Sampath Bank plans to be the private sector bank with the largest presence in the North and the East this year and also be the `e-gateway’ of banking across the entire nation, the company has told shareholders in its just issued annual report.
The bank’s profit in the year ended December 31, 2009 had reached an all-time high of Rs.2.1 billion after-tax, up 48.4% from a year earlier with the results boosted by a capital gain of Rs.1.6 billion from the part divestment of its shareholding in an offshore venture, LankaBangla Finance Limited, a leading finance company in Bangladesh.
Sampath remains the single largest shareholder of this company with a 13.5% stake holding two board seats, the report said.
The LankaBangla share did excellently in 2009 with the company posting 58.7% profit growth boosting its share price from an initial BDT 10 to a current level of BTT 260.
In addition to LankaBangla Finance, which is a leading finance company operating in Bangladesh, Sampath is represented in that country by Lankabangla Securities, a subsidiary of LankaBangla Finance, which is the largest stockbroking firm there in terms of daily turnover and is also the most profitable player in Bangladesh’s stockbroking industry.
Sampath Chairman I.W. Senanayake said that he was justifiably proud that their profit growth during the year under review had surpassed the performance of most other local banks despite their facing one of the most challenging macro environments during his 22-year long association with Sampath.
"That we achieved this amidst eroding public confidence in local financial institutions and insufficient credit lines due to the global financial meltdown, clearly reflects the strength of our banking fundamentals," he said.
Senanayake noted that 61% of their pre-tax profits had been paid to national coffers with Rs.3 billion contributed on account of corporate and other taxes.
The bank’s CEO, Mr. G.L.H. Premaratne, said that the year under review opened with limited international credit lines at steep borrowing costs and ended with excess liquidity.
"Challenged with shrinking international credit which caused borrowing rates to skyrocket in the first quarter of the year, and eroding public confidence in the entire non-government backed financial sector due to issues in certain local financial institutions, the bank shifted into overdrive," he said.
In the context of the high interest regime and shrinking export markets affecting many businesses and their capacity to repay borrowings, the bank’s non-performing loans (NPL) ratio had gradually increased from 7.47% in December 2008 to 9.84% by June 2009.
The strategy adopted to arrest this trend succeeded in reducing the net NPL ratio from 9.84% as at June 30, 2009 to 7.6% at the end of the year on December 31, 2009.
Better tax planning had resulted in reducing their effective tax rate (excluding deferred tax) from 5.9% in 2008 to 41.5% a year earlier.
They had further rationalized staff numbers in several departments across the head office, set up a centralized credit processing system that further rationalized staff numbers at branches and revamped procurement procedure resulting in productivity gains and cost efficiencies.
Their 48.4% profit growth last year surpassing the targeted 20% had contributed to some of their key performance indicators outperforming the previous year’s levels with return on equity up to 19.41% in 2009 from 15.41% the previous year. This had enabled the dividend per share to be increased to Rs.6.25 in 2009 from Rs.4 the previous year.
The Sampath share which traded at Rs.68 at the end of 2008 was up to Rs.204.25 at the end of 2009 – a growth of 200% which was far in excess of the share price appreciation of all other leading banks in the local market.
Premaratne announced that one of their overseas companies, Sampath Trade Services (Hong Kong) Limited, was in the process of being liquidated although there was no explanation for this in the report.
The bank has a stated capital of Rs.1.58 billion, statutory/risk reserve of Rs.471 million, other capital reserves of Rs.1.15 billion and revenue reserves of Rs.8.6 billion in its books as at December 31, 2009.
Total assets were running at Rs.156.2 billion while total liabilities were Rs.144.3 billion.
The bank’s major shareholders are Rosewood (Pvt) Ltd 5.58%, Sampath Bank Ltd Account No.2 (5.00%), Vallibel Investments (Pvt) Ltd (5.00%), Stassen Exports Ltd (5.00%), Sri Lanka Insurance Corporation Life Fund (4.98%), Mr. K.D.D. Perera (4.95%) and Mr. P. Singuppuliaratchige Don (4.04%).
The directors of the bank are: Messrs. I.W. Senanayake (Chairman), S.G. Wijesinha (Deputy Chairman), M.A. Abeynaike, D.J. Gunaratne, Dr. Saman Kelegama, J.D. Bandaranayake, E.A. Gunasekera, L.J.K. Hettiaratchi, W.M.P.L. de Alwis, K.D. Dhammika Perera, G.L.H. Premaratne, M.Y.A. Perera and R. Samaranayake.