The Sampath Group comprises of Sampath Bank Plc and four subsidiaries providing diverse financial services. The Bank is the main entity of the group contributing 94% to the Group’s pre-tax profit and Sri Lanka’s third largest non-government Bank, with an asset base of Rs 382 Bn and a network of 212 branches throughout the country.
Our Performance
2013 has been another challenging year for the banking sector, with a moderate growth due to many challenges posed by the external market forces, which included excess liquidity, lower credit demand and worldwide decrease in gold prices etc. Despite the strong growth recorded in key core banking income areas such as net interest income and commission income, profit growth was adversely affected by high FX revaluation gains in 2012 and significant impairment provisioning made against pawning advances in 2013, consequent to the drop in gold prices.
Sampath Bank Group has recorded a profit before tax of Rs. 4.79 Bn for year ended 31st December 2013 with the Bank recording a profit before tax of Rs.4.5 Bn. The post –tax profit of the Group and the Bank for the same period amounted to Rs 3.64 Bn and Rs 3.43 Bn respectively.
Net Interest Income (NII)
NII, which is the main source of income from the fund based operations and representing over 70% of the total operating income, rose from Rs 11,612.5 Mn in 2012 to Rs 14,365.8 Mn in 2013, recording a significant growth of 23.7%. This significant growth in NII was largely due to the high growth rates recorded by the Bank in key business volumes, namely 24.9% in customer advances, 23.5% in total assets and 24.1% in deposits during the year ended 2013. It was also possible to maintain the Net Interest Margin (NIM) almost at the same level (4.16%) , as compared to 4.17% in 2012, despite falling lending & Treasury Bill rates, increase in cost of funds, mainly through diverting resources to more remunerative products and effective re-pricing of both assets and liability products.
Net Fee and Commission Income
Net Fee and Commission income totalled Rs 2.5 Bn in 2013, an increase of 18.4% over the previous year. Net Fee and Commission income represented 13.0% of the Total Operating Income in line with aggressive growth of business volumes in our card operations and trade services. We have aggressively grown our card operations and are one of the leading local Banks in this business line. We also implemented a strategy to gain market share in trade finance through provision of a superior service and extended business hours.
Other Operating Income
Other income of the bank dropped by Rs.1,433Mn to Rs 2,671Mn in 2013 compared to Rs 4,104 Mn., in 2012, This was mainly due to the drop in the revaluation gains on the FCBU reserve by Rs.994 Mn over the previous year. We continued to enhance arrangements with Correspondent Banks and Exchange Houses to attract more inward remittances channeled by migrant workers. The network covers 87 exchange houses located in 5 main countries represented by 10 Business Promotion Officers.
Operating Expenses
Operating expenses increased by 14.9% from Rs 9.2 Bn in 2012 to Rs 10.6 Bn in 2013 due to inflation, increase in staff cost and the island-wide programme to upgrade branches to a consistent standard. Careful management of expenses has enabled us to achieve a deceleration of operating expenses growth rate for the second consecutive year. Curtailing growth of operating expenses has been possible due to our low cost branch model which deploys technology effectively to centralise specialised functions.
Impairment Loss on Loan and Receivables
Total impairment losses increased dramatically from Rs 65 Mn to Rs 3,490 Mn mainly due to the impact of a sudden sharp decline in gold prices on the pawning portfolio. The impairment charge against the pawning portfolio for the year amounted to Rs 3,509 Mn. The net impairment charge from all other advances was Rs 214 Mn. Financial investments recorded a mark to market gain of Rs 276 Mn. The impairment provision on pawning has been computed taking into account the gold prices prevailing as at 31st December 2013 for the entire pawning portfolio covering both facilities in the "fallen due" category as well as "not fallen due" category.
We strategically reduced the pawning portfolio (including interest receivable) in view of the volatility in gold prices which impacted the entire financial services sector since April 2013 and have reduced the Bank’s exposure from 25.4% at the beginning of the year to 19.7% at the end of the year.
Business growth
Assets
Total assets of the Bank grew by 23.5% above the industry growth rate of 16.6% for 2013 according to a client focussed strategy driven by a dedicated team of banking professionals. We continued to maintain credit growth rates above the industry average due to our unrelenting focus on providing a superior service to all segments of our clients. The Bank managed to grow its loan book by 24.9% despite the Banking sector recording a disappointing growth rate of 8.8% due to low demand for credit as underlying economic growth decelerated.
Liabilities
The deposit growth of the Bank during the year was 24.1% as against 24.3% growth achieved in 2012. No major campaigns were carried out to attract deposits as there was excess liquidity. Sampath Bank engaged HSBC to raise a syndicated loan of USD 45 Mn which was increased to USD 100 Mn in view of the vibrant market appetite making it the first successfully concluded deal over the USD 100 Mn mark by the Bank. A further loan of USD 20 Mn was raised from Proparco, the ‘private sector’ arm of the French Development Agency (AFD), to finance renewable energy projects which the Bank believes will be a key growth sector in the country. Further, Bank raised Rs 5 Bn by issuing unsecured subordinated redeemable 5 year debentures in the local market.
Performance Ratios
The cost to income ratio increased slightly from 58.24% in 2012 to 59.14% in 2013 due to drop in income growth as a result of higher FCBU revaluation gain in 2012 over 2013. ROA and ROE declined in line with the decrease in profits due to the impairment charge on the pawning portfolio.
