Sampath Bank delivers healthy financial results amidst challenges

Financial results declared by Sampath Bank and the Group for the year 2021:

Sampath Bank reported profit before tax (PBT) of Rs 16.8 Bn in FY 2021, up by 50.7% against Rs 11.2 Bn recorded in 2020. Profit after tax (PAT) for the year under review also grew by 55.2% to Rs 12.5 Bn from Rs 8.0 Bn recorded in the previous year.

Sampath Bank’s NIM reported a healthy increase of 31 bps over the previous year despite notable pressure on interest income

The Bank recorded a sizable 35.7% increase in net fee and commission income during the period, primarily driven by cards, electronic channels, and trade-related operations.

Despite the improvement reported in NPL and Stage 3 loans, additional impairment provisions were made as allowance for overlay to reflect potential credit losses due to the COVID -19 related uncertainties.

The Sampath Group too posted significant growth for the current financial year, with Group PBT and PAT of Rs 18.8 Bn and Rs 13.9 Bn respectively. All four subsidiaries recorded remarkable performance compared to the previous year.

Fund based income

Interest income of the Bank fell by 3% to Rs 85.9 Bn in the year under review compared to the previous year. The lower interest rate environment which prevailed for most part of the year and the weak credit demand resulting from the pandemic-induced economic downturn, were the main reasons for this contraction. Notably however, the decline in interest income from loans and advances was partially offset by interest income from other financial instruments.

Meanwhile, interest expenses for FY 2021 declined by 19.1% compared to the previous year on the back of a strong improvement in CASA. The Bank recorded 640 bps growth in its overall CASA portfolio, while recording a decline in relatively costly term deposits. This change in the composition of the deposit portfolio coupled with the lower interest rate regime that prevailed for most part of the year contributed towards lowering interest expenses.

Moreover, with the decrease in interest expenses making up for the decline in interest income, NII recorded a growth of Rs 7.8 Bn and reached Rs 41.7 Bn at the end of 2021. Consequently, the Bank’s NIM too reported a healthy increase of 31 bps over the previous year despite notable pressure on interest income.

Non-Fund based income

Net fee and commission income, comprising fees related to loans and advances, credit cards, trade, and electronic channels, increased to Rs 11.5 Bn in 2021 from Rs 8.5 Bn reported in 2020. This significant year-on-year growth was driven by a strong increase in fee-based revenues generated from trade related transactions, the sizable improvement in credit card business volumes and higher volumes of online transactions made through Sampath Bank’s digital products in 2021 compared to last year. Fee and commission income received a further boost following the government decision to gradually ease restrictions on the collection of commissions during the year.

Sampath Bank’s net other operating income also recorded a significant growth of 37.5% in 2021, on the back of the depreciation of the Rupee against the US Dollar. With the Rupee depreciating by 8.2% against the US Dollar during the year, the Bank’s Net gain from trading increased to Rs 399 Mn from Rs 24.8 Mn recorded in the last year. The net gain on the derecognition of financial assets meanwhile decreased to Rs 150.4 Mn from Rs 423.8 Mn recorded in the previous financial year.