2017. We are particular optimistic on infrastructure investments, export growth and FDI.
The recommencement of stalled infrastructure projects will likely give a positive boost to the economy in general and the banking and finance sector in particular. Private investment is also picking up, especially in the real estate, tourism and industrial sectors. Sampath Bank has always been a keen participant in these investment projects and we look forward to do the same this year.
Exports have been lagging in 2016 and we expect to see a turnaround this year. The granting of the GSP Plus, gradual improvement in developed market economies and the receding deflationary risk are all positives in this regard. The government has also paid special attention to improve exports and in line with this national need, Sampath Bank launched ‘Export House’ in 2016 as a one-stop shop that provides a range of services to both the existing and aspiring exporters. In the current global context, Sri Lanka is emerging as an attractive destination for investment. Sri Lanka is in the middle of the fastest growing region in the world and with its skilled labour force and proposed economic linkages with the regional markets, FDI is likely to increase in the coming years. Sampath bank is playing an active role in facilitating these investments.
Could you elaborate on a few industry-wide growth prospects going forward?
Aside from those mentioned above, we see the proposed CIFC as a key growth prospect for the banking and finance industry in Sri Lanka. This will allow local players to compete at a regional and a global level, opening up significant growth opportunities. New technologies like blockchain are levelling the playing field allowing even banks in Sri Lanka, which are much smaller in size on a global scale, to effectively compete at an international level.
In your opinion, what challenges do you anticipate in the industry and how do you aim to address them?
Banking and finance is undergoing rapid change and this presents both opportunities and challenges for an industry that has seen little change for centuries.
On the one hand, rapid change in technology and the emergence of fintechs is challenging the established industry players. On the other, changes in demographics and the new digital generation is changing how business is done.
We see both these trends as growth opportunities for an innovative and nimble bank like Sampath. Sampath Bank has always been in the forefront of innovation in Sri Lanka. This has been our forte and we have continuously invested in both infrastructure and human capital to maintain this lead. Sampath Bank has a reputation for delivering superior customer service and we are investing in new technology that will enable our staff to maintain these high standards. We have identified CRM as a major differentiating factor and with new technology, we expect to deliver a very personalized service that will both delight customers and increase loyalty. Apart from these trends, the current global uncertainties, particularly with the changing policies in the US, Brexit and slowing down of China, pose significant challenges going forward. Sampath Bank is in a strong position to face these challenges and we will add to our resilience during the year by further strengthening our capital base, training and development of our staff members, maintaining our high standards on credit assessment and making our operations more cost effective and efficient.
Focusing on the shareholder, what efforts and initiatives are you taking to drive shareholder value?
Sampath Bank has continuously delivered superior shareholder value. Our ROE for the first nine months of 2016 was 23.9 percent, highest among the main industry peers, and ROA was 1.57 percent. But beyond these measures, we consistently strive to do better in every sphere of business we are engaged in, achieving fast and sustainable business growth while managing costs effectively, which will ultimately deliver value to our shareholders.
How has listing on the CSE been beneficial to Sampath Bank?
Listing on the CSE has been a catalyst for Sampath Bank’s growth. Listing has helped to raise capital to support our rapid expansion and broad base our shareholding.
In addition to this, listing has helped Sampath to adopt industry benchmark corporate governance practices and establish processes that ensure transparency and sustainability of the bank. This has led to positive identification of Sampath brand among both local and global investors.
Sampath bank has also used listing at the CSE to both reward its loyal staff members through ESOPs and to align their interests with those of the company.
Finally, what is your message to the shareholders of the bank?
On behalf of team Sampath and all other stakeholders, I would like to take this opportunity to thank our shareholders for their steadfast support over the years, and for believing in our values, allowing us to fulfil both our aspirations and responsibilities. We will continue to conduct our operations in a manner that will not only give our shareholders superior returns, but also give them pride as partners of Sampath journey.