Statutory Liquid Asset Ratio recorded an increase from 22.4% as at 31-12-2012 to 27.6% as at 31-12-2013. The reduction of the Statutory Reserve Requirement which stood at 8.0% by 2.0% to 6.0% in July too contributed for the excess liquidity . Though this ratio was somewhat above the minimum requirement of 20%, it was lower than the industry average of 37.7% as the bank maintains a prudent trade-off between liquidity and interest earning assets.
Capital adequacy ratios
Tier 1 capital adequacy ratio recorded a decline over 2012 due to reduction in profit after tax and increase in assets. However, total capital adequacy ratio improved fro, 13.6% in 2012 to 14.2% as at 31-12-2013. This was mainly due to additional Tier II capital raised by issuing Rs 5Bn worth of Rated Unsecured Subordinated Redeemable Debentures during the year 2013.
Dividend
The Directors have recommended a final cash dividend of Rs 8.00 per share in comparison to the last year Rs 12.00 .
Infrastructure growth
We commenced the year with 209 branches and added 3 branches during the year in Karagampitiya, Thalahena and Gampaha Super. Further we also opened a pay office at the Mattala Rajapakse International Airport. All branches were upgraded to provide a pleasant environment in which to carry out banking transactions and to better reflect the brand. Additionally, 4 branches were upgraded to super branches in 2013. They are open for business from 8.00 am to 8.00 pm and are located in busy towns taking the total of super branches to 8.
Our ATM network increased with 12 new installations taking the total ATM network to 274. Three ATMs are foreign currency ATMs enabling conversion of US Dollars and Euros to Sri Lankan rupees and are conveniently located in the tourist hubs of Colombo, Kandy and Negombo. We installed 2 off-site ATMs at the Southern Expressway at the Welipenna Interchange Zone, for the convenience of the commuters. First time in Sri Lanka card less cash ATM concept was introduced and now operating in selected ATMs.
Channel Products
The Bank’s expanding range of channel products enhances value to the customer, facilitates ease of transacting with the Bank and managing their finances, which provides a competitive edge. This year a mobile app was launched for smart phones and tablets on both iOS platform and Android platforms and was made available to the customers through the Apple and the Google Play Stores. We will continue to invest in technology for branchless banking in view of the country’s high penetration rate over 100% for mobile phones and increasing internet based payments.
Our customers benefit from the ability to send and receive cash instantly, ability to withdraw around the clock, 24 hours call centre assistance, accessibility through a wide agent network, remittance notification via SMS to beneficiary and the support of an island wide network of 212 branches. They also have a choice of transaction types to suit their particular circumstances which include Pay on Identification, Sampath Bank account credits, other bank account credits, receive to mobile and withdraw from ATM and payment to wow.lk and anything.lk to purchase goods via internet. We will continue to increase accessibility and penetration into migrant worker markets and invest in product innovationS to tailor solutions for this key customer segment.
Sampath Bank continues to be the only Bank in Sri Lanka to have the world’s three leading card franchises: Visa, MasterCard and American Express®. We aim to be the leading Debit and Credit Card issuer in the country by providing superior value, security, transparency and convenience that meet the lifestyle requirements of our customers.
Future
Sampath Bank has demonstrated its ability to grow by focussing on enhancing customer experiences through improved service quality effectively combining human resources and technological innovation. We have proved resilient to external shocks through effective risk management processes and our ability to respond to changes in our operating environment. Our strategy was to support the country’s ambition to be the regional hub for Energy, Aviation, Maritime, Knowledge, Commercial and Tourism. We also continued our support to the agriculture sector, focussing particularly on the value addition to these commodities and also ensured that we maintain a minimum of 10% lending to the agriculture sector as directed by the Central Bank.
Accolade
Sampath Bank has been selected as the "Best Bank in Sri Lanka - 2013" by the prestigious Business Magazine "The Euromoney". Euromoney is a highly reputed global financial magazine involved in selecting best performing banks worldwide .Bank also won two awards at the recently concluded "National Best Quality Software Award-2013" Silver award for "Sampath iOS Android Application" and Merit award for "E-Reconciliation System". Sampath Bank has been ranked 7th among the Business Today Magazine’s "TOP TWENTY FIVE" 2012 - 2013 companies. (Last year the Bank occupied the 12th place).
At the National HRM Conference 2013, out of three National Level awards presented for Excellence in HR, the bank has been able to clinch two awards for Best Talent Management (HRM) and People Development (Training). Further the bank has won a joint Runner Up award for "Sampath Vishwa" under ‘Private Sector Projects’ at the National Project Management Excellence Awards 2013.The bank was declared the 1st runner up at the Best Corporate Citizen Sustainability Awards 2013, and also won awards for Sector winner – Economic Sustainability, Category winner – Economic contribution and top 10 category recipient.
External rating
In the 2013 rating assessment, considering the healthy asset quality, better compliance, transparency, capital adequacy, internal control systems & processes of the Bank, RAM Ratings Lanka has reaffirmed AA (stable) rating for Sampath Bank, in their rating assessment. In the same year, the overall credit rating of the Bank’s "AA-"lka (Stable) has been reaffirmed by Fitch Rating Lanka.
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