Sampath Bank : Interim Financial Statements for the period ended 31st March 2024

SAMPATH BANK PLC

Interim Financial Statements

for the period ended 31st March 2024

(In terms of Rule 7.4 of the Colombo Stock Exchange)

Sampath Bank PLC - Internal

FINANCIAL COMMENTARY FOR THE THREE MONTHS ENDED 31ST MARCH 2024

Financial Performance

Sampath Bank posted a profit before tax (PBT) of Rs 6.2 Bn and a profit after tax (PAT) of Rs 3.4 Bn for the three months ended 31st March 2024, notwithstanding an exchange loss of Rs 4.3 Bn due to the appreciation of LKR against USD by Rs 23.70. These figures signify growth rates of 39.1% and 27.8% respectively, in comparison to the financial results reported in the first quarter of 2023. The Sampath Group also reported PBT and PAT figures of Rs 6.9 Bn and Rs 3.8 Bn respectively, reflecting growth rates of 38.0% and 26.0%

Key highlights for the period ended 31st March 2024

• A significant increase of 27.8% in the Bank's PAT bringing it to Rs 3.4 Bn.
• 12.7% growth in Net Interest Income (NII).
• 17.1% decrease in net fee and commission income due to decreased trade-related operations.
• An exchange loss of Rs 4.3 Bn due to the appreciation of LKR against USD by Rs 23.70.
• 36.8% decline in impairment charges.
• Robust LKR deposit growth of Rs 68 Bn.
• Tier 1 and Total Capital Adequacy Ratios stood at 15.18% and 18.22% respectively as at 31st March 2024, comfortably remaining above regulatory minimum requirements.

Fund based income

During the period, Net Interest Income (NII) reached Rs 20.5 Bn, marking a growth of 12.7% compared to Rs 18.1 Bn recorded in the corresponding period of the previous year. This increase in NII primarily stemmed from a reduction in interest expense which outpaced the decrease in interest income.

The Bank's prudent asset and liability management strategies played a pivotal role in driving the notable growth of NII, especially amid declining interest rates. Additionally, the Net Interest Margin (NIM) witnessed an increase, rising from 5.16% as of 31st December 2023, to 5.24% as of the reporting date.

Non-Fund based income

In 1Q 2024, the Bank experienced a significant 75.3% decrease in its total non-fund based income, declining from Rs 2.8 Bn reported in the corresponding period of last year to Rs 0.7 Bn in the current period. Net fee and commission income recorded a 17.1% decrease compared to 1Q 2023, primarily due to reduced income from trade-related activities. The decline was driven by several factors including lower commission rates for import-related transactions, decreased trade volumes and the appreciation of LKR against the USD. However, fees generated from credit, electronic channels, cards and remittance-related activities showed growth compared to the same period last year.

The Bank reported a net trading loss of Rs 4.5 Bn in 1Q 2024 whereas there was a gain of Rs 1.7 Bn recognized in the previous period. This was primarily due to revaluation losses incurred on forward exchange contracts. The Bank managed to mitigate the impact of this loss through realized exchange gains reported under net other operating income as opposed to the loss of Rs 4.5 Bn recorded in 1Q 2023. Consequently, the Bank's net exchange loss from foreign exchange operations for the period under review amounted to Rs 4.3 Bn, compared to the Rs 2.9 Bn loss reported in the corresponding period of the previous year.

Impairment Charge

In the first quarter of 2024, the Bank reported a total impairment charge of Rs 4.4 Bn, a 36.8% decrease compared to the charge for the comparative period in the previous year. Of this total,

Rs 2.4 Bn was attributed to loans and advances (1Q 2023: Rs 6.2 Bn), while Rs 0.9 Bn related to other

Sampath Bank PLC - Internal

financial instruments (1Q 2023: Rs 0.4 Bn). In addition, an impairment charge of Rs 1.1 Bn was

recorded for commitments and contingencies (1Q 2023: Rs 0.4 Bn).

Impairment charge on loans and advances

The Bank witnessed a 61.5% reduction in the impairment charge against loans and advances. This decrease can be attributed to the effectiveness of the Bank's prudent provisioning policies implemented in previous years and the revival of economic activities resulting in enhanced credit quality of customers.

