Hear From Our Leaders

Dear Valued Stakeholders

It gives me great pleasure to report that Sampath Bank PLC has recorded an unprecedented Profit after Tax of Rs 27.3 Bn, the highest ever Profit since its inception. It is worth noting that the 59.4% growth in earnings was achieved despite the fact that the financial year commenced amidst significant uncertainty as regards the state of the national economy. The stability achieved by the Bank has no doubt set a solid foundation from which to implement a sound strategy to accelerate growth in key areas. Stable profitability, solid positions on liquidity and capital adequacy will facilitate the transformation of the Bank’s business model to one that delivers an even stronger value proposition to all of its stakeholders.

OPTIMISM AND UNCERTAINTY

The financial year 2024 witnessed the positive growth in Q3 and Q4 of 2023 being tempered, to some extent by the uncertainty caused by the scheduled presidential and parliamentary elections. However, the debt restructuring agreement reached with bondholders was a key milestone in paving the way for debt sustainability while worker remittances and a surge in tourist arrivals with increased earnings boosted the country’s foreign exchange reserves. Inflation remained low, moving into negative territory for a few months while the appreciation of the rupee against the major currencies reflected the progress made. These positive trends resulted in a favourable review by the IMF on its Extended Fund Facility programme and the approval of a further USD 333 Mn in November 2024. It also saw the ratings revised from default ratings, supporting the country’s ability to access debt at need. The progress made facilitated the revision of tax thresholds thereby providing much needed relief to lower income bands while the recommencement of import of motor vehicles is expected to boost tax revenue and import activity.

The Banking sector has maintained strong rupee and dollar liquidity during the financial year under review and private sector credit increased at the same time due to an increase in economic activity. The sector also witnessed an improvement in asset quality with stable funding and liquidity ratios by the third quarter, supporting future credit expansion. Profitability of the sector was further supported by stable Net Interest Margins and lower impairment charges due to credit quality improvement in customers. The growth in digital transaction volumes, as customers continue to migrate to digital channels have further enabled banks to manage their costs. The sector benefits from reversals of provisions made in respect of International Sovereign Bonds in previous years, although the full impact of the same is seen only in the 4th quarter performance. Therefore, the share price of most private sector banks recorded strong positive gains post elections and the rating revision, thereby enabling investors to realise strong capital gains during the year.

ALIGNING STRATEGY

The Board reviewed the Bank’s legacy and business model in order to align its strategy with the needs of the future, to build on its strengths and to elevate stakeholder value propositions. The intended outcome of our deliberations is to drive growth in the Corporate and High Net Worth segments by enhancing the Bank’s value propositions in respect of these segments. This in turn will enable the Bank to extend SME value chains, thereby enhancing its value proposition for the SMEs, entrepreneurs and farmers by building resilient ecosystems that ease access to markets and finance. We will continue the democratisation of banking by leveraging technology which is in our DNA. The Bank is possessed of a sound launching pad for this strategy given its leadership in cards, loyal customer base, customer insights, motivated team and favourable financials.

The Bank made visible strides in pursuit of the aforementioned strategy during the year under review, sponsoring events focusing on high-net-worth families. Sponsorship of the July Monthly Medal Event at the Royal Colombo Golf Club, the Symphony Orchestra of Sri Lanka Pops event and Oktoberfest at Hilton were carried out with the intention that such events aligned with the Bank’s brand image. Consequently, the SOSL Pops event was the very first trilingual concert done in its history, requiring extensive work to procure performing rights and write scores for an orchestral performance of Sinhala and Tamil songs. Similarly, the sophistication of the offerings for the July Monthly Medal Event made it a highlight in the golfing calendar. These events established the Bank’s presence as a serious competitor in this exclusive segment while also facilitating access to the corporate segment. The sponsorships will be reinforced by establishing fully fledged private banking centres and probably becoming the first local bank to offer private banking services outside the Western Province. Our leadership position in cards and other products enables us to collaborate with business partners to create novel and exciting products that elevate the value proposition with room to leverage cross sell across both Corporate and High Net Worth segments.

