Sampath Bank posts Rs. 7 bn 1H PAT
Considering the impact and uncertainty created by COVID 19 in the 1H 2020, the Bank provided a sufficient amount of impairment provision in that period. Since the Bank brought forward a sizable buffer of impairment provision from 2020, it did not require similar provisioning in 1H 2021.
As a result of the growth recorded in PAT, the return on Average shareholder’s Equity (ROE) increased by 533 bps to 12.91% as at 30th June 2021 compared to 7.58% reported at the end of the year 2020. In the meantime, Return on Average Assets (ROA) also increased to 1.67% as at 30th June 2021 against the 1.09% reported for the year 2020.
The Bank recorded a PBT of Rs 9.5 Bn for the first half of 2021 compared to Rs 5.3 Bn reported during the corresponding period in the previous year, denoting a growth of 79.3%.
Driven by strong performance recorded by the Bank in the first six months of 2021, the Sampath Group too posted significant growth, with Group PBT and PAT growing by 86.1% and 88.2% respectively over the figures reported for the corresponding period. In the period under review, the Group recorded a PBT of Rs 10.1 Bn and PAT of Rs 7.5 Bn compared to the PBT of Rs 5.4 Bn and PAT of Rs 3.9 Bn recorded in the corresponding period.
The Bank’s Net interest income for the period under review was Rs 19.2 Bn compared to the Rs 17.4 Bn reported for the corresponding period in the previous year, reflecting an increase of 10.4%.
The lower demand for credit and the low interest rate regime are the main reasons for the 9.1% drop in interest income. The interest income of the Bank stood at Rs 41.9 Bn compared to Rs 46.2 Bn recorded for the corresponding period.
Meanwhile, owing to prudent fund management strategies, Sampath Bank was able to re-price its liability products in line with the prevailing lower interest rates.
Net fee and commission income (NFCI) recorded a growth of 33.5% from the figure reported in the corresponding period of the previous year. Net other operating income increased by 27.9% in the first half of 2021 compared to the corresponding period in the previous year.
This growth was mainly backed by the increase in realized exchange income stemming from the 7.5% depreciation of the Sri Lankan Rupee against the US Dollar.
During the first six months of 2021, the Bank recorded Rs 3.3 Bn as net other operating income compared to Rs 2.6 Bn reported in 1H 2020. The Bank recorded a net trading income of Rs 46.3 Mn in the period under review, compared to the Rs 106.5 Mn loss registered in the corresponding period of the previous financial year.
Operating expenses, which stood at Rs 9.5 Bn during 1H 2020, increased to Rs 10.9 Bn during the period under review, reflecting a YoY increase of 14.7%. Meanwhile, the Bank’s Cost-to-Income ratio (excluding taxes on financial services) decreased marginally to 39.5% in the first six months of 2021, from 40.2% reported for the corresponding period in 2020. The impairment charge for the period under review dropped by 32.8% compared to the first half of the year 2020 to reach Rs 4.9 Bn by the end of the period under review.
The Bank provided a sizable amount of impairment provision during the first half of 2020, after considering the impact and uncertainty created by COVID 19 on the economic front during that time.
As a result, cumulative impairment provision against stage 1 loans and Stage 2 loans increased by Rs 0.9 Bn and Rs 4.5 Bn respectively, in the period under review, from the figures reported at the end of 2020.
The Bank continued to recognise the impairment provisions on foreign currency-denominated government instruments by applying the LGD rate of 20%.
The Bank maintained all capital ratios well above the regulatory requirements at the end of Q2 2021. During the first half of 2021, the Bank raised Rs 6 Bn worth of Tier 2 capital via Basel III compliant, listed, rated, unsecured, subordinated, redeemable 7-year debentures with a non-viability conversion. Sampath Bank’s liquidity position remained strong, with the liquidity coverage ratio confirming that the Bank has sufficient liquidity buffers in line with regulatory requirements.
Net loans and advances increased by 8.4% (annualized) in the period under review, compared to the figure reported at the end of 2020.
Meanwhile, the Bank’s deposit base recorded a growth of 13.2% (annualized) from the level reported at the end of 2020. The total Deposit base at the end of Q2 2021 stood at Rs 945 Bn compared to Rs 887 Bn reported at the end of 2020.