During the first quarter of 2024, the Bank conducted a thorough assessment of individually significant customers (ISL) and made tailored provisions in the Financial Statements, accounting for the specific risk factors associated with them. During this period, the Bank observed a reversal in collective impairment indicating an encouraging trend in economic activity and resulting enhancements in customer credit quality. The Bank maintained allowances for overlays for segments with elevated credit risk in line with year-end 2023 practices with most overlays persisting throughout 1Q 2024. Furthermore, the basic impairment models used for collective impairment in 2023 remained unchanged, ensuring sufficient buffers to mitigate potential future credit risks.

Impairment charge on other financial instruments

The Bank recorded a net impairment charge of Rs 0.9 Bn against other financial instruments during 1Q 2024 primarily due to the recognition of an additional charge against Sri Lanka International Sovereign Bonds (SLISB).

Operating Expenses

In the reporting period, operating expenses saw a 7.0% increase compared to the first quarter of 2023. The increase in personnel costs by 16.4% was primarily driven by the annual salary increments. As a result, the Bank's cost-to-income ratio increased by 230 basis points, from 37.7% in 1Q 2023 to 40.0% in 1Q 2024. The negative impact on the Cost to Income ratio can be attributed to both numerator and the denominator, an uptick in operating expenses during the period as well as a decrease in revenue due to exchange losses.

Taxation

The Bank's total effective tax rate rose to 59.7% in the first quarter of 2024 from 57.0% reported in the corresponding period in 2023.

Key Ratios

The Return on Average Shareholders' Equity (after tax) was 9.04% as of 31st March 2024, down from 12.65% reported as of 31st December 2023. Similarly, the Return on Average Assets (before tax) stood at 1.59% as of 31st March 2024, compared to 2.12% reported at the end of 2023.

Capital and Liquidity

Throughout the review period, Sampath Bank maintained all its capital ratios comfortably above regulatory minimum requirements. As of 31st March 2024, the Bank's CET 1, Tier 1, and total capital ratios were at 15.18%, 15.18%, and 18.22%, respectively, compared to 16.35%, 16.35%, and 19.56% recorded at the end of 2023. The change in capital ratios during the reporting period can be attributed to two primary factors: a decrease in capital resulting from the distribution of retained earnings to pay a cash dividend of Rs 6.9 Bn and an increase in risk-weighted assets stemming from loan growth during the period.

Assets

The Bank's asset base grew by 5.8% (annualized growth of 23.3%) from Rs 1.54 Tn as of 31st December 2023 to Rs 1.63 Tn as of 31st March 2024. This expansion was driven by increased investment in Government debt securities and growth in the loan book. Investments in LKR T-bills

Sampath Bank PLC - Internal

and T-bonds collectively increased by Rs 78 Bn, while investments in US Treasuries rose by Rs 28 Bn (USD 98 Mn) during the period under review. Furthermore, total gross loans also increased by Rs 18 Bn, from Rs 877 Bn as of 31st December 2023 to Rs 895 Bn at the end of the reporting period. LKR- denominated loans increased by Rs 20 Bn, while foreign currency loans declined by Rs 2 Bn due to the appreciation of LKR against the USD during the period.

Liabilities

Total liabilities grew by 6.5% (annualized growth of 26.1%), primarily driven by the expansion of the Bank's deposit base, which increased from Rs 1,264.5 Bn at the end of 2023 to Rs 1,331.2 Bn as of 31st March 2024. As of the reporting date, the Bank's CASA ratio stood at 33.6%, reflecting a slight improvement compared to 33.4% at the end of the previous year. The Bank redeemed debentures issued in 2019, amounting to Rs 7.0 Bn, upon maturity during February 2024.

Dividend

At the Annual General Meeting held on 28th March 2024, the shareholders of Sampath Bank approved a first and final Cash Dividend of Rs 5.85 per share for the financial year 2023. In the 1Q 2024 Financial Statements, the Bank made a provision of Rs 6.9 Bn to facilitate the payment of the approved final dividend to its shareholders.

