Your point of view
Sampath Bank | Annual Report 2013 Yourpoint of } Financial reports are often little more than an advertising tool for the companies that produce them; promotional productions that showcase the company yet reveal little of the back office operations that really make things go. This report is a little different. In this report, we’re looking at our operations from your point of view. We’ve focused on presenting the numbers, facts and figures that you need to know, giving you a crystal clear picture of where we were in 2013 and where we’re going in 2014.
We will describe our strategic plans and vision of how we shall widen our reach and diversify our business portfolio even further. And since we’re the third largest private bank in Sri Lanka, there’s a lot going on. From increased deposits and improved asset mobilisation to an even broader footprint across the island… your Bank is moving fast forward into a very promising year ahead.
Read this report carefully. It’s all about Sampath Bank - from your point of view.
Sampath Bank was originally incorporated as the Investment and Credit Bank Limited in 1986 with Mr N U Jayawardena as the Chairman of the Board. In 1988, Sampath Bank launched the first multi- point network of automated teller machines in Sri Lanka. The Bank also introduced the first debit card in South Asia in 1997. Many times awarded, Sampath Bank has won the World Finance Award 2012, the National Best Quality ICT Awards 2011, the Bank of the Year award from The Banker of Financial Times Limited London for two consecutive years and the National Business Excellence Award of Sri Lanka in 2010.
Sampath Bank is still one of the most technologically advanced banks in Sri Lanka since our landmark achievement of becoming the first bank in Sri Lanka to operate with a fully computerized database and related technologies in 1987. Sampath Bank has been the third largest private sector bank in Sri Lanka in terms of total assets, since 2009. The Bank now operates 212 branches and 274 ATMs including 10 off-site ATMs.
Sampath Bank is a multiple award winning retail bank holding an overall credit rating of AA-lka (Stable) from Fitch Rating Lanka. Contents Our Vision and Our Values 3 Directors Statement on Internal Control Financial Highlights 4 Over Financial Reporting 211 Milestones 1986 -2013 6 Independent Assurance Report to the Board Chairman’s Statement 8 of Directors of Sampath Bank PLC 213 Managing Director’s Review 12 Managing Director’s and Group Chief Board of Directors 22 Financial Officer’s Responsibility Statement 214 Corporate Management 29 Statement of Directors’ Responsibility for Chief Managers 33 Financial Reporting 215 Senior Managers 35 Independent Auditors’ Report to the Management Discussion & Analysis 40 Shareholders of Sampath Bank PLC 217 Branch Network 90 Income Statement 218 Nostro Accounts 95 Statement of Comprehensive Income 219 Correspondent Banks and Exchange Companies 98 Statement of Financial Position 220 Corporate Governance 102 Cash Flow Statement 221 Board Audit Committee Report 142 Statement of Changes In Equity 223 Board Human Resources and Notes to the Financial Statements 224 Remuneration Committee Report 146 Income Statement In US$ 322 Board Nomination Committee Report 148 Statement of Comprehensive Income in US$ 323 Board Risk Management Committee Report 150 Statement of Financial Position in US$ 324 Board Credit Committee Report 153 Ten Years at a Glance 325 Board Strategic Planning Committee Report 155 Value Addition 326 Board Shareholder Relations Committee Report 156 Sources & Distribution of Income 327 Board Treasury Committee Report 158 Investor Relations 328 Board Marketing Committee Report 159 Capital Adequacy 336 Risk Management Report 160 Glossary of Financial and Banking Terms 342 Sustainability Highlights 188 Notice of Annual General Meeting 350 Financial Calendar 198 Form of Proxy 351 Annual Report of the Board of Directors Corporate Information Inner Back Cover on the Affairs of the Company 200
2 Our Vision SRI LANKANFINANCIALSERVICES THE GROWING FORCE IN Our Values
Uncompromising ethical and professional standards of behaviour. Monitor and demonstrate an impressive commitment to results. Open to feedback and demonstrate an for eagerness personal development. Encourage and promote teamwork aspects of inall behaviour. Treat internal all and external customers the we way would like to betreated. development aswell aspromoting innovation and value for customers. Create culture alearning promotes that individual and organisational 3
Annual Report 2013 Sampath Bank PLC FINANCIAL HIGHLIGHTS
Bank Group 2013 2012 Change 2013 2012 Change Rs Mn Rs Mn % Rs Mn Rs Mn %
Profitability Gross Income 46,526 38,796 19.9 48,066 39,728 21.0 Total operating income 19,511 17,872 9.2 20,360 18,380 10.8 Operating expenses, impairment losses and VAT on Financial services 15,019 10,471 43.4 15,571 10,727 45.2 Profit before tax 4,491 7,401 (39.3) 4,789 7,653 (37.4) Provision for taxation 1,061 2,170 (51.1) 1,151 2,213 (48.0) Profit for the year 3,430 5,230 (34.4) 3,638 5,440 (33.1)
Assets & Liabilities Due to banks & other customers (Deposits only) 302,429 243,575 24.2 302,261 243,332 24.2 Loans and receivables to banks & other customers after provision for impairment losses (before staff loan fairvalue adjustment) 261,748 210,404 24.4 268,256 214,700 24.9 Total equity 28,418 25,645 10.8 31,760 27,819 14.2 Total assets 382,042 309,410 23.5 391,304 315,055 24.2
Investor Information Net asset value per share (Rs) 169.37 152.96 10.7 188.75 165.57 14.0 Market value per share at year end (Rs) 171.90 200.50 (14.3) 171.90 200.50 (14.3) Earnings per share - Basic (Rs) 20.45 31.34 (34.7) 21.67 32.57 (33.5) Earnings per share - Diluted (Rs) 20.44 31.30 (34.7) 21.66 32.54 (33.4) Dividend yield ( %) 4.65 5.99 (22.4) Dividend per share (Rs) 8.00 12.00 (33.3) Dividend cover (Times) 2.56 2.61 (1.9) Gross dividend (Rs Mn) 1,342 1,953 (31.3) Market capitalisation (Rs Mn) 28,843 32,629 (11.6)
Key Indicators Loan impairment allowance to loans & receivables to other customers (%) 3.70 3.25 13.8 3.67 3.24 13.3 Return on average assets (%) - before tax 1.30 2.66 (51.1) 1.36 2.70 (49.6) - after tax 0.99 1.88 (47.3) 1.03 1.92 (46.4) Return on equity (after tax) (%) 12.69 22.26 (43.0) 12.23 21.32 (42.6) Cost to income ratio ( %) 59.1 58.2 1.5 58.9 57.9 1.7 Liquid assets Ratio (%) 27.62 22.40 23.3
Capital adequacy ratios (%) - Tier I 10.08 11.80 (14.6) 10.08 11.87 (15.1) - Tier I & II 14.22 13.61 4.5 14.14 13.75 2.8 RAM Rating AA (Stable) AA (Stable) Fitch Rating AA-(lka) (Stable) AA-(lka) (Stable)
4 SAMPATH BANK IS A GROWTH- ORIENTED, TECHNOLOGICALLY ADVANCED BANKING INSTITUTION. THE BANK HAS CONTRIBUTED TO NATIONAL DEVELOPMENT AND ALSO HELPS ITS INDIVIDUAL CUSTOMERS TO GROW. SAMPATH BANK OFFERS SECURITY, SPEED AND TECHNOLOGY AS WELL AS THE PERSONALISED CARE THAT HAS ENABLED ORGANISATIONS SUCH AS OURS TO GROW AND OUR NATION TO PROGRESS.
M G KULARATNE CHAIRMAN & MANAGING DIRECTOR (MAGA ENGINEERING PVT LIMITED) 17TH FEBRUARY 2014 Milestones 1986 -2013 2001 Quality Approved Status for the Bank 1998 - Sampath Bank 1986 The Bank was became the first Sri Sampath Bank was incorporated honoured with Lankan organisation as Investment & Credit Bank Ltd, the award BEST to achieve the it received the certificates to COMMERCIAL “Quality Approved commence business BANK OF THE Status” of best YEAR 1998 by practice, which 1997 “Asiamoney” for is presented by the The Bank the third year Chartered Institute introduced the in succession. 1988 of Management DEBIT CARD, Accountants. The ATM (SET) facility another first in was introduced South Asia, in and Sampath Bank association with became the first CIRRUS and bank in Sri Lanka to MAESTRO. operate a multi-point network of Automated 1997 Teller Machines.
1986 1988
1987 1989
1989 Uni-Banking system was introduced to the country for the first time.
1987 1996 2000 The Bank ceremonially “asiamoney” opened for business on the prestigious 1999 15th May 1987. Mr N U financial The Bank successfully Jayawardhana became magazine in Asia migrated to a more the Chairman of the Bank, voted Sampath versatile banking Mr Janaka de Silva was Bank as the ‘Best package, Bancs2000 appointed as the General Commercial Bank which provided a Manager. of the year’ in competitive edge Sri Lanka. 1987 considering the 2000 variety of services The Bank introduced a Sampath Bank and products it offers. cheque guarantee card, launched an Internet It also invested in a a saving account with banking facility new state-of-the-art checking facilities and “Sampathnet” in ATM switch, which extended banking hours till Jul y. also assisted the 3.00 pm for the first time continued efforts of in the country. improving products and services offered by the Bank. 2005 The Bank was adjudged the 2010 Best Corporate Creating history in Citizen for the the banking industry year 2005 in of Sri Lanka, the the Top Ten Bank opened 40 category. branches and 39 ATMs during the 2009 year, bringing the Sampath Bank total number of 2004 reached a greater branches to 171 and The first ever height by total number of ATMs Cheque Imaging clinching the to 222 by end of & Truncating (CIT) global accolade 2010. site in Sri Lanka was “Bank of the Year launched by us on 2009” by the 25th of October. highly acclaimed international magazine ”The Banker” of the 2011 Financial Times Introduced the London. Super Branch concept of 365-day banking at Dharmapala Mawatha and Kiribathgoda.
2009 2011
2010 2012 2012 We 2013 celebrated Sampath Bank pioneer our Silver in introducing many Jubilee innovations to the marking 25 Sri Lankan banking 2013 great years of industry proudly launched service to its latest state-of-the-art the nation. banking facility “Cardless Cash ATM” for the first time in Sri Lanka. With this new facility the customer would be able 2008 to withdraw cash from 2003 2007 ATMs without using an The Bank became the Telecommunication Honoured at the ATM- debit card. The soft first in Sri Lanka to technology National Science and launch of “Cardless Cash introduce “one day was infused Technology Awards ATM” was held on 17th clearing” for all cheques into banking 2008 in the category December at Sampath drawn on any Sampath technology with of Locally Developed Bank headquarters. Bank branch, collected the introduction of New Technologies. by any Commercial ‘Sampath Mobile This has resulted in Bank in the island and Cash’, a money successfully marketed presented through transfer process products / services for Sri Lanka Automated using mobile our innovative product Clearing House (SLACH). phones. “Sampath eRemittance System”.
CHAIRMAN’S STATEMENT WE FIRMLY BELIEVE, THAT MEETING OUR STAKEHOLDER INTERESTS AND VIEWING OUR PRIORITIES IN THE LIGHT OF YOUR PRIORITIES IS KEY TO REALIZING OUR COLLECTIVE VISION FOR SAMPATH BANK, AS WE FAST FORWARD INTO THE FUTURE.
OUR SRI LANKAN IDENTITY REMAINS ONE OF OUR KEY STRENGTHS AND IS THE FOUNDATION ON WHICH OUR VALUE SYSTEM IS BUILT UPON.
Dhammika Perera Chairman banking industry to revisit their strategies for income generation and to become more efficient through CHAIRMAN’S tighter cost to income ratios. This remains a priority focus on our strategic agenda. STATEMENT As all of you are well aware, Sampath Bank prides itself in being a wholly Sri Lankan, home grown bank that is steeped in the local culture. Our Sri Lankan Your point of view is our point of consideration identity remains one of our key strengths and is the As another financial year comes to an end, it gives foundation on which our value system is built upon. me great pleasure to address and welcome all of you, As a result, we engage in a form of inclusive banking, our valued shareholders, to the 28th Annual General which I believe is uniquely our own style. By pursuing Meeting of Sampath Bank PLC and to present to you excellence in customer care through customer the audited Financial Statements and Annual Report relevance, by innovating consistently to deliver firsts for the financial year 2013. in technology driven solutions to the banking industry and through continuous product innovations, we have As a stalwart in the financial services industry and carved a veritable niche for ourselves in the eyes of indeed as an industry innovator , your Bank has led our customers. And it is thus that your point of view the way towards sustained growth even in a year remains our point of consideration. where challenges have defined the dynamics of the industry. This is inherently the result of our pursuit to perceive our operations, our performance and above all our strategic intent from your point of view. Rs Billion We firmly believe, that meeting our stakeholder interests and viewing our priorities in the light of your BANK priorities is key to realizing our collective vision for Sampath Bank, as we fast forward into the future. PAT 3.4 The financial year under review was without doubt one of the more challenging years for the financial services industry as a whole, and it was no different for Sampath Bank. An operational scenario defined by contracting net interest margins has become a norm, a trend that we believe will continue to pressure the
BY PURSUING EXCELLENCE IN CUSTOMER CARE THROUGH CUSTOMER RELEVANCE, BY INNOVATING CONSISTENTLY TO DELIVER FIRSTS IN TECHNOLOGY DRIVEN SOLUTIONS TO THE BANKING INDUSTRY AND THROUGH CONTINUOUS PRODUCT INNOVATIONS, WE HAVE CARVED A VERITABLE NICHE FOR OURSELVES IN THE EYES OF OUR CUSTOMERS.
