Construction sector largest contributor to increased NPLs owing to payment delays:Bank

Sri Lanka’s construction sector is the largest contributor to non- performing loans (NPLs) owing to long delays in receiving their dues, a leading bank said this week.

“While the entire banking industry is witnessing a sharp increase in NPLs amidst significant collection and debt recovery challenges across most sectors of the economy, the construction sector followed by the agriculture sector appears to be the main contributors towards the increase in NPLs. The troubles experienced by the construction sector were largely from long delays in receiving dues for completed projects, while the agriculture sector continued to underperform due to adverse weather conditions experienced in the previous year,” Sampath Bank said this week in releasing its 9-month results ending September 2018 .

In this backdrop, Sampath Bank’s NPL ratio increased to 4.25 per cent as at September 30, an increase of 2,610 basis points from the 1.64 per cent reported at the end of December 2017.

Furthermore, the total impairment charge for the nine months increased to Rs.6.6 billion, mainly on account of the increase in individual impairment charge by Rs.3.0 billion. In addition, the collective impairment charge also increased by Rs.1.6 billion, it said.

The bank, in a lengthy statement, reported Rs.14.2 billion in Profit before Tax (PBT) at the end of September 2018, 20.3 per cent higher than the PBT of Rs.11.8 billion recorded in the corresponding period in the previous year.

“This is a significant achievement particularly given the challenging macroeconomic conditions that were seen throughout this period. Profit after Tax (PAT) too grew by 13.6 per cent YoY to reach Rs.9.6 billion for the nine months ended 30th September 2018, as against the Rs.8.5 billion reported for the corresponding period in the previous year,” the bank said in a media release.

The Sampath Bank Group, which comprises of the bank and four fully owned subsidiary companies, also posted strong results, with group PBT and PAT for the nine months ended 30th September 2018 growing by 19.8 per cent and 13.2 per cent respectively over the results reported for the corresponding period in the previous year, it said.

Net Interest Income (NII), the main source of income of the bank which accounts for more than 71 per cent of the total operating income, recorded an increase of Rs.6.7 billion (32.8 per cent) over the corresponding period in 2017.

Net fee and commission income, which largely comprises of credit, trade, card and electronic channel related fees increased to Rs.7.3 billion during the period under review, as opposed to Rs.5.9 billion recorded during the corresponding period in 2017.

Sampath Bank’s total asset base grew by 12 per cent (annualised 16 per cent) during the period under review to reach Rs.890 billion as at end September, up from Rs.795 billion as at end December 2017.