STATEMENT OF PROFIT OR LOSS

		Bank			Group
For the three months ended 31st March	2024	2023	Change	2024	2023	Change
	Rs 000	Rs 000	%	Rs 000	Rs 000	%
Gross income	50,628,353	53,899,167	(6.1)	53,383,629	56,329,480	(5.2)
Interest income	48,745,858	50,221,439	(2.9)	51,041,994	52,321,299	(2.4)
Less: Interest expense	28,292,932	32,078,636	(11.8)	29,478,973	33,526,590	(12.1)
Net interest income	20,452,926	18,142,803	12.7	21,563,021	18,794,709	14.7
Fee & commission income	5,670,930	6,302,419	(10.0)	5,795,681	6,465,968	(10.4)
Less: Fee & commission expense	1,196,735	903,443	32.5	1,197,439	903,552	32.5
Net fee & commission income	4,474,195	5,398,976	(17.1)	4,598,242	5,562,416	(17.3)
Net (loss)/gain from trading	(4,514,963)	1,692,810	(366.7)	(4,497,696)	1,672,920	(368.9)
Net gain on derecognition of financial assets
- at fair value through profit or loss	54,812	93,374	(41.3)	54,948	96,658	(43.2)
- at fair value through other comprehensive income	344,427	14,918	2,208.8	344,427	14,918	2,208.8
Net other operating income	327,289	(4,425,793)	107.4	644,275	(4,242,283)	115.2
Total operating income	21,138,686	20,917,088	1.1	22,707,217	21,899,338	3.7
Less: Impairment charge	4,372,636	6,921,080	(36.8)	4,406,178	6,818,202	(35.4)
Net operating income	16,766,050	13,996,008	19.8	18,301,039	15,081,136	21.4
Less: Operating expenses
Personnel expenses	3,883,284	3,335,040	16.4	4,356,518	3,693,895	17.9
Depreciation and amortisation expenses	764,079	715,708	6.8	700,652	622,906	12.5
Other expenses	3,800,769	3,843,443	(1.1)	4,100,321	4,045,640	1.4
Total operating expenses	8,448,132	7,894,191	7.0	9,157,491	8,362,441	9.5
Operating profit before taxes on financial services	8,317,918	6,101,817	36.3	9,143,548	6,718,695	36.1
Less: Taxes on financial services
Value added tax	1,823,468	1,418,296	28.6	1,965,413	1,506,551	30.5
Social security contribution levy	253,259	196,986	28.6	272,974	210,064	29.9
Total taxes on financial services	2,076,727	1,615,282	28.6	2,238,387	1,716,615	30.4
Profit before income tax	6,241,191	4,486,535	39.1	6,905,161	5,002,080	38.0
Less: Income tax expense	2,886,514	1,860,833	55.1	3,111,480	1,991,849	56.2
Profit for the period	3,354,677	2,625,702	27.8	3,793,681	3,010,231	26.0
Attributable to:
Equity holders of the Bank	3,354,677	2,625,702	27.8	3,793,681	3,010,231	26.0
Non-controlling interest				-	-	-
	3,354,677	2,625,702	27.8	3,793,681	3,010,231	26.0
Earnings per share - Basic/Diluted (Rs)	2.86	2.24	27.8	3.23	2.57	26.0
		1

STATEMENT OF COMPREHENSIVE INCOME

		Bank			Group
For the three months ended 31st March	2024	2023	Change	2024	2023	Change
	Rs 000	Rs 000	%	Rs 000	Rs 000	%
Profit for the period	3,354,677	2,625,702	27.8	3,793,681	3,010,231	26.0
Other comprehensive income
Items that will be reclassified to profit or loss:
Debt instruments at fair value through other comprehensive income:
Gain arising on re-measurement	4,310,760	863,080	399.5	4,310,760	863,080	399.5
Reclassification to profit or loss due to derecognition	(344,427)	(14,918)	(2,208.8)	(344,427)	(14,918)	(2,208.8)
Changes in impairment recycled to profit or loss	53,769	16,383	228.2	53,769	16,383	228.2
Deferred tax effect on the above	(1,206,031)	(259,364)	(365.0)	(1,206,031)	(259,364)	(365.0)
Net other comprehensive income to be reclassified to profit or loss	2,814,071	605,181	365.0	2,814,071	605,181	365.0
Items that will not be reclassified to profit or loss:
Equity instruments at fair value through other comprehensive income:
Loss arising on re-measurement	(797,177)	(135,265)	(489.3)	(797,177)	(135,265)	(489.3)
Exchange loss in translation	(255,854)	(486,555)	47.4	(255,854)	(486,555)	47.4
Deferred tax effect on the above	315,909	186,546	69.3	315,909	186,546	69.3
Net other comprehensive income not to be reclassified to profit or loss	(737,122)	(435,274)	(69.3)	(737,122)	(435,274)	(69.3)
Other comprehensive income net of tax	2,076,949	169,907	1,122.4	2,076,949	169,907	1,122.4
Total comprehensive income for the period net of tax	5,431,626	2,795,609	94.3	5,870,630	3,180,138	84.6
Attributable to:
Equity holders of the Bank	5,431,626	2,795,609	94.3	5,870,630	3,180,138	84.6
Non-controlling interest				-	-	-
	5,431,626	2,795,609	94.3	5,870,630	3,180,138	84.6
	2