10 18th February 2014 Colombo, Sri Lanka Chairman PereraDhammika dedication. next year financial with confidence and resolute of both We success lookto and the challenges. shareholders for beingpillars of support attimes Myappreciationsthe to veritable our challenges. another year of performance commendable despite and the Sampath Bank team for making2013 yet Director,the Managing Team the Management My sincere appreciations to the Board of Directors, realizing the our targets. we expect to formulate further strategies aimedat Colombo Stock Exchange. Inthe upcoming year, Company with the intention to belisted onthe of Siyapath Finance Finance Ltd to afully-fledged Sampath Bank in2013 converted the operations large. wealth for our stakeholders aswell asthe nationat confident this that strategy isawin-win in creating enterprises. andsmall mediumscale We remain spectrum of households and businesses including caterthat to the needsof financial abroader range of products, services and financing solutions long-term growth, through the offer of adiverse been supported by initiatives to drive SriLanka’s the nationtowards aUSD4Kera and beyond, has Specifically, our concerted drive towards propelling Sri Lanka’s economic and developmental targets. creation, we are committed to contributing towards with aligned fully the strategy national for wealth stakeholders.all With acorporate strategy is that our intent remains focused onwealth creation for As we move forward into the future with confidence, STAKEHOLDERS. FOCUSED ON WEALTH CREATION FOR ALL WITH CONFIDENCE, OUR INTENT REMAINS AS WE MOVE FORWARD INTO THEFUTURE } 11
Annual Report 2013 Sampath Bank PLC
MANAGING DIRECTOR’S REVIEW WE CONTINUE TO FOCUS ON BOTH TRADITIONAL BRANCH BANKING AND TECHNOLOGY DRIVEN CONVENIENCE FOR CUSTOMERS AS WE ADAPT OUR STRATEGY TO THE CHANGING DEMOGRAPHICS OF OUR COUNTRY AND THEIR PERSONAL PREFERENCES IN HOW THEY CARRY OUT THEIR BANKING TRANSACTIONS.
OUR CONSISTENT FOCUS ON CUSTOMER CONVENIENCE HAS BEEN THE KEY COMPETITIVE ADVANTAGE
Aravinda Perera Managing Director MANAGING DIRECTOR’S REVIEW
2013 has been a year in which we have faced concept were key factors that enabled growth in many challenges and relied on our abilities honed deposits. We continue to focus on both traditional over a quarter century to overcome them in line branch banking and technology driven convenience with our values. Our consistent focus on customer for customers as we adapt our strategy to the convenience has been the key competitive changing demographics of our country and their advantage that fuelled our credit growth rate of personal preferences in how they carry out their 24.9% above the industry growth rate of 8.8% during banking transactions. 2013. The Loans and Advances portfolio increased from Rs 217.4 Bn to Rs 271.7 Bn during 2013 reflecting Our growth was financed by both foreign and local the growth in both Personal Banking and Corporate borrowings reflecting investor confidence in our Banking which grew by 16.9% and 38.2% respectively. ability to grow and deliver performance. Sampath We have been able to safeguard the asset quality Bank reached a key milestone when we became of our lending portfolios and improved performance the first private bank listed on the Colombo Stock in this key area on all portfolios except on pawning Exchange to raise US$ 100 Mn in a single transaction. where the sharp decline in gold prices weighed The syndication arranged was through HSBC which on our overall performance. Our centralised credit took the deal to the market for US$ 45 Mn which was sanctioning and monitoring processes together with increased to US$ 100 Mn in view of the keen interest continued investment in creating a risk culture have demonstrated by investors. A further US$ 20 Mn was been key strengths that contributed to our success raised from Proparco, the private investment arm in this vital area. Accordingly total assets increased of the French Development Agency (AFD) in which from Rs 309.4 Bn in 2012 to Rs 382.0 Bn during the year, an increase of 23.5% reflecting growth in loans and advances and investments.
Rs 382 Bn
Rs Business Growth - Bank 309 Bn Rs Bn Rs Bn
382 309 302
191 248 272 244 217 196 179 153
2013 2012 133 Total Assets Total Assets
Deposits grew by 24.1% to Rs 302.4 Bn largely driven 2011 2012 2013 2010 by increased business volumes from Personal Banking as branches increased their business volumes. Our Loans & Advances Deposits Assets countrywide presence through our network of 212 branches and initiatives implemented during the year such as extended hours and the super branch
14 income grew by 9.1% from Rs17.9 Bn in2012 to Rs to earningsin2012. Totalsignificantly Operating Foreign exchange revaluation income contributed foreign exchange this year. gainsand losses early measures taken to reduce volatility inearningsfrom relatively slower duringthe year, coupled with the to Rs2.7 Bnby 34.9%due to LKRdepreciating Income however declined from Rs4.1 Bn in2012 competitiveintensely market. Other Operating through of the benefitsto our customers inan EXCELLENCE INALLKEYAREAS. AREAS AS WE CONTINUE TO STRIVE FOR SUSTAINABILITY AND HUMAN RESOURCE LANKA 2013” AND OTHER AWARDS IN “EUROMONEY BEST BANK OFSRI WHICH INCLUDED THEPRESTIGIOUS AWARDS WON FOR OUR PERFORMANCE WE WEREGREATLY ENCOURAGED BY THE with correspondent apass banks whichenabled in trade volumes and streamlining of arrangements Rs 2.1 Bnin2012 to Rs2.5Bnin2013 reflecting growth and Commission Income growth was 18.3%from re-pricing inlinewith market movements. Net Fee industry average of 3.5%dueto itsability to optimise maintain the Net Interest Marginat4.2%above the (CASA) incustomer deposits. The to Bank was able growth proportion of current and savings accounts resulted inlower spreads aswell asthe slower industry dueto both intense competition which Margin (NIM) however isdeclining inlinewith the the previous years’ NII of Rs11.6Bn.The Net Interest efficiency increasing by 23.7% to Rs14.4Bnover of credit portfolios and operational enhanced Net Interest Income (NII) reflected the strong growth shown by investors. and the issue was oversubscribed with keen interest to increase upto Rs5Bnincaseof oversubscription subscriptionofbe an initial Rs2.5Bnwith the option asset and liability maturitymismatches. This was to the Bank’s regulatory Tier IICapital baseand reduce Rs 5Bnindebentures duringthe year to strengthen growth area for the country. The Bank issued renewable energy projects whichisan identified the stake French for government amajority has Income declined by 10%from Rs17.8 Bnin2012 to to pawning this year. Net Operating Consequently intention beento recognise has losses relating all in atrue and fair manner have beenmade, asour the impactof the losses onthe pawning portfolio requiredwas adjustments Rs3.5Bnasall to present forThe loans impairmentcharge and other losses the moderation of earningsfrom volatile sources. Interest Income and Fee BasedIncome and reflects dueto strong19.5 Bnin2013 mainly growth inNet Income Net Interest Rs Billion 14.4 15
Annual Report 2013 Sampath Bank PLC MANAGING DIRECTOR’S REVIEW
Rs 16.0 Bn in 2013 moderating an otherwise strong performance for 2013. The Cost to Income ratio marginally increased during the year from 58.2% in 2012 to 59.1% in 2013. Other operating expenses growth of 18.6% were mainly due to the upgrading of our branch network to reflect the brand and ensure that all customers are able to conduct business in a pleasant environment at all branches. The impairment charge on the pawning portfolio impacted Operating Profit before Income Tax and Profit for the year which declined by 39.3% and 34.4% respectively. Total Capital adequacy also improved during the year from 13.6% to 14.2%. However Tier I Ratio slightly declined from 11.8% in 2012 to 10.1% in 2013. The team at Sampath Bank which I am privileged to lead has demonstrated its ability to respond to challenges arising from the operating environment while staying true to our values and demonstrating that we are indeed the growing force in Sri Lankan Financial Services. We were greatly encouraged by the awards won for our performance which included the prestigious Euromoney Best Bank weather conditions. The industry sector growth of Sri Lanka 2013 and other awards in sustainability was encouraging estimated at 9.2% for 2013 due to and human resource areas and we continue to favourable macroeconomic conditions, increased strive for excellence in all key areas. The Board infrastructure development and gradual economic has provided invaluable guidance in a year where recovery of major trading partners. All subsectors of strategy was reviewed and revised in response to the industry sector performed well during 2013 and a changing landscape and I am appreciative of its it is noteworthy that it recorded the highest sector commitment and insightful guidance this year. growth for the 5th consecutive year with double digit growth in the mining & quarrying, electricity, gas & Our operating environment water and construction sectors in the 3rd quarter. The global economy improved during the year with The services sector growth is estimated to be 6.7% World Output growth forecast at 3.5% for 2013. A mainly due to strong growth witnessed in the Hotels gradual tapering of the quantitative easing was and Restaurants and Transport and Communications announced following moderate economic growth in subsectors which grew in double digits during the the US and the risk of the Euro zone break up was year. It was encouraging to note that the country’s successfully averted by policymakers. Emerging growth was more broad based and inclusive with market economies continue to account for the bulk the other provinces contributing 56.6% of the GDP in of the growth although significant slowdowns were 2013. Increased employment was observed across all witnessed in Brazil, Russia, India and China. While old sectors with unemployment rising marginally from risks remain, new ones are also coming into play and 4% in 2012 to 4.5% in 2013 mainly due to the entry it is expected that there will be a gradual recovery of of new job seekers into the labour force. Labour the global economy in 2014. It is observed that global productivity also increased during the year across all financial stability has improved as stated in the key sectors of the economy. Global Financial Stability Report in April 2013 which provides a platform for a growth agenda. Exports, which declined in the first quarter, gradually increased from June due to a gradual recovery Sri Lanka’s economic growth rebounded in 2013 and in key export destinations and high agricultural is estimated to be 7.2% in comparison to 6.4% in volume exports. Earnings from exports grew by 5.6% 2012. The agriculture sector showed strong growth during the period January to November 2013 to due to the increased harvest in paddy and increased US$ 9,400 Mn led by increased agricultural exports output in the fisheries sector. Disappointingly, tea, and industrial exports which grew by 10.6% and 4.1% rubber and coconut were impacted by adverse respectively during the same period. Expenditure
16 MARKET MOVEMENTS. ABILITY TO OPTIMISERE-PRICING INLINE WITH INDUSTRY AVERAGE OF3.5%DUE TO ITS NET INTEREST MARGIN AT 4.2%ABOVE THE THE BANK WAS ABLETO MAINTAIN THE 3,688 Employees 274 ATMs Sampath Bank Branches 212 Total Capital 14.2% Adequacy Ratio increased migration inthe professional and skilled reach Rs6.7 Bnfor 2013, an increase of 11.6%dueto their growth momentumand are estimated to 2013. The migrant worker remittances maintained respectively for the to period November January an increase of 15%and 24% inarrivals and earnings GDP. Growth inthe tourism sector was strong with US$ 8,594 Mnby end of to 12.8%of 2013 equivalent the 11months first of 2013 and isestimated to be balance declined by 10.7% to US$7,831 Mnduring totalling the to trade US$19,046 Mn.Consequently the overall decline inimports for 2013 will be0.7% international commodity prices. Itisestimated that to policy measures implemented in2012 and lower on imports declined by 2.5%to US$17,231 Mndue fiscal discipline.fiscal prices and the effectiveness of monetary policy and year dueto the moderation of commodity global Consumers Price Index declined to 4.7% duringthe benchmark. Headlineinflation asmeasured by the and are deemed ahealthy level above the 3month to beUS$7.1 to 4.5month’s Bn,equivalent imports intervention. Gross Reserves Official are estimated the quarter last and appreciated 1.6%with minimal fourfirst months of the year. Itstabilised by again the appreciated USDollarhaving 2.25%duringthe Rupee depreciated 2.4%duringthe year against Mn in2012 to asurplus of US$700 Mnin2013. The improved accordingly from asurplus of US$151 among other inflows. The balance of payments and US$650MninCorporate Sector Borrowings government, US$1.5Bnforeign borrowings by banks which included US$1.5Bninproject loans to the finance account were observed duringthe year Substantial foreign inflows to the capital and observed duringthe year. dueto the positivein 2012 mainly developments to 3.9%ofequivalent GDP, adecrease from 6.6% for 2013 isexpected to contract to US$2.6Bn for inward remittances. The current account deficit remittances and introduction of web basedsystems category, increased useof for formal channels 17
