Friday, April 30, 2010

Sampath Bank first quarter post-tax profit rises 53.6%

The Pre-Tax Profit of the Sampath Bank at Rs.791.5 million for the first quarter 2010 registered a growth of Rs. 93.3 Mn (13.4%), over the previous year’s Rs. 698.2 million, aided by several factors.

The bank’s continued success in professionally managing its core banking operations, paid rich dividends, according to a statement.

The Net Interest Income (NII), which is the net return of the bank’s entire fund-based operations, made the single largest contribution for the increased profitability, by rising from Rs 1,741.5 mn in 2009 to Rs. 2,199.5 mn in 2010, registering an impressive growth of Rs 458.0 Mn or 26.3%.

The growth in NII, in turn was facilitated by the continued expansion in the fund base and the success of the Bank in managing the returns thereon, as reflected by the improvement in the Net Interest Margin (NIM).

Consequently, the NIM rose from 5.07% in the first quarter 2009 to 5.59% in 2010, as shown above. Prudent fund-management measures taken by the Bank, which included improving the composition of the fund-base on both sides of the Balance Sheet, managing maturity patterns and maximizing the financial returns of fund-based products, contributed towards increasing the NIM. Furthermore, measures taken to minimize the NPA Ratio and timely re-pricing strategies of the ALCO, supplemented the task.

Apart from the NII, the other income of the Bank, bulk of which is commission and fee-based income, too recorded a growth of 9.6% in 2010, over 2009. The only source of core-banking income, which recorded a negative growth (by 55.1%) in 2010 was exchange income, largely due to the revaluation loss of Rs.26.028 mn., incurred in 2010, as against the revaluation profit of Rs. 113.994 mn recorded in 2009.This in turn was mainly due to the appreciation of LKR against the US Dollar, from Rs.115.60 as at 31.03.2009 to Rs.113.95 as at 31.03.2010.

The operating expenses of the bank recorded an increase of 16.9% during the period, mainly due to expenses incurred in connection with the rapid branch expansion program undertaken (19 new branches during the 12-month period ended 31/03/2010) and the salary revision to the staff effective April 1, 2009.

The Specific Provision for Loan Losses for the period under review amounted Rs.702.569 mn, as against Rs.254.718 mn for the corresponding period last year. This increase of Rs. 447.851 mn in specific loan loss provisions, was due to the bank’s decision to make additional loan loss provisions as a prudential measure against certain identified NPLs, over and above the prevailing time–based provisioning requirements. Hence, additional provisions totaling to Rs516 mn were made, disregarding the collateral held against these NPLS. This move also helped the Bank to increase its Provision Cover (excluding the General Provisions) against the NPLs from 54.34% as at 31.12.2009 to 61.83% as at 31.03.2010.

However, the increased recoveries helped to off-set partially, the effect of these additional provisions on the bottom line. The recoveries, which rose from Rs.133.012 mn in 2009 to Rs.424.457mn in 2010, included a specific recovery of Rs. 331.9mn, made against a Foreign Currency Bond, for which full provision was made in 2008.

The Post Tax Profit of the Bank of Rs. 558.610Mn for the 1st quarter 2010, recorded an increase of Rs. 194.820 Mn, (53.6%) over the previous year’s corresponding figure of Rs.363.790 mn. This increase was due to the Bank’s tax charge for the period under review, decreasing by Rs. 101.494 mn, despite the increase of 13.4% in pre-tax profits., which in turn was facilitated mainly by the recovery of Rs.331.9 mn against a Foreign Currency Bond referred to above, not being liable for tax and the effects of certain other tax planning measures implemented.

Based on the above profits, almost all the key financial ratios of the Bank recorded a significant improvement during the period under review, as detailed above. Apart from the increase in the Net Interest Margin, the drop in the NPL Ratio from 7.57 % to 6.89% and the increase in the Provision Cover from 54.34% to 61.83%, within a three month period in 2010 are noteworthy.

Total deposit base and the total assets of the bank grew by 5.3% and 4.1% respectively, during the three month period under review. In addition, the total advances of the Bank too recorded a growth of 3.8% during the period, thus continuing the growth trend that began in the 4th quarter 2009.

Reflecting the growing investor confidence in the bank, the Sampath share price has now risen to an all-time high level, surpassing that of all other banks listed on the CSE. In terms of market capitalization, Sampath Bank’s ranking on the CSE has now improved to the 15th position, as against the 19th position held on 31.12.2009. Further, for first time in the recent past, Sampath share has been considered as one of the most liquid stocks of the CSE and included in the Milanka Price Index. The share-split that effectively increased the number of shares held by the shareholders by 10%, was successfully concluded recently and the final dividend for 2009 was paid on the increased number of shares.

Currently Sampath Bank has 137 branches and 192 Automated Teller Machines. The bank opened 6 new branches this year, Plans are underway to accelerate the expansion program.

Last year, the Bank won many accolades on its superior performance. This process continued in 2010, with the Bank being ranked as No. 10 in the list of "Top Ten Companies" by the "Business Today" Magazine.

No share of profit was recognized in 2010 under the Equity Method of Accounting in respect of LankaBangla Financial Ltd, (as against Rs.46.786Mn recognized in 2009), as this company is no longer an Associate Company of the Bank. Nevertheless, it was possible to record a post-tax profit growth of 52.2% at group level as well, due to the improved financial performance of the other subsidiary companies of the bank.

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