Massive loan loss provisions undermine Sampath Bank’s June performance
A massive jump in provisions made against possible bad loans took away an otherwise an exceptional quarter at Sampath Bank PLC, marked by improved margins, healthy growth in new loans and balanced funding mix.
Releasing its interim financial accounts for the April-june quarter (2Q18), Sampath Bank PLC reported earnings of Rs.14.36 a share or Rs.3.7 billion net profits, up 5.9 percent from the same period, last year.
The net interest income rose 40 percent year-on-year (YOY) to Rs.10.1 billion supported by some healthy growth in new loans and margins.
The bank with assets of Rs.866 billion and Rs.900.2 billion at the group level, gave new loans of Rs.57.9 billion, which is a 10 percent increase in the portfolio.
The bank has a total loans and receivables book of Rs.630 billion. However, the 2.96 percent of these gross loans were bad or nonperforming as of June 30, 2018, sharply up from 1.64 percent in December 2017. This phenomenon is common in the Sri Lankan banking sector since the beginning of 2018 and marks a sharp U-turn for Sampath Bank, which remained the poster child for best in asset quality among the domestic licensed commercial banks.
Meanwhile, the net interest margin—the difference between the loan yields and what the bank pays for deposits and other funds— rose to a healthy 4.26 percent from 3.91 percent six months ago.
The bank increased its net fees and commission incomes by 30.1 percent YOY to Rs.2.5 billion.
The provisions made for possible bad loans by individual customers soared to Rs.1.2 billion from just Rs.204. 2 million in the corresponding quarter of 2017.