Annual Report 2013 Sampath Bank PLC MANAGING DIRECTOR’S REVIEW THE OVERALL PERFORMANCE OF THE SECTOR DEMONSTRATES THE RESILIENCE AND STABILITY OF THE BANKING SECTOR AS IT CONTINUED ITS GROWTH TRAJECTORY AND MAINTAINED PROFITABILITY IN 2013
Monetary policy eased during the year with the at end November 2013. The overall performance of repurchase rate and the reverse repurchase rates the sector demonstrates the resilience and stability were revised downward in May and October by of the banking sector as it continued its growth 50 bps. Market interest rates declined accordingly trajectory and maintained profitability in 2013 and is with both deposit and short term lending rates expected to perform at a higher level in 2014 with the adjusting swiftly reflecting the downward trend. improvement in global economic outlook. Long term loan rates have also now adjusted to reflect monetary policy. A selective growth strategy We adopted a selective growth strategy during Banking sector asset growth was 16.6% for the year, 2013 in response to the economic conditions that moderating from the 19.9% for 2012. Private sector prevailed during 2013. A key area of focus was credit growth was 7.3% a decline from 17.6% in increasing branch business volumes and improving 2012 due to a number of factors including a sharp the profitability of branches which yielded results and reduction in pawning activity, high base effects, now more than 95% of our branches are profitable. increased foreign borrowings by corporates and Centralising specialist skills structures played a convenient access to debt markets. Branch networks key role in the growth of business volumes as we and ATM networks grew during the year with a were able to streamline operations and optimise number of branches opened outside the Western access to these specialists to reach a higher level of Province providing a platform for inclusive growth. performance during the year. Our branch network Deposit growth moderated from 18% in 2012 to grew from 209 branches to 212 branches during 15% in 2013. Total borrowing by the Banking sector the year with new branches opened in Thalahena, increased from Rs 804 Bn in 2012 to Rs 1,006 Bn by Karagampitiya and Gampaha (Super). We also December 2013 reflecting a structural change in upgraded the interiors and exteriors of our branches the funding structure of banks. Foreign currency to reflect the brand and ensure that our customers borrowings grew by 45% from Rs 441 Bn in 2012 to have a pleasant environment in which to conduct Rs 641 Bn as at end November 2013 as banks raised their banking transactions. Some of the branches US$ 1,548 Mn in foreign borrowings during the year. are now accommodated in premises that are owned Rupee borrowings of the banking sector showed by the Bank and purpose built for the business of little movement growing from Rs 363 Bn to Rs 365 Bn banking. These locations are in key towns in the during the period January to November 2013. Gross country where we expect growth. We have also Non Performing Loans ratio increased from 3.7% in continued to develop electronic channels for the 2012 to 5.6% mainly due to the decline of gold prices convenience of our customers which include the impacting the pawning portfolio. Liquidity of banks ATM network, mobile banking and internet banking improved during the year as Liquid Assets to total which we believe will be the way forward as younger assets ratio improved from 26% in 2012 to 32% as tech savvy generations avail themselves of banking
18 a key role inthe role profitabilitya key of our branches asit focus oncustomer convenience. played This has recognition asaresponsible bank and the relentless relative easewith increase inour footprint, brand to raise deposits beenable Sampath with Bank has recognise losses this all year. interest reversals asour intentionbeento has in full duringthe year, together with the resulting year. We have recognised the impairmentcharges portfolio compared to 25.3%atthe beginningof the year whichnow accounts for 19.7% of the Bank’s loan reduced from Rs54.9Bnto Rs 53.5 Bnduringthe portfolio (whichincludes interest receivables) was was concern akey duringthe year. The pawning the focus onreducing the pawning portfolio which It isnoteworthy retail that grown banking has despite enabling their growth asstrategic partners. segment of merchants intonetworks our payment a POS terminal. We are committed to growing this mPOS whichconverts any android phoneto mobile usto reach merchants through enabled smaller has previouslythan available. Technological innovation customers awider choice of merchants and products number players of smaller enablingusto offer e-commerce through aggregators whichlinka increase our market share. We have promoted growth beenencouraging usto and has enabled The number of active cards and business volume franchises, Visa, MasterCard and American Express the country the three card has global that leading the Bank and we bank in continue to bethe only Credit and Debitcards are growth akey area for system to provide greater convenience. Bankingcombined with Mobile our e-Remittance through and their mobile our ATM network aswe recipients to access their remittances 24 hours from 53 to 82.Technological enabled enhancements growth of our overseas business partner network through expansion programmes whichincluded We focussed also onthe growth of our remittances response to customer needs. grew 31%and 53% respectively reflecting our internetSimilarly banking volumes and value also products increased dueto customer familiarity. by 20%and 23%respectively asutilisation of these Telebanking volumes increased also duringthe year investment and development inthis area. and Mobile downloads whichdemonstrates the needfor further Store overand Play had Google whichhas 10,000 AppavailableSampath from Mobile Store the Apple 274 ATMs of Sampath Bank. We launched also the combines the ATM networks of 10banks including of 1,842ATMs connected to the ATM Switch which services. Ourcustomers have access to anetwork ® . Exchange in2014. is expected to obtain inthe alisting Colombo Stock branded asSiyapatha Finance Ltd, duringthe year. It license to operate asafinance company and was re- Sampath Leasing &Factoring Ltd, obtained the banking customers. including ‘Sampath Vishwa’ for our corporate convenience of our customers and re-launched electronic have beenimproved channels for greater cover tourist key markets inthe country. Many of our and expanded the foreign currency ATM network to have launched ATM the cardless first inthe country which are discussed above. Inadditionto these, we industry through technological innovations, someof customers. We continuethe to banking shape intertwined with our brand promise to our needs of our customers and isinextricably provided uswith solutionsfor the banking scalable Our heritage of technological innovation has country’s growth strategy. identified growth sectors with inalignment the growth strategy usto grow whichenabled in strategy was the bedrock of our corporate banking contracted inthe country. growth Ourselective our trade volumes duringayear inwhichvolumes growthcustomer service enabled whichalso of 2013. Growth was facilitated through excellent as private sector credit growth rate declined during year forby the 24.9% industry duringachallenging We grown have significantly our advances portfolio base for the cross-selling of our other products. the growthenabled of business volumes creating a Bank’s Accordingly business goals. we promoted 243 of their personal career with in alignment goals the needs and developing them to facilitate achievement recruiting for the talent our best identified business business ofday the Bank. We continue to focus on embedded our values has into thethat day-to- developed through and mentoring alearning culture greatest competitive been edge. poolhas The talent our sustained growth and provides uswith our Our team continues to bethe drivingforce for Talent Management to Introduce Cardless ATMs 1 st 19
Annual Report 2013 Sampath Bank PLC
MANAGING DIRECTOR’S REVIEW } } of Directors on a regular basis. The Compliance Unit, Risk Management Unit and Internal Audit Our focus on talent continue to provide the Board and its Committees development has been with assurance on compliance with the statutory framework which includes regulations issued by rewarded with a the SEC and the Central Bank of Sri Lanka. The Risk continuous increase in Management Department which forms the 2nd line of defense and the Compliance and Internal Audit employee productivity Departments which form a vital part of the 3rd line which has been the of defense have been strengthened during the year with increased staff and investment in software to foundation for our assist in fulfilling not just the regulatory requirements performance this year. but the more prudential guidance of the Board and its Sub Committees which are charged with oversight of these functions.
Our strategy for 2014 officers at various levels during the year and grew We will continue our strategy of selective growth our talent pool with the recruitment of 372 team into 2014 in line with the Government’s strategy. members. Our focus on talent development has been Our ambition for 2014 is to grow our operations rewarded with a continuous increase in employee beyond the country’s borders and establish a regional productivity which has been the foundation for our presence in identified growth markets. The initial performance this year. We have widened the scope visits and studies have been completed and we of the Sampath Leadership Academy and enhanced expect to establish our presence in the selected leadership capability at all levels of the Bank which markets in 2014. Care has been taken to understand has energised and empowered managers at all levels the challenges and changes in the risks for the Bank to bring forward valuable suggestions for innovation and we are confident that these areas have been and streamlining of business processes enhancing sufficiently addressed. Our focus will be on private our profitability and productivity. Our talent retention sector credit growth in 2014 with an emphasis on rate continues to be high at 97% which is testimony the power, leisure, infrastructure development and to the commitment and dedication of our team and trade which are key sectors for growth. We will look strong alignment with the corporate vision to be the to technological innovations to increase financial growing force in Sri Lankan Financial Services. inclusion in the country as a core part of our retail banking strategy. Debit and Credit cards, remittances Compliance and Regulatory framework and deposit growth remain key areas of focus The Central Bank continued to strengthen the following our success in 2013 in these business lines. banking sectors with a focus on risk-based Our strategy to reduce the pawning portfolio will supervision, calibrating business models and continue into 2014 and we will continue to monitor processes of banks and aligning the country’s needs developments in this area proactively to ensure that and strategy with the banking sector. Accordingly strategy is in line with market and risk appetite. We a number of Directions were issued during the year will intensify our operations with SMEs as we expect to strengthen risk management, financial reporting, a high rate of growth and we are well positioned to regulate stock market activity and cap interest rates serve this sector’s need as we now have the footprint on credit cards and penal interest rates. The ceiling and technology which enable a speedy response to rates for credit cards, pawning and penal interest the entrepreneurs who drive the growth of this sector. limit the tools for management of recoveries which is The Investment Fund Account is utilised in full for the a greater concern than the limitation on profitability development of this sector with the loan size being of these business segments. below Rs 30 Mn in line with the Government’s vision in setting up the fund. We will continue to invest in Compliance with regulations is a key priority at developing our talent pools through provision of the Bank and is monitored at the highest levels technical, soft skills and leadership training to enable by the Board Audit Committee and the Board Risk them to compete effectively in an increasingly Management Committee which report to the Board competitive market with declining margins.