STATEMENT OF FINANCIAL POSITION

		Bank			Group
As at	31st March	31st December	Change	31st March	31st December	Change
	2024	2023		2024	2023
		(Audited)			(Audited)
	Rs 000	Rs 000	%	Rs 000	Rs 000	%
ASSETS
Cash & cash equivalents	46,306,390	79,272,087	(41.6)	46,719,040	79,530,247	(41.3)
Balances with Central Bank of Sri Lanka	16,671,020	14,463,854	15.3	16,671,020	14,463,854	15.3
Placements with banks	28,064,675	33,741,322	(16.8)	28,064,675	33,741,322	(16.8)
Reverse repurchase agreements	-	-	-	196,600	150,400	30.7
Derivative financial instruments	1,492,607	587,577	154.0	1,492,607	587,577	154.0
Financial assets recognised through profit or loss - measured at fair value	6,976,214	4,744,188	47.0	7,089,545	4,841,302	46.4
Financial assets at amortised cost
- loans & advances	775,056,999	756,435,559	2.5	807,473,250	787,355,719	2.6
- debt & other instruments	393,838,816	368,100,002	7.0	402,698,601	373,899,842	7.7
Financial assets - fair value through other comprehensive income	291,421,836	216,022,295	34.9	291,421,892	216,022,351	34.9
Investment in subsidiaries	4,116,611	4,110,642	0.1	-	-	-
Property, plant & equipment	9,629,527	9,623,120	0.1	20,013,660	19,960,610	0.3
Intangible assets	851,628	745,395	14.3	870,427	766,532	13.6
Right-of-use assets	3,828,932	3,605,525	6.2	3,281,353	3,152,666	4.1
Deferred tax assets	18,124,599	17,292,023	4.8	18,348,463	17,517,519	4.7
Other assets	34,814,408	33,204,832	4.8	36,880,568	35,386,047	4.2
Total Assets	1,631,194,262	1,541,948,421	5.8	1,681,221,701	1,587,375,988	5.9
LIABILITIES
Due to banks	16,163,226	11,621,838	39.1	22,445,567	17,344,766	29.4
Derivative financial instruments	6,928,768	1,498,777	362.3	6,928,768	1,498,777	362.3
Securities sold under repurchase agreements	44,717,164	34,688,209	28.9	43,916,397	34,438,086	27.5
Financial liabilities at amortised cost
- due to depositors	1,317,237,602	1,253,642,547	5.1	1,343,031,452	1,276,551,041	5.2
- due to other borrowers	6,476,530	6,637,129	(2.4)	6,476,530	6,637,129	(2.4)
- due to debt securities holders	16,922,538	26,709,893	(36.6)	20,558,022	30,386,809	(32.3)
Retirement benefit obligation	3,368,073	3,170,247	6.2	3,559,270	3,355,039	6.1
Dividend payable	7,070,348	212,571	3,226.1	7,070,348	212,571	3,226.1
Current tax liabilities	17,903,993	16,220,788	10.4	18,463,778	16,688,675	10.6
Deferred tax liabilities	-	-	-	1,465,112	1,465,112	-
Other liabilities	47,961,833	39,673,346	20.9	50,465,850	40,967,491	23.2
Total Liabilities	1,484,750,075	1,394,075,345	6.5	1,524,381,094	1,429,545,496	6.6
	3

