Sampath Bank reported a Profit after tax (PAT) of Rs 11.2 billion for the year under review, reflecting a slight decline of 8.2% over the previous year. The Group recorded a PBT and a PAT of Rs 16.3 billion and Rs 11.7 billion respectively.
The Bank’s total operating profit before impairment and taxes grew by 1.1% to Rs 34.8 Bn in 2019 compared to Rs 34.4 Bn reported in 2018. However, profit before tax (PBT) for the year 2019 dropped to Rs 15.5 Bn from Rs 18.3 Bn recorded in 2018. This decline of 15.5% is attributed mainly to the 39% increase in taxes on financial services and the 12% increase in impairment charges. Taxes on Financial Services for the year increased to Rs 6.7 Bn, mainly due to the newly introduced debt repayment levy. Total debt repayment levy for the year exceeded Rs 2.2 Bn. Sampath Bank’s Board of Directors has recommended a final cash dividend of Rs 11.75 per share to be paid for the financial year ended 31st December 2019 subject to the approval of the shareholders at the Annual General Meeting to be held on 30th March 2020. The dividend payout ratio for the year ended 31st December 2019 is over 40%.
Low credit growth, higher non-performing loans, Easter Sunday terrorist attacks, Presidential election and pressure on lending rates/interest rate caps affected the Sampath Bank’s NII growth during the year 2019.
Despite the challenges however, the Bank’s NII increased by Rs 3.5 Bn during the period under review to reach Rs 41.6 Bn as at 31st December 2019. This 9.3% growth was the result of effective fund management strategies adopted by the Bank, coupled with timely re-pricing of assets and liability products right throughout the year 2019. It is noteworthy to mention that the Rs 12.1 Bn worth of Tier 1 capital raised during the year, enabled the Bank to release some of its larger high-cost deposits.
This helped to reduce the cost of funds and created a positive impact on NII.
The reduction of SRR from 7.5% to 6% with effect from 16th November 2018, followed by a further reduction to 5% with effect from 1st March 2019 also contributed towards improving the NII. Overall interest income for the period under review recorded an increase of Rs 5.7 Bn to reach Rs 103.6 Bn compared to Rs 97.9 Bn recorded in 2018, which was a moderate growth of 5.8%.
Interest expenses for the year too increased slightly by 3.5% owing mainly due to the new debenture issue that took place in February 2019 and the marginal growth in the deposit portfolio.
At the end of 2019, the Bank’s interest expenses reached Rs 62 Bn compared to Rs 59.9 Bn recorded in 2018.
Consequently, the Net Interest Margin too improved marginally to 4.46% in 2019 compared to 4.41% reported in 2018. Net fee and commission income, which comprises credit, trade, card, operations and electronic channel related fees, grew marginally by 1.2% to Rs 10 Bn in 2019 from Rs 9.9 Bn in 2018.
Net gains from trading activities recorded a significant growth of 195%, mainly due to movements in forward exchange rates working in favour of the Bank. For the year under review, net gains from trading stood at Rs 2.2 Bn compared, to a loss of Rs 2.3 Bn recorded in 2018. Meanwhile, other operating income recorded a decline of 84.4% from Rs 8 Bn in 2018 to Rs 1.2 Bn in 2019.
This was due to the drop in realized exchange income following the appreciation of Sri Lankan Rupee against the US Dollar by Rs 1.55 in 2019, in complete contrast to the depreciation of Rs 29.4 recorded in 2018. Total exchange income which consists of net gains/losses from forward contracts and realized exchange income, decreased to Rs 2.8 Bn for the year 2019, from Rs 5.5 Bn recorded during the previous year which is a decline of 49%.
Stressed economic conditions that prevailed throughout the year 2019 continued to affect business cash flows of many businesses in the country. As a result, the Bank experienced significant increase in customer defaults and delayed repayments.
To address this issue, the Bank continued to take strategic measures such as rescheduling/restructuring existing facilities to suit the customers’ debt-servicing capacity coupled with improvements to the pre credit evaluation and post credit monitoring protocols. This helped to manage the increasing trend in the NPL to some extent towards the latter part of 2019.
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