Sampath Bank September profit falls despite stronger loan growth

Chairman Harsha Amarasekera	MD/CEO Sanjaya Gunawardana

Sampath Bank PLC showed a sharp acceleration in new loans in the three months ended in September, after a relatively slow start to the year but the profits made only a little traction for the quarter still.

The bank gave Rs.114.11 billion in new loans in the July-September quarter, bringing the total nine-month growth to Rs.182.46 billion, resulting in a 18.9 percent growth in the loan book. The net interest income slipped 3.0 percent to Rs.20.09 billion for the quarter, as these new loans take some time to result in a higher top-line growth.

“This decrease was primarily driven by the continued reduction in the Average Weighted Prime Lending Rate and lower yields from government securities. The interest expenses saw a corresponding decrease of 2 percent year-on-year to Rs.76.8 billion, reflecting the overall downward trend in market interest rates,” the bank said in an earnings release of its nine-month performance, which mirrored the last three months.

As a result, the net interest margin contracted to 4.09 percent, from 4.90 percent at the start of the year.

The bank’s share ended 3.38 percent lower at Rs.150.25 at yesterday’s trading and was among the leading constituents to the day’s decline in the All-Share Price Index.

The bank meanwhile set aside Rs.633.77 million for possible loan defaults in the quarter, turning from a provision reversal of Rs.828.07 million in the same period last year. “An impairment charge of Rs.0.6 billion was recognised on other financial instruments during the reporting period, primarily attributable to newly acquired investments,” the bank said again on its nine-month results.

Meanwhile, the asset quality matrix, the so-called stage three loans ratio, fell to 3.77 percent, from 4.69 percent at the beginning of the year, reflecting improving asset quality.

Against this backdrop, the bank reported earnings of Rs.6.41 a share or Rs.7.52 billion for the quarter, compared to Rs.6.16 a share or Rs.7.22 billion reported in the same period last year. This translated into a modest 4 percent increase.

Profits were also buttressed by foreign exchange gains made possible from the slight depreciation in the rupee.

The fee incomes rose by a robust 43 percent to Rs.6.24 billion on “strong performances in key business areas, including advances, cards, trade, operations and electronic banking services”, it said. The bank raised deposits worth Rs.131.36 billion in the nine months, at a 9.0 percent growth in the portfolio. The bank has a total deposit portfolio of Rs.1.59 trillion and a loan portfolio of Rs.1.15 trillion as of end-September.

Billionaire Dhammika Perera-controlled Vallibel One PLC held a 14.95 percent stake in Sampath Bank.