20 18th February 2014 Colombo, SriLanka DirectorManaging Aravinda Perera together. promise to beresponsive to their needs aswe grow the foundation for our success and we renew our trusted usto betheir partner in growth have been and continued support. Ourcustomers whohave achieving our visionand the Board for itsguidance the Team Sampath for itscontinued commitment to era of growth and an enlargedvision.Iwish to thank strategic direction usto anew asinthe to past, lead look to the Board to provide leadership, visionand the ability to grasp new opportunities for growth. I An experienced and dynamicteam provides uswith beyond itsshores. opportunities for growth both within the country and 2014. We year with expect 2014 to beachallenging sectors and focus onimproving our NPA ratio in strategy business inselected linesand industry this sector. We will continue our aggressive lending decrease the growth opportunities for banks in in debenture issues and foreign direct borrowings sector and the growing trend of corporate interest driveras itisakey of growth for the banking growth rates inthe country are of particular concern although downside risksremain. Private sector credit US and the Eurozone isencouraging for exporters growth rates. However, the positive outlook for the although remain they above the advanced economy as emerging markets growth rates have declined Concerns outlined inthe previous year still remain if we dodeem growth itadesirable strategy. ensure with alignment the Bank’s longterm strategy will evaluate the growth opportunities presented to above the threshold for forced consolidation and strategy inthis regard atthe timeof writing.We are and we are inthe process of determining our own proposals for consolidation of the banking industry The Road Mapfor 2014 presented by CBSLoutlines 21
Annual Report 2013 Sampath Bank PLC Mr Dhammika Perera 01 Chairman (Non Executive)
Mr Aravinda Perera Managing Director 02 (Executive)
BOARD OF DIRECTORS
22 Mr Sanjiva Senanayake Senior Director Mr Channa Palansuriya 04 (Non Executive / Independent) Deputy Chairman 03 (Non Executive)
Mr Deepal Sooriyaarachchi 05 Director (Non Executive / Independent)
Prof Malik Ranasinghe Mrs Dhara Wijayatilake 06 Director (Non Executive / Independent) 07 Director (Non Executive / Independent)
23 BOARD OF DIRECTORS
Mr Deshal De Mel 09 Director (Non Executive) 08 Miss Annika Senanayake Director (Non Executive / Independent)
10 Mr Ranil Pathirana Director (Non Executive)
Mr Ranjith Samaranayake Group Chief Financial Officer Mrs Saumya Amarasekera Director (Executive) 11Director (Non Executive) 12
24 Mr Dhammika Perera Risk Management Committee, Board HR & 01 Skills & Experience: Extensive governance Remuneration Committee, Board Strategic experience gained through membership of Planning Committee and Board Treasury the Boards of Sampath Bank, NDB Bank, Pan Committee Asia Bank and other financial institutions; a quintessential business leader with interests Current Appointments: Managing Director, in a variety of key industries including hydro Sampath Bank PLC; Director of Siyapatha power generation, manufacturing, hospitality, Finance Ltd. Director Institute of Bankers of entertainment, banking and finance. He Sri Lanka, Director Lanka Financial Services enriches the Board with over 25 years of Bureau Limited, Director Lanka Bangla Finance experience in managing companies to deliver Limited and President of the Association of high performance. Professional Bankers of Sri Lanka
Appointed to the Board: 1st August 2007. Former Appointments: Deputy Managing Appointed as Non Executive Chairman on 1st Director, Chief Operating Officer, Deputy January 2012. General Manager, Corporate Banking and other roles spanning a career of 26 years at Sampath Membership of Board Sub Committees: Bank. Senior Project Officer, DFCC and Chairman of Board Strategic Planning Departmental Manager and Service Engineer Committee; Member of Board Nomination at Ceylon Tobacco Company, Engineer at Committee National Milk Board. Current appointments: Secretary, Ministry 03 Mr Channa Palansuriya of Transport, Sri Lanka. Director, Strategic Skills & Experience: Thirty years of extensive Enterprise Management Agency of Sri Lanka. experience in the Apparel sector by heading Chairman Vallibel One PLC, Vallibel Finance the Orit Group of companies and through PLC, Vallibel Power Erathna PLC, The Fortress continuous leadership given to other Resorts PLC, The Queensbury Leisure Ltd and companies in the Apparel Industry. Further, Delmege Limited. He is the Deputy Chairman being a Board member of the BOI since 2005, of Hayleys PLC, Royal Ceramics Lanka PLC, he gained wide experience in Government Horana Plantations PLC, Lanka Administration. He has won awards such as Ceramic PLC and LB Finance PLC. He also Asia Pacific Outstanding Entrepreneurship serves on the Boards of Amaya Leisure PLC, Award in 2013, Sri Lankan Entrepreneur of Haycarb PLC, Hayleys MGT Knitting Mills PLC, the Year in 2002 and the Silver Award of the The Kingsbury PLC, Dipped Products PLC, National Chamber of Exporters of Sri Lanka for Lanka Floortiles PLC and Orit Apparels Lanka the Garment Extra Large category in 2004. (Pvt) Limited. Appointed to the Board: 1st January 2012 as Former appointments: Chairman and Director a Non Executive Director. Appointed Deputy General, Board of Investment, Sri Lanka. Chairman on 26th January 2012. 02 Mr Aravinda Perera Membership of Board Sub Committees: Skills & Experience: Counts over 29 years Chairman of Board Shareholder Relations in the Banking sector. Fellow Member of Committee, Member of Board Risk Management Institute of Bankers, Sri Lanka; Fellow Member Committee, Board HR and Remuneration of the Chartered Institute of Management Committee, Board Strategic Planning Accountants, UK; Chartered Engineer Committee, Board Nomination Committee and and member of the Institute of Engineers, Board Credit Committee. Sri Lanka; MBA from the University of Sri Jayewardenepura; Bachelor of Science Current Appointments: Chairman/Managing degree in Engineering from the University of Director of Orit Group comprising Orit Apparels Moratuwa. Lanka (Pvt) Ltd, Orit Trading Lanka (Pvt) Ltd, Chairman Style-Kraft Sportswear (Pvt) Ltd Appointed to the Board: 25th November (Canada) and Orit Inspired Creations (Pvt) Ltd, 2008 as an Executive Director and appointed Deputy Chairman of Joint Apparel Association Managing Director with effect from 1st January Forum (JAAF), Executive Committee Member 2012. of Apparel Exporters Association 200gfp, Executive Committee Member of Sri Lanka Membership of Board Sub Committees: Apparel Sourcing Association (SLASA), Member of Board Credit Committee, Board Executive Committee Member of Old Boys’
25 Mr Deepal Sooriyaarachchi BOARD OF 05 Skills & Experience: Counts over 30 years experience in Sales, Advertising, Marketing, DIRECTORS Human Resources Development & Strategy with extensive experience in the field of insurance. Fellow member of the Chartered Institute of Association of Ananda College & Patron of Old Marketing UK and a Chartered Marketer. Past Ananda Buddhist Association and Basnayake President of Sri Lanka Institute of Marketing. Nilame of Hendala Temple. Holds an MBA from the University of Sri Jayawardenapura. Pioneer in disseminating Former Appointments: Board Member of Sri management knowledge in Sinhala Language. Lanka Institute of Textile & Apparel, Chairman A leading management development of Apparel Exporters’ Association 200gfp consultant and Author. during 2006 to 2008, Chairman of GC Lanka Clothing (Pvt) Ltd. Appointed to the Board: 5th August 2010 as an Independent Non Executive Director Mr Sanjiva Senanayake 04 Skills & Experience: Extensive local and Membership of Board Sub Committees: overseas experience in the financial Chairman of Board HR & Remuneration services sector having served in the senior Committee and Board Marketing Committee. management capacities at premier financial Member of Board Audit Committee institutions and as an independent consultant. Current Appointments: Independent Appointed to the Board: 1st January 2012 Non Executive Director at AIA Insurance as Independent Non Executive Director and Lanka PLC; Pan Asian Power PLC, Hemas appointed as Senior Director with effect from Manufacturing PVT Ltd (Chairman, Non 26th January 2012. Executive Independent) Commissioner of Sri Lanka Inventors Commission. Member National Membership of Board Sub Committees: Administrative Reforms committee (NARC). Chairman of Board Treasury Committee, Certified Partner RBL Group USA Member of the Board Audit Committee, Board Credit Committee, Board Risk Management Former Appointments: Managing Director Committee and Board Strategic Planning Aviva NDB Insurance PLC. Committee, Prof Malik Ranasinghe Current Appointments: Non Executive Director 06 Skills & Experience: Extensive governance of Asian Hotel & Properties PLC, Hemas Power experience as a Vice-Chancellor and Non- PLC, Hemas Pharmaceuticals (Pvt) Ltd Executive Director on corporate boards. A Fellow Member and International Professional Former Appointments: Senior Investment Engineer of the Institution of Engineers, Sri Officer, Global Financial Markets Department, Lanka; Fellow of the National Academy of International Finance Corporation (Private Sciences, Sri Lanka; PhD from University of sector investment arm of World Bank); British Columbia, Vancouver, Canada in Civil International Finance Corporation Resident Engineering as a Canadian Commonwealth Representative for Sri Lanka & Maldives; Scholar; published extensively on Engineering Assistant General Manager (Treasury & and Environmental Economics with Project Investment Banking) at National Development Management, Recipient of accolades and Bank of Sri Lanka; Consultant (Treasury & awards including the General Research Business Development) Commercial Bank of Committee Award for outstanding Contribution Ceylon Ltd, Citi Bank Brunei, Citibank Colombo to Sri Lankan Science from the Sri Lanka Citibank Sydney; Co-ordinating Engineer, Association for Advancement of Science, the Greater Colombo Economic Commission; Committee of Vice-Chancellors and Directors Development Planning Assistant, United (CVCD) Excellence Award for 2012 for the Nations Development Program. Most Outstanding Senior Researcher in Technology and related Sciences, the Award for Outstanding Contribution to Education 2012 at World Education Congress and the Education Leadership Award 2013 at the 4th Asia’s Best B-School Awards, Singapore.
26 Appointed to the Board: 30th August 2011 as an Member of Board HR & Remuneration Independent Non Executive Director Committee, Board Credit Committee and Board Marketing Committee Membership of Board Sub Committees: Chairman of Board Credit Committee, Member Current Appointments: Chief Executive Officer of Board Audit Committee, Board Strategic of ART Television Broadcasting Company Planning Committee and Board Treasury (Pvt) Ltd, and IWS Geographical Information Committee Systems Ltd. Director of IWS Holdings (Pvt) Ltd. Current Appointments: Senior Professor in Civil Engineering, University of Moratuwa and 09 Mr Deshal De Mel Independent Director Textured Jersey Lanka Skills & Experience: Master of Science degree in PLC and Access Engineering PLC International Political Economics from the London School of Economics, Bachelor of Arts degree Former Appointments: Vice-Chancellor of with Honours in Philosophy, Political Science and the University of Moratuwa, Chairman of the Economics from University of Oxford. Committee of Vice Chancellors and Directors of Sri Lanka, Council Member of the Association Appointed to the Board: 1st January 2012 as a of Commonwealth Universities, Fellow of Non Executive Director the National University of Singapore, Non Executive Director of the Colombo Stock Membership of Board Sub Committees: Exchange and Lanka IOC PLC, Independent Member of Board Credit Committee, Board HR Director Hemas Power PLC & Remuneration Committee, Board Strategic Planning Committee, Board Shareholder 07 Mrs Dhara Wijayatilake Relations Committee, Board Treasury Skills & Experience: Attorney-at-Law, LLB (Cey), Committee and Board Marketing Committee Senior Public Officer counting over 39 years experience in the Public Service. The first Current Appointments: Senior Economist, woman to hold the post of a Secretary to a Hayleys PLC, Member, Economic Fiscal Cabinet Ministry. and Policy Planning Committee and Export Committee of the Ceylon Chamber of Appointed to the Board: 30th August 2011 as Commerce. Independent Non-Executive Director Former Appointments: Economist, Institute Membership of Board Sub Committees: of Policy Studies, Sri Lanka focussing on Chairperson of Board Risk Management international trade, trade in services, foreign Committee, Member of Board Audit Committee aid and post-conflict economics.
Current Appointments: Secretary to Ministry of 10 Mr Ranil Pathirana Technology & Research, member of Sri Lanka Skills & Experience: Extensive experience Law Commission in finance and management in financial, apparel and energy sectors. Fellow member Former Appointments: Secretary to the Ministry of the Chartered Institute of Management of Justice, Secretary to the Ministry of Plan Accountants, UK(FCMA) and holds a Bachelor Implementation of Commerce degree from the University of Sri Jayawardenapura. Miss Annika Senanayake 08 Skills & Experience: Graduate of the University Appointed to the Board: 1st January 2012 as an of Nottingham Heads Corporate Planning for Non Executive Director IWS Holdings (Pvt) Ltd., in diversified business interests in telecommunications, broadcasting, Membership of Board Sub Committees: aviation, automobiles, shipping, warehousing Chairman of Board Audit Committee, Member and logistic support services, packaging and of Board Strategic Planning Committee food processing. Current Appointments: Group Finance Director, Appointed to the Board: 1st January 2012 Hirdramani Group of Companies, Non- appointed to the Board as an Independent Non Executive Director of Hayleys PLC. Executive Director. Former Appointments: Chief Executive Officer, Membership of Board Sub Committees: Vanik Bangladesh Securities; AVP of Vanik Chairperson of Board Nomination Committee, Incorporation.
27 BOARD OF DIRECTORS
Mrs Saumya Amarasekera 11 Skills & Experience: Counts over 26 years in active legal Trusts and Practice in Civil Law practicing in the Original, Apellate & Supreme Court as an Attorney-At-Law. Holds a Masters in Law from the University of Pennsylvania with particular emphasis on Insurance Law, Privacy and Defamation Law. She has experience in areas relating to Money Recovery, Property, Testamentary, Condominium Disputes, Family Law and litigates on behalf of financial services sector clients and has specialised in local and international arbitrations.
Appointed to the Board: 1st June 2012 as an Independent Non Executive Director
Membership of Board Sub Committees: Chairperson of Board Nomination Committee (from November 2012 until 11th December 2013). Member of Board Nomination Committee and Board Marketing Committee.
Current Appointments: Legal practitioner Member of the Bar Association of Sri Lanka, Member of the Supreme Court Complex Board of Management. 12 Mr Ranjith Samaranayake Skills & Experience: Extensive experience as Head of Finance & Planning at National Savings Bank, Commercial Bank PLC and Sampath Bank. Counts over 38 years experience of managing finance in the financial services sector. Holds a Bachelor of Commerce (Accountancy Special) Degree from the University of Peradeniya.
Appointed to the Board: 1st January 2009 as an Executive Director.
Membership of Board Sub Committees: Member of Board Credit Committee, Board Risk Management Committee, Board Strategic Planning Committee and Board Treasury Committee
Current Appointments: Group Chief Financial Officer, Sampath Bank PLC, Director Siyapatha Finance Ltd.
Former Appointments: Senior Deputy General Manager, Finance & Planning at Commercial Bank PLC.
