Hear From Our Leaders

Dear Valued Stakeholders

I am pleased to report that Sampath Bank delivered strong earnings growth of 57% to record Profit Before Tax of Rs 46.7 Bn for the financial year ended 31st December 2024. The Bank also recorded prudent credit growth of 10% and strong deposit growth of 16% reflecting the positive business sentiments that are expected to continue into the next year. The uncertain times were well-utilised by the Bank as we crafted an exciting growth strategy founded on our heritage of pushing boundaries with technology to deliver new products and connect to our customers. Sustainability of our operations and investments are embedded in the strategy ensuring that the Bank’s business model is anchored to sustainability as we move into a new era of growth with positivity.

HOPE, RECOVERY AND REGULATION

The Sri Lankan economy maintained its growth trajectory to record 5% GDP growth for the first 9 months of 2024 despite the uncertainty associated with Presidential and General elections during the year. The country made notable progress in delivering macroeconomic stability as evinced by the improvement in the sovereign rating by two rating agencies. This was supported by the completion of the international sovereign bond restructuring as well as improved external finances and macroeconomic indicators. The strong mandate received by the government and its commitment to support progress on reforms set out in the IMF Extended Fund Facility has imbued a sense of optimism in the outlook for the country although vulnerabilities remain.

Inflation declined during the year, reaching deflationary levels in the last quarter of 2024 aided by reduced energy prices, a stronger currency and reduced food prices. This supported an uptick in consumption leading to much needed investment, paving the way for economic growth.

Interest rates also declined during the year as CBSL revised policy rates downwards, adopting an accommodative stance. Accordingly, AWDR moved down by 411 basis points by end December 2024 while AWLR declined by 228 basis points to 11.93% during the same period. Additionally, CBSL moved from a dual policy interest rate system to a single policy interest using the Overnight Policy Rate (OPR) as the primary tool of monetary policy in November 2024. Consequently, private sector credit increased by 10.7% up to December while credit to the public sector corporations decreased by 14.7%.

The performance of the external sector improved significantly as earnings from tourism surged by 53% and worker remittances also recorded 10% growth. Trade activity expanded with exports recording growth of 7% to USD 12.8 Bn and imports recording 12% growth to USD 18.8 Bn up to December 2024. Accordingly, the trade deficit widened to USD 6.1 Bn compared to USD 4.9 Bn for the same period in 2023. Favourable movements in commodity prices were key to managing imports while exports were boosted by an uptick in tea prices and quantities. Gross Official Reserves increased by USD 1.6 Bn to USD 6.1 Bn during the year 2024 equivalent to 3.9 months of imports. The rupee appreciated against the dollar by 9.5% from Rs 324.00 to Rs 293.25 by end 2024 reflecting strong dollar liquidity within the financial sector. A combination of economic tail winds and targeted policies supported economic recovery which needs to be further strengthened to drive economic growth.

A CATALYST FOR GROWTH

Sampath Bank aligned its priorities to support the much-needed growth in the economy. A key area of action for the Bank was providing much needed financial advice and management tools to businesses that needed to rise above the daily cashflow stresses to thrive in a reviving economy. The Business Revival Unit was set up for this purpose, leveraging the expertise within the Bank to guide struggling businesses in our portfolios towards prosperity. This unit was able to stabilise over 74 businesses to date which moved out of the Bank’s Stage II and Stage III portfolios enabling them to adhere to agreed repayment schedules.

Credit growth also resumed with the easing of economic stress, stimulating business activity. As a result, loans and advances of the Bank increased by 10% during the year compared to a decline of 4.7% in the previous year, as we supported growth in active sectors of the economy such as Tourism, Information and Communication Technology and Healthcare.

The Bank retained its leadership position in worker remittances which recorded healthy growth, well above the growth recorded for the country. This reflects growth in market share as we enhanced our reach and re-imagined our offering with relevant benefits. Growth in digital transaction volumes and values continue to nurture our legacy of leveraging relevant technology to integrate Sri Lankans with a digital era and the benefits of access to financial services.