STATEMENT OF FINANCIAL POSITION

		Bank			Group
As at	31st March	31st December	Change	31st March	31st December	Change
	2024	2023		2024	2023
		(Audited)			(Audited)
	Rs 000	Rs 000	%	Rs 000	Rs 000	%
EQUITY
Stated capital	48,741,119	48,741,119	-	48,741,119	48,741,119	-
Reserves
Statutory reserve fund	6,615,000	6,615,000	-	6,929,000	6,929,000	-
Other reserves	84,027,442	81,950,709	2.5	87,525,380	85,448,647	2.4
Retained earnings	7,060,626	10,566,248	(33.2)	13,645,108	16,711,726	(18.4)
Total equity attributable to equity holders of the Bank	146,444,187	147,873,076	(1.0)	156,840,607	157,830,492	(0.6)
Non-controlling interest				-	-	-
Total Equity	146,444,187	147,873,076	(1.0)	156,840,607	157,830,492	(0.6)
Total Liabilities & Equity	1,631,194,262	1,541,948,421	5.8	1,681,221,701	1,587,375,988	5.9
Commitments & contingencies	479,418,666	481,333,065	(0.4)	477,748,111	479,795,279	(0.4)
Net asset value per share (Rs)	124.88	126.10	(1.0)	133.74	134.59	(0.6)
Memorandum information
Number of employees	4,297	4,179
Number of branches	229	229

CERTIFICATION:

I certify that the above Financial Statements are in compliance with the requirements of the Companies Act No. 7 of 2007.

(Sgd)

Ajantha de Vas Gunasekara

Executive Director/Chief Financial Officer

We, the undersigned, being the Chairman and the Managing Director of Sampath Bank PLC, certify jointly that:

1. the above statements have been prepared in compliance with the format and definitions prescribed by the Central Bank of Sri Lanka; and
2. the information contained in these statements have been extracted from the unaudited Financial Statements of the Bank and its subsidiary companies unless indicated as audited.

(Sgd)	(Sgd)
Harsha Amarasekera	Ayodhya Iddawela Perera
Chairman	Managing Director
13th May 2024

4

STATEMENT OF CHANGES IN EQUITY

Bank

For the three months ended 31st March 2023		Net Scrip			Other Reserves
	Stated	Statutory				Retained	Total
	Dividend to be	Revaluation		General
	Capital	Reserve Fund	FVOCI Reserve	Earnings	Equity
	Capitalised	Reserve	Reserve
	Rs 000	Rs 000	Rs 000	Rs 000	Rs 000	Rs 000	Rs 000	Rs 000
Balance as at 1st January 2023	47,622,493	-	5,755,000	3,594,984	2,248,650	58,989,347	8,169,471	126,379,945
Total comprehensive income for the period
Profit for the period	-	-	-	-	-	-	2,625,702	2,625,702
Other comprehensive income	-	-	-	-	169,907	-	-	169,907
Total comprehensive income for the period	-	-	-	-	169,907	-	2,625,702	2,795,609
Transactions with equity holders, recognised directly in equity,
contributions by and distributions to equity holders
Final dividend for 2022: scrip	-	1,118,626	-	-	-	-	(1,316,031)	(197,405)
Final dividend for 2022: cash	-	-	-	-	-	-	(3,948,089)	(3,948,089)
Unclaimed dividend adjustments	-	-	-	-	-	(559)	-	(559)
Total contributions by and distributions to equity holders	-	1,118,626	-	-	-	(559)	(5,264,120)	(4,146,053)
Balance as at 31st March 2023	47,622,493	1,118,626	5,755,000	3,594,984	2,418,557	58,988,788	5,531,053	125,029,501
For the three months ended 31st March 2024				Other Reserves
	Stated	Statutory	Revaluation		General	Retained	Total
	Capital	Reserve Fund	FVOCI Reserve	Earnings	Equity
	Reserve	Reserve
	Rs 000	Rs 000	Rs 000	Rs 000	Rs 000	Rs 000	Rs 000
Balance as at 1st January 2024	48,741,119	6,615,000	3,594,984	11,344,032	67,011,693	10,566,248	147,873,076
Total comprehensive income for the period
Profit for the period	-	-	-	-	-	3,354,677	3,354,677
Other comprehensive income	-	-	-	2,076,949	-	-	2,076,949
Total comprehensive income for the period	-	-	-	2,076,949	-	3,354,677	5,431,626
Transactions with equity holders, recognised directly in equity,
contributions by and distributions to equity holders
Final dividend for 2023: cash	-	-	-	-	-	(6,860,299)	(6,860,299)
Unclaimed dividend adjustments	-	-	-	-	(216)	-	(216)
Total contributions by and distributions to equity holders	-	-	-	-	(216)	(6,860,299)	(6,860,515)
Balance as at 31st March 2024	48,741,119	6,615,000	3,594,984	13,420,981	67,011,477	7,060,626	146,444,187
			5

