Sampath 4Q profit soars amid higher credit

Sampath Bank PLC, Sri Lanka’s third largest private lender by assets, reported earnings of Rs.14.44 a share for its October–December quarter against Rs.8.91 a share reported a year ago, the interim results released to the Colombo Stock Exchange showed. 
This translated into a net profit of Rs.2.56 billion, an increase of 67 percent year-on-year (YoY), backed by strong growth in loans and advances recorded at better margins. 
The net interest income (NII) for the quarter rose by 47 percent YoY to Rs.6.95 billion while the net fee and commission income grew by 27 percent YoY to Rs.1.92 billion.  
Although the net gain from trading activities of financial assets was a negative Rs.59.1 million, other operating income rose by 52 percent YoY to a little over Rs. 1 billion probably due to the exchange incomes. 
The bank recorded a total operating income of Rs.9.85 billion, up 42 percent YoY. 
For the year ended December 31, 2016, the bank reported an earning of Rs.53.66 a share or Rs.9.5 billion, an increase of 43 percent YoY. 

The NII rose by 29 percent YoY to Rs.23.9 billion, “amidst several challenges such as low liquidity, higher cost of funds, volatile margins and unstable currency rates posed by the external market forces”, the bank said in a post earnings release. 
The Net Interest Margin rose to 3.87 percent from 3.64 percent a year ago. 
The return on equity improved to 23.47 percent from 18.42 percent due to higher earnings but any future capital infusion could dent the ratio. 
The loans and receivables book grew by a strong 21 percent or Rs.81.3 billion to Rs.465. 9 billion on a standalone basis out of which housing loans, credit cards and overdrafts rose sharply. 
Meanwhile, the bank’s deposit base grew by 25.7 percent or Rs.104.3 billion in new deposits to Rs.510.6 billion but the low cost Current and Savings Accounts (CASA) ratio weakened to 38.8 percent from 47.6 percent YoY. The asset quality improved as the gross non-performing loan ratio fell to 1.61 percent from 1.64 percent a year earlier. 
The bank’s efficiency also improved as the cost-to-income ratio fell to 47.8 percent from 52.7 percent a year ago. 
The bank might need to raise fresh capital to ensure its capital adequacy ratios remain above the minimum requirements while maintain the desired growth as both Tier I and Tier II capital adequacy ratios stood at 8.31 percent and 12.87 percent, respectively. 
The regulatory minimums are 5 percent and 10 percent, respectively. 
Dhammika Perera had 14.95 percent stake in the bank through Vallibel One PLC while Indra Silva held 9.98 percent stake being the second largest shareholder. 
The Employees’ Provident Fund held a further 9.97 percent stake being the third largest shareholder of the bank.