Sri Lanka’s economic recovery in 2024 marked a significant turnaround, with most sectors of the economy showing positivity in renewal and regrowth. This resurgence, fuelled by Sampath Bank’s strategic focus on innovative solutions and customer centricity, enabled the Bank to perform outstandingly compared to the previous year.
Financial Performance
For the year ended 31st December 2024, the Bank achieved a Profit Before Tax (PBT) of Rs 46.7 Bn and a Profit After Tax (PAT) of Rs 27.3 Bn, marking impressive year-on-year growth of 57.0 % and 59.4% respectively. Similarly, the Sampath Group reported a PBT of Rs 49.2 Bn and a PAT of Rs 28.7 Bn, reflecting growth rates of 57.6% and 60.1% respectively.
A Snapshot of Key Financial Highlights for the Year Ended 31st December 2024
- Declaration of a first and final cash dividend of Rs 9.35 per share, marking an increase of Rs 3.50 per share compared to the previous year
- Improvement of ROE to 17.74 %, up from 12.65% in 2023
- Net Interest Income (NII) growth of 10.7%
- Loss of Rs 8.4 Bn due to the restructuring of SLISBs
- A reversal of impairment totalling Rs 15.8 Bn on investments following the government’s restructuring of SLISBs
- Exchange loss of Rs 4.2 Bn due to the appreciation of the LKR against the USD by Rs 30.75
- A decrease in Impairment charges on Loans and advances by Rs 15.3 Bn in 2024
- Total tax charge of Rs 32.6 Bn, with an effective tax rate (ETR) of 54.4%
- Growth of the LKR loan book by Rs 82.6 Bn
- Robust growth in the LKR deposit portfolio, reaching Rs 1,247.3 Bn by year end 2024
- Sound Tier 1 and Total Capital Adequacy Ratios of 16.75% and 19.38%, respectively, comfortably surpassing the regulatory minimum thresholds, providing a solid capital buffer
Fund Based Income
The Bank reported a total interest income of Rs 183 Bn for the year ended 31st December 2024, reflecting a decline of 10.0% compared to 2023. This was primarily due to a lower AWPLR and reduced interest rates on government securities compared to the previous year. Interest expense for the year amounted Rs 103 Bn, decreasing by 21.4 % in response to falling market interest rates. The timely repricing of deposits and effective management of CASA levels helped reduce interest expenses, offsetting the decline in interest income. As a result, Net Interest Income (NII) increased by 10.7%, reaching Rs 80 Bn for the year.
The Net Interest Margin (NIM) however, contracted by 26 basis points, decreasing from 5.16% as of 31st December 2023 to 4.90% at the reporting date. This decline was primarily due to reduced yields across the Bank’s interest-earning asset portfolio, driven by the downward trend in market interest rates.
Impact of Sovereign Debt Restructuring
The Bank had maintained a 52% provision cover against its investment in Sri Lanka International Sovereign Bonds (SLISB), with a total amortised cost of USD 112.2 Mn. The restructuring of SLISB was finalized by the Government of Sri Lanka in December 2024. Under the restructuring options offered, the Bank opted for the ‘Local Option’, receiving 30% of its exposure in LKR bonds and accepting a 10% nominal haircut on the face value of the remaining 70% of SLISBs. Consequently, a new USD-denominated bond was issued, representing 63% of the original face value, with the Government retaining the option to settle this bond in LKR in the event of default. Additionally, a ‘Past Due Interest’ (PDI) bond was issued, applying an 11% haircut on past-due interest claims. A 1.9% consent fee on the face value was also received in bonds.
The Bank determined the exit yields in accordance with the guidelines issued by the Institute of Chartered Accountants of Sri Lanka in December 2024, titled “Accounting Treatment for International Sovereign Bonds in Line with SLFRS 9.”
As a result:
- The previously booked impairment of Rs 15.8 Bn was reversed under the Impairment line in the Statement of Profit or Loss during the year 2024.
- An additional loss of Rs 8.4 Bn was recognized under the Loss/Gain on Derecognition of Financial Assets line due to the SLISB restructuring.
- The net after tax impact on the bottom line for the year ended 31st December 2024 was Rs 2.6 Bn.
Non-Fund Based Income
Fee and Commission Income
The Bank’s net fee and commission income amounted to Rs 17.5 Bn, declining by 7.3% due to reduced trade-related income from lower import commission rates and the appreciation of the LKR. However, growth in fees from credit services, electronic transactions, card operations and other activities partially offset this decline.
Net Loss on Derecognition of Financial Assets
As outlined above, the Bank incurred a loss of Rs 8.4 Bn due to the SLISB restructuring. Meanwhile, the Bank gained Rs 1.1 Bn from the sale of Treasury bills and bonds.
Trading and Other Operating Income
The Bank reported a net other operating Loss of Rs 1.0 Bn for the year, driven by an exchange loss of Rs 2.4 Bn resulting from the LKR’s 9.5% appreciation against the USD as well as a net trading loss of Rs 1.8 Bn from revaluation losses on forward exchange contracts. Total exchange losses for the year ended 31st December 2024 amounted to Rs 4.2 Bn, compared to Rs 1.9 Bn in the previous year.
Impairment Reversal/Charge
The Bank reported a total impairment reversal of Rs 11.7 Bn for the review period, reflecting a significant decrease of 158.2% compared to the previous year. This comprised a charge of Rs 2.8 Bn for loans and advances (2023: Rs 18.1 Bn), a reversal of Rs 15.8 Bn for Sri Lanka International Sovereign Bonds (2023: charge of Rs 5.5 Bn), and a charge of Rs 1.3 Bn for other financial assets and credit related commitments (2023: reversal of Rs 3.5 Bn).