28 CORPORATE MANAGEMENT
01 02
04
03
06
05
29 CORPORATE MANAGEMENT
08
07
09 10
11
12
30 13 14
15
16 17
19
18
31 CORPORATE MANAGEMENT
1 Mr Aravinda Perera 15 Mr Amanda Abeyweera Managing Director Assistant General Manager - Administration
2 Mr Ranjith Samaranayake 16 Mr Upali Dharmasiri Executive Director / Assistant General Manager - Recoveries Group Chief Financial Officer 17 Mrs Nimali Abeyratne 3 Mr Nanda Fernando Assistant General Manager - Branch Credit II Senior Deputy General Manager 18 Mrs Shashi Jassim 4 Mr Lalith Jayakody Assistant General Manager - Senior Deputy General Manager - Corporate Finance & FCBU Finance & Planning 19 Mr Pradeep Perera 5 Mr Saman Herath Head of Internal Audit Senior Deputy General Manager - Operations & Branch Credit
6 Mr Wije Dambawinne Deputy General Manager - Treasury
7 Mr Tharaka Ranwala Deputy General Manager - Marketing & Business Development
8 Mr Aruna Jayasekera Deputy General Manager – Human Resources
9 Mrs Anoja Karunaratne Group Chief Risk Officer
10 Mr Ajantha De Vas Gunasekara Deputy General Manager - Finance
11 Mrs Hiranthi De Silva Deputy General Manager - Corporate Credit
12 Mr Dinusha Ihalalanda Assistant General Manager - Operations
13 Mr S Sudarshan Group Company Secretary
14 Mr Deepal Samarasekera Assistant General Manager - Branch Credit I
32 CHIEF MANAGERS
02
01 03
06
04 05
07 09
08
33 CHIEF MANAGERS
10
11 12
14
13
1 Mrs Anuja Goonetilleke 8 Mr Maheel Kuragama Chief Compliance Officer Chief Manager - Operations
2 Mrs Nirosha De Silva 9 Mr H B Keerthiratne Chief Manager - Card Centre Chief Manager - Finance & Forex Back Office
3 Mr Rajendra Ranasinghe 10 Mr Amal Kirihena Chief Manager - Systems & Procedures Chief Manager - Branch Credit
4 Mr Pununuwan Wickremasekera 11 Mr Sanjaya Gunawardena Chief Legal Officer Chief Manager - Branch Credit
5 Mr Sanath Abhayaratna 12 Mr Thusitha Nakandala Head of Trade Services Chief Manager - Branch Credit
6 Mr Manoj Akmeemana 13 Mr Prasantha De Silva Chief Manager - Branch Credit Chief Dealer
7 Mr Ajith Salgado 14 Mrs Ayodya Iddawela Perera Head of Information Technology Chief Manager - Corporate Credit
34 SENIOR MANAGERS
02
01 03
04
05 06
08
07 09
35 SENIOR MANAGERS
10 12
11
15
13 14
17
16 18
36 20 19
21
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22
25 26
27 28
37 SENIOR MANAGERS
1 Mr Sujith Abeyratne 16 Mr Hemantha Marasinghe Senior Manager - Branch Supervision Senior Manager - Engineering Services
2 Mr Dushyantha Dassanayake 17 Mr Nalaka Gunawardena Senior Manager - Systems Development & Senior Manager - System Audit Electronic Delivery Channels 18 Mr Prasanna Mullegama 3 Mr Asoka Manikgoda Senior Regional Manager Senior Manager - Recoveries 19 Mr Janaka Jayasuriya 4 Mr Ananda Wijitha Senior Manager - City & Commercial Credit Senior Manager - IT/ Communication & Networks 20 Mr Lasantha Senaratne Assistant Company Secretary 5 Mr Jawana Atukorale Senior Manager - Compliance 21 Mrs Kumari Jayasuriya Senior Regional Manager 6 Mr Thilak Abeysinghe Head of Deposits 22 Mr Pasan Manukith Senior Manager - Systems Development 7 Mr Sisira Dabare Senior Regional Manager 23 Mr Deepal De Silva Senior Regional Manager 8 Mr Saman De Silva Senior Regional Manager 24 Mr Halin Hettigoda Senior Manager - Network Service Centre 9 Mr Vijith Peiris Senior Manager - Computer Operations 25 Mr Gayan Ranaweera (IT-EDP) Senior Manager - Credit Risk
10 Mr Priam Kasturiratne 26 Ms Dulsiri Jayasinghe Senior Manager - Operational Risk & Senior Manager - Corporate Finance Market Risk 27 Mrs Aloka Ekanayake 11 Mrs Achala Wickremaratne Senior Manager - FCBU Senior Regional Manager 28 Mr Lalith Weragoda 12 Mr Prasada Gooneratne Senior Manager - Human Resources Senior Manager - Database Administration (IT-EDP)
13 Mr Nayana Peiris Senior Regional Manager
14 Mrs Chamila Bandara Senior Regional Manager
15 Mr Chatura Rudesh Senior Manager - Trade Services
38 THANKS TO THE LOAN WE RECEIVED FROM SAMPATH BANK, WE WERE ABLE TO CONSTRUCT A FIVE STOREY BUILDING FOR THE LINGAM COOL BAR IN JAFFNA. WE ALSO APPRECIATE THE BANK’S ADVICE AND SUPPORT TO EXPAND OUR BUSINESS.
THE SERVICE AND HELP WE RECEIVED AT THE BANK WAS EXCEPTIONAL.
A GEETHASHAGILAN PROPRIETOR (LINGAM COOL BAR, JAFFNA) 17TH FEBRUARY 2014 MANAGEMENT DISCUSSION & ANALYSIS
WE HAVE PROVED RESILIENT TO EXTERNAL SHOCKS THROUGH EFFECTIVE RISK MANAGEMENT PROCESSES AND OUR ABILITY TO RESPOND TO CHANGES IN OUR OPERATING ENVIRONMENT.
services to all customers throughout the country as Sampath Bank Group well as overseas customers. Sampath Bank PLC is Sri Lanka’s third largest non- government Bank with an asset base of Rs 382 Bn and GROUP STRUCTURE 3,688 employees serving over 1,865,012 corporate The Group comprises of Sampath Bank and and retail customers through a network of 212 Subsidiaries engaged in providing specialised branches throughout the country. We have a proud financial services to clients and Subsidiaries heritage of customer focussed innovations which engaged in providing services to the Bank. The Bank have shaped the banking industry in the country and contributes 94% to the Group’s pre-tax profit and is we have gained recognition as an innovative bank, the most significant entity within the Group. successfully combining technology and financial services to provide superior access to financial
Sampath Bank PLC
Siyapatha Finance Sampath Co Ltd (formerly: SC Securities Information Sampath Sampath Leasing (Pvt) Ltd Technology Centre Ltd and Factoring Ltd) 100% Solutions Ltd 97% 100% 100%
Provides IT Leasing, Factoring related services Renting of and Accepting Fixed Stock Broking to the parent and Commercial & Savings Deposits to financial sector Property clients
40 period. Asaresult the trade deficit isexpected to is estimated to bereduced by 0.7% for the same increased by 6.9% in2013 and imports expenditure extent. Earnings from exports are estimated to be curtailed the growth of the trade deficit to agreat costs corrected the overheating of the economy and andvehicles greater pass through of fueland energy tariffs onimports of items selected includingmotor greater flexibility onexchange rates, higher border rates, impositionof acredit ceiling onbank lending, in 2012 whichincluded increasing of policy interest 2012. The stringent policy measures implemented be 7.2% for 2013, an improvement from 6.4%in The SriLankan economy growth isestimated to unresolved and could result innew crises. advanced economies remaindebt major inall system inthe Euro zone and highlevels of public remain. issues Key suchasthe fragmented financial their rate of growth butsignificant downside risks markets. The advanced economies have increased growth rates and asset declined quality inthese continue to account for the bulk of the growth but averaging amere 3.5%in2013. Emerging economies economicGlobal growth continued to remain weak Operating Environment delivering services financial imaginative to Sampath Bank isamass-bank focussing on CORE AREAS OFOPERATION E-Banking Credit &DebitCards Treasury Operations Corporate Banking Personal Banking Lanka e-gateway for tourist visasto SriLanka. for the convenience of our customers. These range from cashto the mobile Sri Develops and maintains arange of products facilitating electronic transactions unmatched promotions and the securityfor highest transactions all Offers arange of cards to suitthe diverse needsof lifestyle SriLankans with through Unitand the Investment PrimaryDealer Department. Also investments of and Government customer sales Securitiesare carriedout exchange rate, interest rate and liquidityriskfrom normal business activities. activities and inter-bank operations, the to Bank’s manage exposure to for carryingout andResponsible local foreign currency fund management Services, Corporate Credit and the Foreign Currency Banking Unit operational needsthrough our sub-divisionsCorporate Finance, Trade Delivers solutionstailored financial to meet corporate investment and transactional and financing needs finances through arange of products address that their investment, Caters to awide range of customers facilitating of management personal experienced emerging inmost market economies. earnings and somedeterioration inasset as quality which reflected the moderated growth incorporate transport. year Overall, beenachallenging ithas costs of services essential suchaselectricity and from the drastic weather patterns and the increasing 6.9% driven by both increasing food prices resulting 4.5 months of imports. average Annual inflationwas USD 7,128 to Mnasatend 2013 whichisequivalent The gross official reserves increased by 4.4%to respectively, bolstering the Balance of Payments. worker remittances increased by 24% and 11.7% in 2013. Encouragingly, earningsfrom tourism and contract to US$8,594 Mnwhichis12.8%of the GDP core areas of operations are: individuals, corporates and other Our institutions. Economic 7.2% Growth 41
Annual Report 2013 Sampath Bank PLC MANAGEMENT DISCUSSION & ANALYSIS
COUNTRY PERFORMANCE
GDP Growth Import & Export Exchange rate - USD - LKR % USD Mn Rs
8.0 8.2 127.16
83 130.75 ,1 19 20,269 6.8 19,046 7.2 13,451 4 110.95 113.90 9,77 10,559 10,452 8,626 2011 2011 2011 2012 2012 2012 2013 2013 2013 2010 2010 2010
GDP Growth % Import - USD Mn Exchange rate - USD - LKR Exports - USD Mn
CBSL Policy Rates Inflation Balance of Payments & Trade Balance % % USD Mn 9.5 7.6 921 700 9.0 151
8.5 8.5 (1,061) 7.5 7.2 6.9 6.2 6.7 7.0 (4,825) 6.5 10) (8,594) ,7 (9,409) (9 2011 2011 2011 2012 2012 2013 2013 2013 2012 2010 2010 2010
Repo Annual Avg Balance of Payments - USD Mn Reverse Repo Trade Balance - USD Mn
Per Capita Income Worker Remittances Bank Interest Rates
USD-Mn USD-Mn % % 24.2 24.4 6.7 14.4 3,28 2 6.0 2,923 11.7 2,836 .1 10.9 10.8 4 10 3 3 5.1 2,400 9.
17.7 9. 9. 8.3 5 2 7. 7. 4.1 6.2 11.7 2011 2011 2011 2012 2013 2012 2013 2013 2012 2010 2010 2010
Per Capita Income Worker Remittances USD Mn T-bills - One Year Growth rate % AWPLR AWDR
42 Banking sector soundness indicators of Licensed Commercial Banks * 2013 3rd quarter figures high growth. The industry experienced ahighlevel external factors prevailed that duringthe period of this given anaturalthat isperhaps adjustment the years of highcredit growth itcould beargued also portfolios. Asthe slower growth rate follows two growth of both corporate and personal banking the mainreason for declining imports impacting margins for import of motor whichwas vehicles such asthe impositionof documentary credit remainedvehicles, inplace with further restrictions introduced motor imports, onselected particularly included pawning product. asakey Border tariffs the growth of personal banking portfolios which prices inApril 2013 was factor a key decelerated that the highbaseeffects. The dramatic decline of gold borrowing of funds from abroad by corporates and debt markets, economy, asluggishglobal increased of the Banking sector includingeaseof access to Several factors contributed to moderate the growth ceiling imposedby Central Bank inMarch 2012. 21% growth recorded in2012 inlinewith the credit credit 2013 compared ceiling inJanuary to the rate of 8.8%in2013 despite the withdrawal of the The sector witnessed amoderated loan growth September. 3,031 extension offices and 2,496 ATMs asatend the banking atotal sector has of 3,426branches, and 9licensed banks. specialised Collectively commercial banks, 12foreign commercial banks the year whichcomprisedlicensed 12domestic the number of players inthe banking sector during sector’sfinancial assets. There in was nochange systemfinancial accounting for 70.6% of the total The Banking sector player isakey inthe country’s reflecting the lower growth rate of the sector in2013. lower the than contribution made in2012 of 10.7% accounted for 8.6%of GDPin2013, marginally The Banking, Insurance and Estate Real sector THE BANKING SECTOR Capital Adequacy Ratio–Total Capital % Capital Adequacy Ratio–Tier 1Capital % Return onAssets (%)Before Tax Return onEquity (%) Liquidity Ratio(%)-DBU Requirement Statutory 20.0 10.0 5.0 - - demand for private sector credit. reduced further in2013 inan effort to stimulate etc.management Policy rates were kept low and of foreign currency notes, rates lending and risk reporting,financial corporate governance, issuance during the year covering arange of topics including The Central Bank issued anumber of directives increase from 13.1 %and 15.0% respectively in2012. the Total Capital Adequacy Ratioat15.8%,amarginal 2013 with Tier 1Capital Adequacy Ratioat13.6%and sector remains well capitalised asat30th September to more costefficientoperating models. The Banking the measures taken by industry all players to move lowermarginally the than previous year reflecting curtail the growth of operating expenses to alevel exports and imports. The to industry beenable has due to lower trade volumes witnessed inboth of interest. Fee basedincome declined marginally both and inhigher reversal impairmentcharges redeemed dueto loss invalue whichwas reflected earnings of the sector asfewer were pawned articles Deterioration of the pawning portfolios impacted to excess liquidityand intensifying competition. interest marginsdeclined across the sector due lacklustre performance of the Colombo Bourse. Net and exchange rates, excess liquidityand the further exacerbated by the volatility of the interest the earningsof the banking sector whichwere Low demand for credit discussed above impacted liquidity obviated the need. out aggressive campaignsfor deposits asthe excess deposit growth inthe sector asbanks didnot carry second quarter by 200basispoints.This impacted Bank lowering the statutory reserve ratio inthe of liquiditydueto low credit demand and Central 2011 32.4 16.0 14.3 19.8 1.7 2012 20.3 15.0 31.3 13.1 1.7 2013 *13.6 *15.8 16.0 37.7 1.3 43
Annual Report 2013 Sampath Bank PLC MANAGEMENT DISCUSSION & ANALYSIS
OVERALL, IT HAS BEEN A CHALLENGING YEAR WHICH REFLECTED THE MODERATED GROWTH IN CORPORATE EARNINGS AND SOME DETERIORATION IN ASSET QUALITY AS EXPERIENCED IN MOST EMERGING MARKET ECONOMIES.
