Higher provisions, slower loan growth stymie Sampath Bank 1Q19
The lacklustre demand for new loans and higher provisions made for possible bad loans hurt Sampath Bank PLC’S performance during the quarter ended March 31, 2019 (1Q19), the interim financial accounts released to the Colombo Stock Exchange showed.
The bank with assets of Rs.911.1 billion, down from Rs.914.2 billion three months ago, reported earnings of Rs.7.22 a share or Rs.2.11 billion total earnings for the January-march quarter, against Rs.11.23 a share or Rs.2.80 billion reported for the same period, last year, down 25 percent.
The bank, which was flirting with a trillion rupee balance sheet, appears to have readjusted
its aggressive approach due to the vagaries in the economy as the lender only loaned Rs.5.7 billion new facilities during
the three months under review, which amounts to a mere 0.85 percent growth.
The bank, which never had issues luring in deposits, also reported Rs.5.2 billion in new deposits for the quarter.
However, banks intentionally stop pursuing deposits actively when opportunities to deploy such funds run dry as was the case during the quarter under review.
Meanwhile, Sampath Bank raised funds via debenture and rights issues bolstering its capital base ahead of the elevated BASEL III capital requirements, which came into effect on January 1.
In March, the bank again called for Rs.12.1 billion in fresh equity by way of a rights issue of seven for 23 shares soon after it closed a Rs.7.0 billion debenture issue.
For the three months, the bank recorded Rs.10.9 billion in net interest income, up 21.8 percent year-onyear (YOY) but the fee and commission incomes fell by 1.1 percent YOY to Rs.2.35 billion.
The bank managed to maintain its net interest margin through the quarter at 4.54 percent.
Like many other banks, Sampath Bank was also battered by hefty provisions against possible bad loans amid the slowdown in economic activities in the country and the adoption of new reporting standards, which require banks to make higher provisions.
As a result, Sampath Bank’s impairment charges for the three months alone was a substantial Rs.3.7 billion, compared to Rs.2.1 billion reported for the same period, last year.
Meanwhile, the bank’s asset quality measured by the gross non-performing loans ratio also rose to 4.87 percent from 3.69 percent end-december 2018.
The bank charged Rs.512.4 million as Debt Repayment Levy for the quarter.
Billionaire businessman Dhammika Perera has a 14.95 percent stake in Sampath Bank while the state-run private sector pension fund, the Employees’ Provident Fund, has a 9.97 percent stake, being the third largest shareholder.