STATEMENT OF CHANGES IN EQUITY

Group

For the three months ended 31st March 2023					Other Reserves			Total Equity
		Net Scrip
	Stated	Statutory				Retained	Attributable to	Non Controlling	Total
	Dividend to be	Revaluation	FVOCI	General
	Capital	Reserve Fund	Earnings	Equity Holders	Interest	Equity
	Capitalised	Reserve	Reserve	Reserve
				of the Bank
	Rs 000	Rs 000	Rs 000	Rs 000	Rs 000	Rs 000	Rs 000	Rs 000	Rs 000	Rs 000
Balance as at 1st January 2023	47,622,493	-	6,033,000	7,092,922	2,248,650	58,989,347	13,564,655	135,551,067	-	135,551,067
Total comprehensive income for the period
Profit for the period	-	-	-	-	-	-	3,010,231	3,010,231	-	3,010,231
Other comprehensive income	-	-	-	-	169,907	-	-	169,907	-	169,907
Total comprehensive income for the period	-	-	-	-	169,907	-	3,010,231	3,180,138	-	3,180,138
Transactions with equity holders, recognised directly in equity,
contributions by and distributions to equity holders
Final dividend for 2022: scrip	-	1,118,626	-	-	-	-	(1,316,031)	(197,405)	-	(197,405)
Final dividend for 2022: cash	-	-	-	-	-	-	(3,948,089)	(3,948,089)	-	(3,948,089)
Unclaimed dividend adjustments	-	-	-	-	-	(559)	-	(559)	-	(559)
Total contributions by and distributions to equity holders	-	1,118,626	-	-	-	(559)	(5,264,120)	(4,146,053)	-	(4,146,053)
Balance as at 31st March 2023	47,622,493	1,118,626	6,033,000	7,092,922	2,418,557	58,988,788	11,310,766	134,585,152	-	134,585,152
For the three months ended 31st March 2024				Other Reserves			Total Equity
	Stated	Statutory	Revaluation	FVOCI	General	Retained	Attributable to	Non Controlling	Total
	Capital	Reserve Fund	Earnings	Equity Holders	Interest	Equity
	Reserve	Reserve	Reserve
				of the Bank
	Rs 000	Rs 000	Rs 000	Rs 000	Rs 000	Rs 000	Rs 000	Rs 000	Rs 000
Balance as at 1st January 2024	48,741,119	6,929,000	7,092,922	11,344,032	67,011,693	16,711,726	157,830,492	-	157,830,492
Total comprehensive income for the period
Profit for the period	-	-	-	-	-	3,793,681	3,793,681	-	3,793,681
Other comprehensive income	-	-	-	2,076,949	-	-	2,076,949	-	2,076,949
Total comprehensive income for the period	-	-	-	2,076,949	-	3,793,681	5,870,630	-	5,870,630
Transactions with equity holders, recognised directly in equity,
contributions by and distributions to equity holders
Final dividend for 2023: cash	-	-	-	-	-	(6,860,299)	(6,860,299)	-	(6,860,299)
Unclaimed dividend adjustments	-	-	-	-	(216)	-	(216)	-	(216)
Total contributions by and distributions to equity holders	-	-	-	-	(216)	(6,860,299)	(6,860,515)	-	(6,860,515)
Balance as at 31st March 2024	48,741,119	6,929,000	7,092,922	13,420,981	67,011,477	13,645,108	156,840,607	-	156,840,607
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