SECTOR PERFORMANCE
Asset Growth Net Interest Margin Statutory Liquid Assets Ratio % % %
19.9 4.6 37.7
17.9 19.7 36.6 4.1 4.2 16.6
31.3 3.5 32.4 2011 2011 2011 2013 2013 2013 2012 2012 2012 2010 2010 2010
Asset Growth Net Interest Margin Statutory Liquid Assets Ratio (DBU)
Cost to Income Ratio Return on Assets Return on Equity
% % %
1.8 79.3 1.7 22.0
1.7 75.2 20.3
19.8 74.1 72.0 1.3
16.0 2011 2011 2013 2013 2012 2012 2010 2010 2011 2013 2012 2010
Cost to Income Ratio Return on Assets Return on Equity
44 Sri Lankans. there access isequal to services financial to all continue to provide the all services to ensure that taking the total of super branches to 8.Ourbranches 8.00 amto 8.00 pmand are located towns in busy branches are in2013. They open for business from Additionally, 4branches were upgraded to super transactions and to better reflect the brand. environment inwhichto carryout banking branches were upgraded to provide apleasant to creating apositive customer experience. All our serviceon enhancing capabilities with aview branch network. This year we focussed attention increase the business volumes of the existing of ourelement corporate strategy beento has of locationswith potential inthe country, avital International Airport. Asthere isadequate coverage officeopened apay atthe Mattala Rajapakse Super. and Gampaha Thalahena Further we also added 3branches duringthe year inKaragampitiya, We commenced the year with 209branches and Infrastructure growth * 2013 3rd quarter figures by customer focussing experiences onenhancing demonstratedSampath Bank has itsability to grow credit demand and decreased trade volumes. banking sector with moderate growth dueto low year beenanother for the2013 has challenging Our Performance Total Capital Adequacy Ratio Tier ICapital Adequacy Ratio levels ofsustainable organic equitygeneration. The Bank maintains astrong capital baseasour aimisto maintain astrong balance sheet provides that for teammanagement tasked with the assets managing and liabilities. our ability to compete and effectively the skills and experience of our maintained even increasing while our market share whichreflects efficient pricingof our assets and liabilities. This trend been has industry and levels reflecting our ability the to timely manage Our Net Interest maintained beenconsistently above Marginhas in 2013 dueto the excess liquidity. campaigns were nomajor fact that doneto increase the deposit base year period. We continued to maintain this in2013 aswell despite the Our deposit growth remains well above industry growth rates over a5 interfaces. bothby enhancing face-to-face interactions and technology user by focussing onproviding asuperior service to customer all segments We have achieved asset growth rates above the industry growth rate those whoare not customers. services to Sampath Bank customers and even to devices duringthe year which provides arange of withcompatible iPhones/iPads and Apple Android rate exceeding 100%.We launched an application in popularity dueto the country’s penetration mobile banking re-launched continued to grow in2012 has customers to transact through 1,842ATMs. Mobile ATM network isthe inthe largest country enabling Kandy and Negombo. The Sampath Interbank conveniently located inthe tourist hubsof Colombo, US Dollarsand Euros to SriLankan rupees and are are foreign currency ATMs enablingconversion of taking the total ATM network to 274. Three ATMs Our ATM network increased with 12new installations continued to invest inmaintaining this advantage. been acore competitive strength and we have From the inception of the Bank, technology has operating environment. and our ability to respond inour to changes shocks through effective processes risk management innovation. We have proved resilient to external combining human resources and technological through improved service effectively quality Sampath Bank 35 16.6% 23.5% 42 *15.8% 14.2% 41 15.0% 24.1% 01 *13.6% 10.1% .%3.5% 4.2% 2013 Banking Industry 2013 45
Annual Report 2013 Sampath Bank PLC MANAGEMENT DISCUSSION & ANALYSIS
Province No of Branches No of ATMs Central 19 25 Eastern 17 17 North Central 9 10 North 13 13 North Western 19 21 Sabaragamuwa 12 15 Uva 9 10 Western 92 137 Southern 22 26 Tota l 212 274
Assets Assets Total assets of the Bank grew by 23.5% above the Rs Bn industry growth rate of 16.6% for 2013 according to 4
a client focussed strategy driven by a dedicated 259. team of banking professionals. We continue to maintain credit growth rates above the industry 208.1 average due to our unrelenting focus on providing 169. 7 a superior service to all segments of our clients. 124.1
The Bank managed to grow its loan book by 24.9% .7 75
despite the Banking sector recording a disappointing 66.0 54.9 46.9 40.6
growth rate of 8.8% due to low demand for credit as 35.2 26.7 underlying economic growth decelerated and trade 23.1 volumes declined. Policy interest rates were reduced
twice during the year. This positively impacted the 2011 2012 2013 2010 growth rate in the second half of the year. However, Loans & receivables to other customers underlying factors such as economic growth and Financial assets held for trading Other Assets trade will need to improve to sustain the momentum in the long term. While growth was largely led by the corporate sector it was encouraging to see the increasing contribution made by the branch network to the growth of advances which amounted to 58.8% of the total advances. We will continue to focus both Rs 3,490 Mn in 2013 mainly due to the increased on increasing our market share in the corporate provision for pawning which amounted to Rs 3,509 sector as well as the increasing business volumes Mn. Collective impairment without pawning on through the branch network. the other hand decreased by Rs 572.0 Mn in 2013. Financial investments recorded a mark to market Financial Assets held for trading which consist of gain of Rs 276 Mn from the Treasury Bills and other Government Treasury Bills and quoted equities held trading securities which were higher than the for dealing purposes increased from Rs 35.1 Bn in 2012 corresponding gain in 2012 of Rs 72 Mn. There was to Rs 46.9 Bn in 2013. The Bank invested more than Rs a net impairment reversal of Rs 19 Mn without the 11.0 Bn in Treasury Bills during the year due to excess pawning provision. liquidity in the market. The decline in gold prices impacted the pawning The impairment provision on individually significant portfolio of the Bank and safeguards were introduced loans marginally increased from Rs 729 Mn in 2012 to maintain the risk reward equilibrium in line to Rs 798 Mn in 2013. The total Impairment provision with the risk appetite of the Bank which includes a increased significantly from Rs 65 Mn in 2012 to lower loan to value ratio and measures to manage
46 33.9% in2013. from 34.6%in2012 to deposits declined marginally current and savings account balances (CASA) to total the atacost.The needarises,albeit proportion of the that growthoptimistic can beaccelerated when attract deposits asthere was excess liquidity. We are campaignswerein 2012. Nomajor carriedout to the year was 24.1% 24.3% growth as against achieved growth rate. The deposit growth of the Bank during the Bank growth remained has above the industry 2012 dueto excess liquidityinthe market although Liability growth beenlow also incomparison has to Liabilities governance structure. leveraging technology combined with arobust credit avoid delays inprocessing facilities by successfully staff. specialised Wea highly to have beenable business. This ensures credit that isgranted by Branch or Relationship whoinitiate Managers delegated to and Managers Regional not the system where authority for credit approval is of credit by quality acentralised credit approval ispre-sanctioning mechanisms NPL management exposure onpawning. strength Akey of the Bank’s reducing productthe the lending mix, gradually Liabilities Rs Bn
153.3 Debt issued& Due to 2010 8.6
ot 8.5 her cust Borrowings - 120Mn 2013: USD ot 195.2 her borr Foreign omers 2011 19.8
11.4 ow ed fu
243.3 nd
s 2012 28.8
11.6 Other Liabilities
300.6
2013 38.9
14.2 Priority privileges for Sampath Bank cheques USD 100MnSyndicated Term Loan Facility governance structure. with robust credit technology combined successfully leveraging processing facilities by to avoid delays in We have beenable } 47
Annual Report 2013 Sampath Bank PLC MANAGEMENT DISCUSSION & ANALYSIS
Foreign Borrowing & Local Borrowing Rs Bn Credit Growth 22.3 24.9% 18.1 16.5 13.5 1 0.7 8.6 6.3 Interest Income was insufficient to offset the impact from the additional impairment charge against the pawning portfolio. Further the revaluation gain on 2011 2012 2013 2010 the Foreign Currency Banking Unit’s (FCBU’s) foreign Foreign Borrowing currency reserves fell below the previous year by Rs Local Borrowing 994 Mn mainly due to the slower depreciation of the domestic currency during 2013, as compared to the Sampath Bank engaged HSBC to raise a syndicated last year and due to the conversion of a part of Bank’s loan of USD 45 Mn which was increased to USD 100 FCBU reserve into LKR in 2013. All these factors played Mn in view of the vibrant market appetite making it a key role in the decreased profitability of the Bank the first successfully concluded deal over the USD in 2013. However, we are of the view that all charges 100 Mn mark by the Bank. This reflects the confidence relevant to 2013 have been recognised and that we of the foreign investors in the Bank’s performance to commence a new year with the worst behind us and date, a strong Balance Sheet and the ability to sustain improved systems to manage the risks arising out of the growth momentum. A further loan of USD 20 Mn our business lines. The Group companies contributed was raised from Proparco, the ‘private sector’ arm 5.7% of the net profits as the Bank continues to of the French Development Agency (AFD), to finance dominate Group results. renewable energy projects which the Bank believes will be a key growth sector in the country given the Key Challenges policy to allow greater pass through of the rising Whilst the operating environment presented energy costs. a number of challenges for the Banking sector including Sampath Bank, we were able to successfully Debt Issued and Other Borrowed Funds increased grow our lending portfolio by 24.9%. The credit during the year by 34.8% from Rs 28.8 Bn as at end ceiling imposed in 2012 was withdrawn in December 2012 to Rs 38.8 Bn as at the end of 2013. However, 2012 but it failed to stimulate credit demand as the mix of foreign currency borrowings and rupee expected reflecting the deceleration in the economy borrowings changed significantly from 62.7% in in line with most emerging markets. Despite exports 2012 to 57.4% in 2013 even with the syndicated loan which grew only by 6.9% and a decline in import raised during the year. This is partially due to the volumes, the Bank was able to grow its export trade Bank raising Rs 5 Bn by issuing 50 Mn unsecured volumes by 30% during the year by providing a subordinated redeemable 5 year debentures of Rs. superior service to our corporate and SME customers. 100/- each in the local market. The Bank entered into a cash flow hedge to manage the exchange rate risk The most significant impact was the dramatic on the USD 100 Mn foreign currency borrowing. decline of gold prices which affected the pawning portfolio which had grown significantly in the Profitability previous year. Pawning is a popular product which The profit before tax of Rs 4.5 Bn was 39.3% lower than many personal banking customers are familiar with the Rs 7.4 Bn profit before tax recorded in the previous and is relatively easy to obtain due to a relatively year due to the impairment provision against the simple documentation and evaluation process. In the pawning advances which amounted to 17.9% of Total North and East where immovable collateral cannot Operating Income in 2013. Despite the satisfactory be independently verified due to the destruction growth in advances, the corresponding increase in Net of land registries, it is key to providing capital to
48 comparison with 64.9%in2012. 73.7% of Total Operating Income in2013 in both asset and liability products. NII contributed remunerative products and effective re-pricing of duetoof diverting 23.7% mainly resources to more Rs 11.6Bnin2012 to Rs14.4Bnin2013, an increase foreign currency borrowings. NII increased from to Rs20.3 Bnin2012 dueto increase indeposits and increased by 31.0% to Rs26.6Bnin2013 compared to the increased Interest Income. Interest Expense the year which facilitated contributed LKRlending of the FCBU into currency partof local inthe early Conversion of partof the foreign currency reserves funds and effective of management the fund base. growth re-pricing inbusiness volumes, of timely Rs 31.9Bnin2012 to Rs40.9 Bnin2013 dueto Interest Income increased by 28.4%from Net Interest Income (NII) increase incosts. coming years. This will the helpto also manage moderate expansion to itsbranch network inthe locations of the country, itexpectsa to have only now coveredhas adequately of most the strategic branches to aconsistent standard. Since the Bank 2nd quarter 2013, general inflationand upgrading increments given to the staff with effect from the to an increase instaff cadre coupled with salary growth inoperating due expenses was largely recording an increase of Rs1,386Mn(15%).This Rs 9,248 Mnin2012, rose to Rs10,634 Mnin2013, Operating expenses of the Bank whichstoodat more predictive and proactive tools and techniques. ofthe management asset portfolios and the useof in technology to further our enhance capabilities in risk awareness culture inthe organisation and invest from the pawning portfolio. We continue to nurture a addressed despite effectively the adverse impacts the that Bank environment was achallenge Safeguarding asset inthe quality current operating term and could bere-priced. position to re-price products asmost were short Net Interest Margin.The Bank was inafavourable both asset and liability products to safeguard the this and through effective timely re-pricing of higher interest rates. However, the Bank addressed accounts to timedeposits to take advantage of the customers shiftingfunds from current and savings (CASA) with inthe deposit mixdeclined marginally The proportion of Current and Savings Accounts to this product. marketsin global makes itprudent to limitexposure banking sector. However, the volatility ingoldprices even more limited access to capital inthe formal entrepreneurs and farmers whootherwise will have Profit Af Profit Bef Rs Bn Int Int & NI Net Int Rs Bn Rs Bn
er er 5.0 4.07 21.1 NI Net Int Profit Af Profit Bef Int Int M 2011 est Expense est Incomeest & M 2011 8.94 2011
er er 12.6 3.4 er est Expense est Incomeest te er or est Incomeest te r Ta est Incomeest or r Ta
7.4 e Ta
31.9 e Tax 4.17 11.61 2012 2012 2012 x 20.3 5.2 x x &
40.9 4.5 4.16 2013 2013 14.37 2013 26.6 3.4 % 49
Annual Report 2013 Sampath Bank PLC MANAGEMENT DISCUSSION & ANALYSIS WE HAVE AGGRESSIVELY GROWN OUR CARD OPERATIONS AND ARE ONE OF THE LEADING LOCAL BANKS IN THIS BUSINESS LINE.