A PORTFOLIO VIEW

Corporate Banking and Retail & SME Banking experienced significant challenges as NII declined, exerting pressure on segment profitability. Growth in segment assets was also relatively modest for most of the year although it picked up in the last quarter to record growth of 10.6% in Corporate Banking and 15.2% in Retail & SME Banking. Focused efforts on management of credit risk resulted in these two segments recording significant decreases in impairment charges of 61% and 101.1% respectively. Retail & SME Banking recorded impressive growth of 15.9% in segment liabilities boosted by strong deposits growth in both time deposits as well as CASA.

Dealing and Investment activities of the Bank recorded PBT of Rs 34.2 Bn. This segment recorded a stellar year despite the declining interest rates as segment assets increased by 25.5%. Consequently, segment NII increased by 8.1% to Rs 26.4 Bn. This was further boosted by the reversal of provisions made on account of International Sovereign Bonds. The net impact on SLISB restructuring amounted to Rs 7.4 Bn and is a one-off gain which nevertheless contributed to the performance on the Dealing/ Investment segment.

The performance of the Sampath Bank Group was also solid as our subsidiaries contributed positively to boost PBT by 57.6% to Rs 49.2 Bn and PAT by 60.1% to Rs 28.7 Bn at Group level. Solid growth in loans and advances recorded by Siyapatha enhanced their total assets to Rs 59.7 Bn, recording growth of 29.1%.

OUR COMMITMENT TO SUSTAINABILITY

As a Bank, we have a significant impact on the socioeconomic progress of the country as well as the environment. Sampath Bank continues the journey to make our business model more sustainable while also investing in the future of the planet and its people through targeted sustainability initiatives that enrich communities in a holistic manner.

The ESMS is now an institutionalised process that assesses the environment and social impact of loan facilities, excluding consumption loans and schematised facilities, above Rs 100 Mn to ensure they comply with regulatory requirements in this regard and that there are no significantly adverse socioeconomic impacts from projects financed by the Bank. Financial inclusion activities are supported throughout our network through a number of initiatives as well as our subsidiary, Siyapatha Finance. As set out in the Chairman’s Message, we have commenced our journey to implement SLFRS Sustainability Standards with assistance from consultants, ensuring that sustainability reporting is the output of reliable systems with robust internal controls and audit trails. We are committed to institutionalising these processes and ensuring that they are integrated into Senior Management and Board processes, supporting effective integration of sustainability criteria into our decision making and resource allocation to manage impacts across our value chain.

The Bank continued to focus on its emissions investing Rs 25 Mn to minimise Scope 1 and 2 emissions by increasing our own solar generation capacity which now stands at 664.6 MWh. The Bank financed Rs 1,440 Mn in renewable energy projects with a total installed capacity of 10 MW minimising its Scope 3 emissions. Initiatives to minimise and manage waste continue to transform how we work, while enhancing awareness of the need for action by all throughout the Bank.

Opening of the sluice gate of Kidachchoori Tank, Vavuniya by the Managing Director

The Bank’s sustainability initiatives have been strategic in nature, nurturing environmental and social ecosystems that support each other to thrive. 'Wewata Jeewayak', the Bank’s flagship project is now in its 24th year having undertaken a total of 30 tanks that are vital for the country’s food production and for livelihoods of over 3,700 families in farming communities. The project helps to irrigate over 3,400 acres of paddy fields, enabling farmers to work 2 seasons (Yala and Maha) instead of just one season. We marked this milestone by undertaking to restore 9 tanks in 2024, the highest we have undertaken in a single year which store and distribute rainwater to paddy fields enabling these communities to continue agriculture. The restoration of tanks also enables the ecosystems associated with the fields and tanks to thrive, contributing to growth of the flora and fauna in the surrounding areas. The involvement of project partners continues to enhance the scope of the projects to include financial inclusion, entrepreneurship development, good agricultural practices to name just a few aspects of this increasingly multifaceted project that delivers benefits at grassroots.

