Post-tax profits drop accompanies Sanasa Bank’s decision to go public

Post-tax profits of Sanasa Development Bank, a leading microfinance and cooperative institution in Sri Lanka, fell by 18 per cent to Rs 311 million in 2012, the first year the company was listed on the Colombo Stock Exchange.

The dip in profits reflects the generally pessimistic outlook for the banking sector in 2012 with the Central Bank’s decision to restrain credit growth in 2012 via the imposition of a credit ceiling, the bank said in its annual report. The credit ceiling on lending by banks also impeded the expansion of the banking sector and consequently smaller banks had a difficult time managing their earnings.

M. T Galgamuwa, CEO of Sanasa Development Bank in his annual review noted that “the sharp increase in interest rates in 2012 increased the bank’s interest expenses by 56 per cent against an interest income growth of only 25 per cent and this translated into a fall in profits”

He also noted that the bank’s bad debt provisions increased by Rs. 53 million against the preceding year mainly due to the provisions taken in the Northern Central Province from the agricultural sectors.

A sizeable share of the bank’s lending portfolio being in fixed rate loans was one of the issues. In this backdrop the rising interest rates created complications in revenue management as the bank holds a larger proportion of fixed rate assets than fixed rate liabilities.

However on a positive note 2012 did see an expansion in Sanasa’s banking activities with the opening of three new banking branches bringing the network of Sanasa to 81 branches in total. Sanasa also focused primarily on the Small and Medium Enterprise (SME) sector in 2012 with the recruitment of more than 34 specialist graduates to cater to the needs of the fast growing SME market. Furthermore there was heavy focus in 2012 on upgrading the banks’ internal and IT systems and improving the coordination between the central management and the bank’s 9000 Sanasa societies spread across the country.

Looking to the future, Mr. Galgamuwa stated, “Sanasa hopes to capitalize on the high growth rates predicated for Sri Lanka in the next 4-5 years with the aim of improving the quality of service provision to its 900,000 customer base”.

(SP)