Fee and Commission Income Income accounted for 13.3% of Total Operating Fee and Commission income totalled Rs 3 Bn in 2013, Income, mainly due to the decrease in foreign an increase of 7.1% over the previous year. Net Fee currency revaluation gains in line with our strategy and Commission income represented 13.0% of the to decrease the proportion of income from volatile Total Operating Income in line with aggressive growth sources. of business volumes in our card operations and trade services. We have aggressively grown our card operations and are one of the leading local Banks in this business line. We also implemented a strategy to gain market share in trade finance through provision of a superior service and extended hours. Our branch network, the dedicated and experienced team and technology combined effectively to expedite processing of documentation to ensure a positive customer experience and enabling them to compete effectively.
Net fee & commision income Rs Mn
SMS Alertz - keeps you updated about your account 2,543
2,149 Total Operating Income 1,811 Total operating income increased by 9.1% to Rs 19.5 Bn in 2013 mainly driven by a significant increase in NII which accounted for 73.7% of Total Operating Income. Net Fee and Commission income also increased by 18.3% accounting for 13.0% of Total Operating Income 2011
2012 2013 due to aggressive growth of card and trade related services. The decline in Other Operating Income is Net fee & commision income mainly due to the decrease in gains from foreign currency revaluation in line with corporate policy to Other Operating Income reduce reliance on income from volatile sources. Other operating Income comprises gains from foreign currency revaluations, income from investment Operating Expenses securities, and other miscellaneous sources of income Operating expenses increased by 14.9% from Rs of which gains from foreign currency revaluation 9.2 Bn in 2012 to Rs 10.6 Bn in 2013 due to inflation, is the most significant. Gains from revaluation of increase in staff cost and the island-wide programme foreign currency declined by 102% over the previous to upgrade branches to a consistent standard. year mainly due to a decrease in foreign currency Careful management of expenses has enabled us to gains arising from the conversion of foreign currency achieve a deceleration of operating expenses growth reserves into rupees for expansion of the LKR credit rate for the second consecutive year. Curtailing portfolio and the slower depreciation of LKR against growth of operating expenses has been possible the US $. Net Trading Income and Other Operating due to our low cost branch model which deploys
50 ratios inthe industry of 11staff per branch. functions. We have one of the lowest staff per branch technology to centralise effectively specialised Expenses Op Rs Mn Expenses Other Op Pe Shareholders fu Rs Mn RsMn rsonnel Expenses& Gr Op er
3,560 1.0 Other Op Pe 2010 20,991 ow 8,058 er 2011 2011 ating rsonnel Expenses ating Expenses
4,499 th Rate
2011 21,344 era er 4,009 14.8
ating Expenses 2012 9,248
2012 ting 5,239 25,645
2012 nd
4,417 14.9 2013 2013 10,634
2013 28,418 6,217 % Consolidated Fund. therefore will not needto transfer any funds to the Fund Account for the purposesand specified lending utilised the fully Investment almost Sampath Bank has per the recent most direction issued by CBSLin2013. unutilised require transfer to the consolidated fund as for for lending specified purposesand any amounts per the relevant direction. These funds are utilised before tax computed for of payment income tax as ofpayment Services Financial VAT and 5%of profit comprises retentions of 8%of profits calculated for fund account isamandatory requirement and 10.8 Mnrespectively. The increase inthe investment Ownership Plan amounting to Rs885.4Mnand Rs of optionsby staff under the Employee Share 33 shares held)paidinApril 2013 and the exercise to capitalisation of scripdividend (1new share for DecemberMn asat31st 2012 to Rs4,460Mndue for 2013. Stated Capital increased from Rs3,564 Mn dueto the relatively modestprofits recorded Shareholders’ Funds increased by amodestRs2,774 Shareholders’ Funds of Inland Revenue. after 2010 tax finalising return with the Department provisions, whichwere provided inprevious years, toBank reverse managed Rs355 Mnworth of tax during the year compared with 29.3% in2012. The Effective Tax Rate for the year reduced to 23.6% economic conditions. limited opportunities for growth given the underlying affected by the highexposure to pawning and the 3.4 Bnin2013. Overall, the performance been has a decrease of 34.4% from Rs5.2Bnin2012 to Rs $. Posttax profits were affected similarly reflecting and the slower depreciation the of US LKRagainst conversion of foreign currency reserves into rupees decrease inforeign currency gainsarisingfrom the decline ingoldprices inworld markets coupled with of the pawning portfolio necessitated by the sharp due to the higher impairmentprovisions inrespect lower the than pre-tax profit of Rs7.4 Bnin2012 The Bank’s pre-tax profit isRs4.5Bnwhich is39.3% Pre and PostTax Profit well due”category. as“not fallen covering both facilities due”category inthe”fallen as December31st 2013 for the entire pawning portfolio taking into account the goldprices prevailing asat impairment provision been computedon pawning has recorded amarkto market gainof Rs276 Mn.The advances was investments Rs214Mn.Financial 3,509 Mn.The net from other all impairmentcharge the pawning portfolio for the year amounted to Rs pawning portfolio. against The impairmentcharge of decline ingoldprices asudden onthe sharp dueto the impact Rs 65Mnto Rs3,490 Mnmainly Total impairmentlosses from increased dramatically Impairment Loss onLoan and Receivables 51
Annual Report 2013 Sampath Bank PLC MANAGEMENT DISCUSSION & ANALYSIS THE BANK HAS NOW COMPLETED ITS PREPARATIONS FOR MIGRATION TO THE INTERNAL RATING BASED FOUNDATION APPROACH (IRBFA) OF BASEL II IN 2014
Dividend The Directors have recommended a final cash Cash dividend of Rs 8.00 per share. Dividend Performance Ratios Rs 8.00 2013 2012 per Share Cost to Income Ratio 59.14% 58.24% (with FSVAT) Return on Assets (after tax) 0.99% 1.88% Return on Equity 12.69% 22.25%
The Cost to Income ratio increased slightly due to worth of Rated Unsecured Subordinated Redeemable drop in income growth as a result of higher FCBU Debentures in December 2013. The Statutory Liquid revaluation gain in 2012. Both ROA and ROE declined Assets ratio improved due to the excess liquidity and in line with the decrease in profits due to the is maintained at a reasonably high level over the impairment charge on the pawning portfolio and the minimum regulatory requirement. It is lower than relatively low credit growth experienced during the the industry average of 37.7% as the Bank maintains year. a prudent trade-off between liquidity and interest earning assets. Tier I Capital Adequacy Ratio showed a decline over December 2012 due to reduction in profit after tax The Bank has now completed its preparations for and increase in assets. Total capital adequacy ratios migration to the Internal Rating Based Foundation however improved from 13.6% in December 2012 Approach (IRBFA) of Basel II in 2014 and looks forward to 14.2% as at 31st December 2013 mainly due to to better management of capital using techniques additional Tier II Capital raised by issuing Rs 5 Bn available in Basel II.
Capital Ratios
2013 2012 Statutory Requirement Statutory Liquid Assets Ratio 27.6% 22.4% 20.0% Capital Adequacy – Tier I 10.1% 11.8% 5.0% Capital Adequacy – Total 14.2% 13.6% 10.0%
52 innovations the havebanking shaped industry that potential markets and aheritage of technological a common abranch goal, network covers that key strengths whichinclude ateam isfocussed that on achieving growth leveraging onour competitive Our strategic priorities for 2013 were basedon STRATEGY Operational Review Bank inSriLankaBest for 2013. Sampath Bank asthe whenselecting Euromoney in the sector and the market, afactor considered by overall return to shareholders isamongthe highest helped to strengthen the Bank’s capital structure. The cash dividend and 50%scripdividend whichalso the inthe highest Banking sector and comprised 50% The dividend proposed in2012 (paidin2013) was Growth through inclusive banking Excellence incustomer service Technology driven banking Safeguard asset quality Operational efficiency Product innovation the defined growth. services and delivery necessary to channels support within the riskappetite of the Bank linked to support for business itskey linesdefining areas of growth The below diagram depicts the strategy of the Bank fell short of our highexpectations. measures to strengthen areas of concern where we operating environmentchallenging and have taken We have performed well onmany fronts despite a foundation for growth. sustainable strategiesoptimal and provide solutionsthat asolid facilitates debate and discussion inarrivingat respect for the rightsof our stakeholders which of striving for excellence, shared values and in the country. our Underlying strategy isaculture 53
Annual Report 2013 Sampath Bank PLC MANAGEMENT DISCUSSION & ANALYSIS
Core areas of Delivery Stakeholders Strategy operation Channels Senior Citizens Children Personal Banking Professionals Growth through innovative product design and excellence in customer care Families Individuals Focussed growth through superior Corporate Banking Corporates service as a business partner Corporates Development SMEs Selective growth Banking MSMEs Corporates SMEs Expand Branch Note Operation Units, Individuals Trade Services aggressive marketing, superior service ATM Network ATM Mobile Banking
Migrant Workers Network Branch Internet Banking Internet and competitive pricing Local and Correspondent Banks Authorised Money Changers Corporates Treasury Individuals Growth through trading and FX markets Operations Local and Foreign Banks Cardholders Credit and Debit VISA, Master and AMEX payment Market penetration through promotions Card Operations schemes and additional product features Merchants Safeguard asset quality Maintain Stability Improve Risk Management, Compliance and Corporate Governance
Wealth Creation
Suppliers and Government and Employees Shareholders Customers Service Providers Regulators
54 Banking facilitated by the branch network followed The Bank’s area key of growth beenPersonal has PERSONAL BANKING Technology Investment in card franchises Three leading Sampath Bank deposit growth was 24.2% Deposit growth Growth through customer focus and inclusive banking investments intechnology. Initiatives launched and expanded duringthe year include: We remain committed convenience to bringunparalleled to our customers through in the industry. of cards despite adecline inboth numbers with growth inboth the number and usage Business growth beenencouraging has the world’s three card franchises. leading We are bank inSriLanka to thehave only innovative banking products. on customer convenience through our branch business volumes and our focus rate. This isattributable to the growth of rate whichwas above the industry growth for 2013 reflecting an encouraging growth First bank inthe First country to have foreign currency ATMs changing Launch of ATM the cardless 1st inAsia/South Asiausingthe East latest technology to Extended banking hours Increasing Super Branches Launch of appfor mobile banking provide secure access. contributors to both income and operating profit. by Corporate Banking whichare the significant most 120,000 150,000 Nos No of 30,000 60,000 90,000 Deposits Rs Bn 0
Credit Card 2010 153 2010
2011 196 2011
244
s 2012 2012
2013 302 2013 55
Annual Report 2013 Sampath Bank PLC MANAGEMENT DISCUSSION & ANALYSIS
Current Accounts Foreign Currency Accounts Deposit Savings Accounts Senior Citizens Accounts Products Term Deposits Minor Savings Accounts Certificates of Deposit
Housing Loans Credit Cards Advances Leasing Pawning Loans against Gold Business Loans Products Personal Loans Development Loans Educational Loans Agriculture Loans
Branch Banking M-Commerce Products Mobile Banking Channel E-Remmittance ATM Banking Door Step Banking Products Internet Banking Other Value Additions Pre-paid Cards Internet Payment Gateway Credit and Debit Cards
Personal Banking is a key business line for the Bank of products broadly categorised into Deposits, accounting for 58.8% of total advances and 67.0% of Advances and Channel products. We rely on interest income which are respectively the largest excellence in customer care in both our face-to-face asset base and highest proportion of income in the interactions and our technology driven interfaces. Bank. It is also the most profitable business line for the Bank and relies on excellence in customer services coupled with technology and innovation for growth. Personal Banking has the largest portfolio
No of Branches and ATMs No of Branches 4 27 264 255
19% 222
17% 212 209 206 91% 13%
9% 171 19% 12% 9% 23% 2011 2012 2013 2010 Central Sabaragamuwa Eastern Southern No of Branches Northern Uva No of ATMs North Central Western North Western