DELIVERING RESULTS

It is my pleasure to note that the strong Profit after Tax growth of 59.4% to Rs 27.3 Bn has provided shareholders with a Return on Equity of 17.74% which is well above the 1-year Treasury Bill rate of 8.96%. Profit growth was propelled by stable Net Interest Margins, reduced impairment charges and the provision reversals in respect of International Sovereign Bonds due to restructuring by the GOSL.

during the year under review in response to escalation of threats globally. We also established a Board Sub Committee for Sustainability as we look to comply with the mandatory sustainability reporting in the year that has commenced. Consultants have been engaged to support the transition to a more nuanced sustainability reporting era reflecting our commitment to this important topic. Leadership and corporate governance continue to evolve, ensuring that policies, procedures and processes are fit for purpose. Further details on governance are set out in pages 148 to 183 of this report.

VALUE TO SHAREHOLDERS

I am pleased to report that Sampath Bank has proposed a final dividend of Rs 9.35 per share retaining Rs 13.95 per share for business needs. Net asset value per share increased by 12.6% to Rs 142.01 reflecting the enhanced value to shareholders. The price of a share increased by 67.7% to Rs 118.25 which increased the wealth of shareholders by Rs 47.75 per share. With the share price below book value and low price to earnings ratio, Sampath Bank is an attractive investment at the current valuations.

SHARED PROSPERITY

Sampath Bank continues to be a partner for prosperity through normal business activities and an expanding portfolio of projects that support growth of communities and biodiversity. The new Board Sustainability Committee will focus on ensuring that sustainability principles are integrated into our core business processes to support credible reporting in alignment with the mandatory SLFRS S1 and S2 standards for 2025. The Committee will also have oversight of the sustainability projects, ensuring that allocated resources and outcomes are optimised. Projects such as “Wewata Jeewayak” are examples of the Bank’s engagement with local communities to make shared prosperity a reality by investing in rejuvenating degraded environments and infrastructure in order to build thriving communities that support the country’s food security while creating livelihoods for themselves. Our project, “A Breath to the Ocean” looks at rejuvenation of coral reefs, turtle and mangrove conservation and supporting the ocean related ecosystems. Continuous monitoring of these projects over many years has seen the Bank reinvest in identified communities to enhance the impact and elevate the prospects of these communities. The Board remains committed to what we see as a moral obligation to share prosperity.

LOOKING AHEAD

Global growth is expected to be 3.3%, marginally above the 3.2% estimated for 2024 reflecting stable growth. Growth for China and India are expected to be moderate due to slower industrial activity with the European Union also facing similar challenges. Importantly for Sri Lanka, oil prices are expected to decline in 2025 while non-fuel commodities are expected to increase. Other common challenges that will affect the prospects for the global economy and Sri Lanka include impacts of potential geoeconomic confrontations, climate change, misinformation and disinformation.

With Sri Lankans giving a clear mandate to the newly-elected government, continuous positive GDP growth for the past six quarters and a sovereign rating upgrade, business confidence has improved significantly. Sri Lanka is forecasted to grow by 5% in 2025 with all agriculture, industry and services sectors showing promising signs of growth. Tourism is expected to continue its growth momentum while worker remittances are expected to stabilise as migration moderates. The Purchasing Managers Index reflects an uptick for both manufacturing and services, reflecting a positive outlook for these sectors.

Sampath Bank will focus on delivering the strategy formulated during 2024, extending its value chains to build stronger ecosystems that enhance value propositions for our customers and other stakeholders. The Bank will invest in capacity building of its people, technology and infrastructure to drive meaningful change to differentiate ourselves, upholding principles of customer centricity and efficiency which are part of our DNA. These principles and our focus on democratising banking by leveraging technology have served us well in our 38- year journey to become the 3rd largest private sector bank in the country.

APPRECIATIONS

The Sampath Bank Team has delivered a commendable performance and the Board and I are deeply appreciative of their efforts under the able leadership of the Managing Director Mrs Ayodhya Iddawela. I thank our customers and business partners for sharing our journey, particularly as regards the enthusiastic acceptance of our digital products. I am grateful to the officials of the Central Bank of Sri Lanka for their advice and guidance and thank my fellow Board members for their continued diligence, debate and advice. The Bank looks forward to delivering value to our shareholders in the year ahead and thanks you for your continued confidence in guiding Sampath Bank.