Projects such as “A Breath to the Ocean” which looks at restoration of mangroves, coral replanting and turtle conservation support life below water, while “Gasai Mamai Pubudu Pothai” inculcate awareness of the importance of nurturing trees in the next generation. Environment restoration projects undertaken by the Bank include the Kanneliya and Udawalawe forest restoration projects as well as the Mangrove Restoration Project in Anawilundawa Ramsar Wetland reflect our commitment to the environment.

Our partnerships with academia, volunteers, non-governmental organisations and like- minded business partners have enriched our projects, and I take this opportunity to acknowledge the technical knowledge and other support provided by them.

A TEAM EFFORT

As a financial services organisation, our people are our most valuable asset and key to delivering positive customer experiences that drive our growth. We continue to invest in our people supporting their career progression through focused training while also implementing initiatives to support their health and well-being. Accordingly, we recorded 199,286 learning hours in 2024, with an average of 45 hours per employee and 98.5% coverage of employees. We promoted 458 employees during the year to meet the business needs of the Bank in a growth phase. The Bank’s retention rate of 96.8% and the return- to-work rates after maternity leave stand testimony to our holistic employee value proposition that continues to be reviewed to ensure that the Bank attracts, retains and develops the people who are the right fit for the Bank. Our success has been built by a smart, agile and committed team and the next era of our growth enables them to align their professional and personal goals to build truly rewarding careers with the Bank as we thrive together.

RELEVANT TECHNOLOGY

Sampath Bank was a pioneer in democratising technology as the first bank to set up a network of ATMs for access by its customers from inception. The Bank has continued to push boundaries in technology over the past three decades, ensuring that Sri Lankans are able to benefit from relevant technology through access to financial services, affordability, empowerment and convenience. Technology continues to be a key pillar of growth for the Bank as we move into our next growth phase and Rs 2,035 Mn was invested during 2024 to enhance our digital and IT infrastructure. Digital transaction volumes and values increased by 18% and 21% respectively. The centralisation of operations during the year was a significant milestone in the history of the Bank which is expected to raise the bar on service standards and turnaround times. As described in strategy above, technology will continue to be a key driver of our success story as we look to nurture our legacy as a technology driven bank.

REALISING OUR POTENTIAL – THE WAY FORWARD

Sri Lanka has a strong start for 2025 with a convergence of positive factors generating a renewed optimism in the country’s prospects. Political stability, an improved sovereign rating, growth in trade, tourism and remittances together with improved business confidence augur well for the country’s ability to reach the forecasted GDP growth of approximately 5% in 2025. The Banking sector is expected to be a catalyst and a beneficiary of the improved prospects for the country.

A multi-pronged strategy for growth will be rolled out in 2025 with robust oversight mechanisms and performance-based incentives to maintain course. Both Retail & SME Banking and Corporate Banking have enhanced digital platforms supporting scalable growth and cost efficiencies as well as sufficient liquidity to meet portfolio growth targets. Prudent capital and asset and liability management in 2024 have strengthened the Bank’s capabilities to raise funds at attractive rates that will support both profitability and growth. Improved risk management is expected to balance risk and reward to a new paradigm, ensuring efficient use of capital. Our quest to be the best bank in the country is one that is close to the hearts of the Sampath Team and we are optimistic that the new focused strategy will enable us to realise our aspirations.

ACKNOWLEDGEMENTS

The solid performance set out above is attributable to the harmonised efforts of many. The course charted by the Board paved the way for success and I am deeply appreciative of their guidance during the year. The Sampath Team worked together to deliver on our strategic goals and I take this opportunity to thank them for their commitment and hard work reflected within the pages of this Annual Report. I thank our customers who keep our brand as one of the country’s most loved brands and our business partners for their continued support in our journey. I also wish to thank officials of the Central Bank of Sri Lanka who continue to provide guidance on regulatory matters. In conclusion, I thank our investors for their continued confidence in our ability to deliver value and look forward to leading the transformation and growth of the Bank in the year ahead.