Impairment charge on loans and advances
During the reporting period, the Bank reported a significant 84.7% reduction in the impairment charge on loans and advances. This improvement was primarily due to prudent provisioning measures taken in previous years which lowered the provision requirements for the current year, coupled with a recovery in economic activity that enhanced customer ability to meet their repayment obligations.
As of 31st December 2024, the Bank evaluated its individually significant customers and made appropriate provisions in its Financial Statements to reflect their risk profiles. The improved repayment capacity of customers bolstered by lower interest rates and favorable economic conditions, resulted in a notable enhancement in credit quality. Additionally, the positive shift in macroeconomic conditions has reduced the need for overlay allowances in most of the previously stressed segments.
Operating Expenses
During the year, the Bank’s operating expenses increased by 21.2% compared to 2023, primarily driven by a 26.7% rise in personnel costs due to annual salary increments. The Bank’s cost-to-income ratio (CIR) increased by 930 basis points to 45.0%, up from 35.7% in the previous year. This rise in CIR was largely attributed to an increase in operating expenses, while total operating income declined by 3.8% during the year.
Taxation
The total tax charge for the current period increased to Rs 32.6 Bn, up from Rs 21.2 Bn in the previous year, reflecting a rise in taxable income. However, the Bank’s effective tax rate marginally decreased to 54.4% in 2024, compared to 55.3% in 2023.
Dividend
The Board of Directors of the Bank has recommended a final cash dividend of Rs 9.35 per share for the financial year ended 31st December 2024, subject to shareholder approval at the 39th Annual General Meeting scheduled for 28th March 2025. The dividend payout ratio for the year stood at 40.13% (2023: 40.02%).
Key Ratios
As of 31st December 2024, the Return on Average Shareholders’ Equity (after tax) increased to 17.74 %, compared to 12.65% at the end of 2023. Meanwhile, the Return on Average Assets (before tax) stood at 2.84 % as of 31st December 2024, up from 2.12% at the close of 2023.
Capital and Liquidity
During the year, the Bank’s capital and liquidity ratios remained exceptionally strong, significantly exceeding the minimum regulatory requirements. As of 31st December 2024, the Bank’s CET 1, Tier 1 and Total capital ratios were 16.75%, 16.75%, and 19.38%, respectively, compared to 16.35%, 16.35% and 19.56% at the end of 2023.
Additionally, the Bank’s liquidity levels remained robust and well above the minimum regulatory requirements, with the All-currency Liquidity Coverage Ratio at 307.4% and the Net Stable Funding Ratio at 198.7% as of 31st December 2024, compared to 312.5% and 184.2% at the end of 2023.
Assets
As of 31st December 2024, the Bank’s total assets grew by 15.3%, reaching Rs 1.8 Tn, driven by increased investments in government debt securities and an expanded loan portfolio. Gross loans rose by Rs 87.3 Bn, from Rs 877.3 Bn at the end of 2023 to Rs 964.6 Bn, primarily due to a Rs 82.6 Bn increase in LKR-denominated loans. Growth in foreign currency loans was limited to Rs 4.6 Bn, influenced by the LKR appreciation against the USD. Additionally, balances with foreign banks and placements were reallocated to foreign investments under amortized cost and FVOCI during the year.
Liabilities
The Bank’s total liabilities increased by 15.6%, reaching Rs 1.6 Tn as of 31st December 2024. This growth was primarily driven by an expansion in the deposit portfolio, which rose by Rs 204.7 Bn, from Rs 1,264.5 Bn at the end of 2023 to Rs 1,469.2 Bn at year-end 2024. LKR deposits grew by Rs 209.6 Bn, while foreign currency deposits decreased by Rs 4.8 Bn, primarily due to the appreciation of the LKR against the USD. The Bank maintained its CASA ratio at stable levels, standing at 34.0% as of year-end 2024, compared to 33.4% in 2023.
Driving a Sustainable Future for Sri Lanka
The Bank has played a pivotal role in supporting Sri Lanka’s economy, particularly through its Business Revival Unit, which offers tailored solutions to stressed borrowers to help revive their businesses. This initiative has not only improved credit profiles but also contributed to enhancing financial stability and fostering growth.
Sustainability continues to be at the core of Sampath Bank’s CSR initiatives. The Bank’s flagship program, ‘Wewata Jeewayak’ has ensured the restoration of many tanks and irrigation networks across the nation, fuelling the sustenance of the agricultural sector of the economy, ‘A Breath to the Ocean’ encompassing ocean preservation, ‘Sampath Saviya’ for MSME development, ‘Hope for Life’ for healthcare and ‘Gasai Mamai Pubudu Pothai’ nurturing environmental consciousness in the young are all efforts that the Bank pursues for the sustainable future of our nation. These initiatives are designed to enhance livelihoods, conserve the environment and build resilient communities, reinforcing the Bank’s commitment to a sustainable future for Sri Lanka.
Sampath Bank was honored as ‘Asia’s Best Bank for Corporate Responsibility’ at the prestigious Euromoney Awards for Excellence 2024. This recognition underscores the Bank’s exceptional contributions to corporate responsibility and sustainability, reaffirming its commitment to making a positive impact through initiatives in these critical areas.