56 in April 2013 and have reduced the Bank’s exposure which impacted the entire services financial sector receivable) inview of the volatility ingoldprices reduced the pawning portfolio (includinginterest safeguardingwhile asset quality. We strategically excellence incustomer care and product innovation volumes from the branch network leveraging on of 8.8%.Ourfocus this year was to increase business encouraging at16.9%,well above the industry average of the Personal Banking advances portfolio was deposit baseand 58.8%of advances for 2013. Growth Personal Banking accounts for 86.3%of the Bank’s Total Assets Business Promotion Officers. located in5maincountries represented by 10 workers. The network covers 87 exchange houses facilitate inward remittances by migrant channelled Correspondent Banks and Exchange Houses to We continue toarrangements enhance with WHILE SAFEGUARDING ASSET QUALITY. CUSTOMER CARE AND PRODUCT INNOVATION NETWORK LEVERAGING ON EXCELLENCE IN BUSINESS VOLUMES FROM THEBRANCH OUR FOCUS THIS YEARWAS TO INCREASE Term Deposits Currency Accounts Accounts Accounts Account Savings Current Foreign Special Special Rupee Accounts for Non-Resident Sri Foreign Special Investment Resident Foreign Currency NonResident Foreign Currency FDfor withdrawals Easy without Cash(Interest Kalin paidupfront) S Double X-Set for Teens and Pubudu Sapiri for Minors Guaranteed Payment Cheques Sampath Supreme Normal Current Accounts Lankan Investors Deposit Accounts Accounts Accounts penalties the intense competition for deposits observed excess liquidityinthe banking sector eased also private sector investment and credit growth. The inOctober and again points inMay to stimulate during the year asCBSLcutpolicy rates by 50basis and current accounts. Average deposit rates declined aggressive branch drive focussed onboth savings successkey area for dueto the the Bank primarily ahead of the industry growth rate of 15%and was a Growth inPersonal Banking deposits was 21.8% Deposits limited the tools asset to manage quality. impacted profitability of card operations and also rates to 2%and to limitcredit card interest to 24% balances. Regulations inplace to interest limitpenal increasemarginal of Rs7.4 Bninindustry credit card a growth of 30%year onyear for 2013 despite a the end of the year. Growth of card balances reflected from 25.4%atthe beginningof the year to 19.7% at Sanhinda Saver for Seniors HitSaver Investment Account Export Foreign Currency SecuritiesInvestment Resident Non-National Normal Fixed Deposits Sanhinda for Seniors Accounts Accounts Foreign Currency Accounts 57
Annual Report 2013 Sampath Bank PLC MANAGEMENT DISCUSSION & ANALYSIS GROWTH IN PERSONAL BANKING DEPOSITS WAS 21.8% AHEAD OF THE INDUSTRY GROWTH RATE OF 15%
in the previous year as well. Consequently AWDR launched for smart phones and tablets on both declined during the year from 10.1% in December iOS platform and Android platforms and was made 2012 to 9.4% by year end. However, the deposit mix available to the customers through the Apple and continued its declining trend for current and savings the Google Play Stores. We will continue to invest accounts (CASA) favouring high cost term deposits. in technology for branchless banking in view of the However, the Bank was able to maintain the CASA country’s high penetration rate over 100% for mobile at 33.9%, marginally below the 34.0% observed for phones and increasing internet based payments. the banking sector in Q3 2013. The Bank’s expanding range of channel products enhances value to the Advances customer, facilitates ease of transacting with the The Personal Banking Advances portfolio accounts Bank and managing their finances, which provides for 58.8% of the total advances of the Bank and a competitive edge. This year a mobile app was contributes 67.0% of the Total Interest Income. It
Sampath Sevana Housing Loans Sampath Sevana Dayada for seniors Sampath Sevana for Professionals
Personal Vehicles Leasing Commercial Vehicles Machinery
Loans Against Pawning Gold Biz Cash for businesses
Personal Loans Educational Loans Loans for Professionals
Factoring Export Bills Purchasing Business Hire Purchase Import Financing Finance Export Finance Working Capital Financing Packing Credit Guarantee Facilities
Development Loans SME Loans Agricultural Loans Microfinancing
58 into private universities dueto difficulties financial employed. Anumber of studentswhocould not enter repay after completion of their educationand once concessionary interest rates allowing the students to their higher education.These loans were granted at considering the needsof the studentsto finance long term loans Educational were introduced rates with terms flexible and conditions. Special scheme for doctors atvery concessionary interest to the needsof the professionals and aseparate LoanSpecial schemeswere introduced to cater this segment. and Hire facility Purchase was introduced to exploit marketvehicle was developed to agreater extent increase inthe unregistered prices, vehicle the used the SME sector inthe formation of capital. Dueto the construction and supports services. Leasing mainly the mainsectors including,agriculture, trading, increase incustomduties.Growth was driven by increaseinstitutions, inthe prices vehicle dueto competitionstiff from other banks and financial portfolioThe grew leasing by 1.7% despite the adopted. monitored and the corrective measures were levels. The world market prices were constantly to value ratios were reduced to more conservative in determining the advances quantum and the loan trend, the Bank adopted aconservative approach Considering the volatile and declining market sectors includingagriculture, SME and consumption. branches. supported Loan proceeds the mainly April 2013. Pawning facilities by are 210 handled byprices dropped about 29.0% significantly since international prices ingold.The international gold portfolio (amortised cost)considering the declining reduced from 25.4%to 19.7% of the total advances Exposure to Pawning sector was consciously helped inimproving the portfolio. housing projects atconcessionary interest rates also repayment capacity. Inaddition,tieupswith major made solutionsto the customers inlinewith the competitive pricing,prompt approval of loans, tailor competition inthe market,dueto the mainly growth over the previous year despite the stiff Housing loans grew by Rs1.8Bn,whichisa16.9% by the SME sector. growth of Rs23Bn,more 80%was than contributed from Rs135 Bnin2012 to Rs158Bnin2013. Outof the Personal Banking Advances portfolio grew by 16.9% Guarantees, E-Remittances and credit cards. The for the Bank through marketing of Trade Services, generatedalso 43.5%of the total Fee BasedIncome collateral to cashflow basedlending It basedlending. the andalso small mediumenterprises prefer that is responsible not for just the personal loans but portfolio. disbursements, monitoring and control of the system improving the appraisal, documentation, be strengthened with the upgrade of the Finacle in appraising credit facilities. These processes will professionalsinvolving skilled appraisal by highly 2013 providing segregation clear of dutiesand appraisal system whichcontinued duringthe year asset portfolio dueto the centralised credit We to maintain have beenable ahighquality lower rate for alonger term. Bank (CDB) for the SME sector atcomparatively granted borrowing against from China Development working capital requirements. Inaddition,loans were rates for the muchneeded capital expenditure and have longterm financing facilities atlower interest the SME with sector immensely the opportunity to exceeded Rs2.3Bnduringthe year, whichbenefited loans granted under the Investment Fund Account credit schemesset upto develop these areas. The branches inthe North and under East, the special We granted 442micro financing loan facilities to infrastructure development, educationand tourism. inagriculture,engaged plantation, manufacturing, to the SME sector indeveloping the entrepreneurs to 12%respectively was extensively utilised to lend the reduction of the rate from 35% to 28%and 20% Corporate Tax and Services Financial VAT dueto (IFA) set upfrom the proceeds of the saving onthe tourism and education.The Investment Fund Account development, Business Process Outsourcing (BPO), coconut, factory modernisations, infrastructure husbandry, plantations includingtea, rubber and sectors assisted included agriculture, fishing,animal entrepreneurs. andsmall mediumscale The main disbursing Rs4,660Mnin2013, to develop micro, The Bank participated in14refinance credit schemes burdening the parents. secondary educationatprivate universities without benefitted from this schemeand commenced their Rs 10 82 Officers Business Promotion Houses Exchange 59
Annual Report 2013 Sampath Bank PLC MANAGEMENT DISCUSSION & ANALYSIS
Channel Products significant channel products are E Remittance and The main purpose of channels is to facilitate ease of Credit and Debit Cards as they account for transaction transacting with the Bank by provision of alternative highest volumes respectively. methods of completing banking transactions which in turn saves time and resources for the customer. Branch Banking We have seen a growth in both the need for face- The branch network expanded to 212 branches to-face transactions and the automated channels as with 3 new branches added during the year to we achieve deeper penetration in providing financial provide island wide coverage. These 212 branches services. It is observed that key growth channels for are organised into 21 Regions and assigned to 21 payments are mobile, cards and internet. The most Regional Managers in order to have a centralised
Branch 212 Branches 8 Super Branches Banking Platinum Plus Priority Banking Centres
Mobile Sampath App (Apple & Android) SMS Banking Mobile Cash Telebanking Banking SMS Alertz
Extended ATM Network Easy Cheque Deposit Machines ATM Banking Cash Deposit ATMs Off Site ATMs Foreign Currency ATM
Internet Sampath Vishwa Sampath Pay-Easy Banking Sampath Internet Payment Gateway
Visa Debit Cards Sampath Cargills Debit Cards X-SET Co-Branded Card Sanhinda Saver Visa Debit Card
Visa and Master Classic Visa Signature Credit Cards Visa and Master Gold Visa Infinite Visa Platinum AMEX Travel
IVR M-Commerce MPOS (Mobile Merchant Banking) E Ticket/NFC Products Mobile Top Up through Bank Account
Sampath EMTs Direct Web Payment E-Remittance EMTs to Mobile Cash Web Service Payment
Other Value Door Step Banking Additions Safety Deposit Lockers
60 installed 2off-siteinstalled ATMs atthe Southern Expressway with new units and upgrading of the software. We the network replacement and timely of oldmachines time at99%level dueto the of prudent management We to maintain have beenable the ATM availability we disburseRs14Bnper month via our ATM network. network through the ATM SWITCH. Onan average wide with the of amalgamation 10 banks into our ATM Our customers can use1,842ATMs spread island expanded to 274 machinesincluding10off site ATMs. notes utility and bills. paying Ourown ATM network mini statements, exchanging foreign currency transferring of funds between accounts, obtaining provide the facilities of withdrawing, depositing, banking transactions. Ourvalue added ATMs base dueto the convenience provided inconducting Bank inimproving the account baseand the deposit Our ATM network isoneof the mainattractions of the ATM Network to serviceAirport the (MRIA)mainly passengers. a bank unit International atthe Mattala Rajapakse by anycustomers bank. unparalleled We set also up to provide exclusive service to our highnet worth service.a special OurPlatinumBranch continues facilitating safe keeping of as customers’ valuables deposit lockers were introduced to 20branches environment for our valued customers. Safety consistent across the network providing apleasant the brand with improved exteriors and interiors A further 115branches were renovated to reflect are citiesinthe atprimelocationsinkey country. year were to premises owned by the Bank which accessibility. Two of the relocations duringthe areas, parkingfacilities additional and improved facilities to our customers includingextended lobby were relocated to provide better infrastructure and to improve customer convenience. Five branches branches basedonthe demand of the customers were extended from the normal timeonselective on the customer needs.Additionally, banking hours This network would befurther extended depending the customers dueto the convenient business hours. to the network. These branches are popular among were expanded to 8by addinganother 5branches Super branches whichprovide banking 365day making profits. and asaresult 31newly opened branches started volumes grew inthe relatively young branch network profitability improved duringthe year asbusiness the asset of quality the branch portfolios. Branch processes have beenfacilitated insafeguarding of decisions. Inadditionthe centralised credit approval maintaining and quality the uniformity of the credit be appraising the needof the customers while are equipped with expert credit teams, whowould other operational approvals. Allregional offices decision makingprocess to expedite credit and during 2013. reflecting the growing popularity of internet banking by 30.7%significantly and 52.8% respectively, effected through internet banking increased The volume and value of the transactions financial Internet Banking a growing youth population. phones declines makingthe technology available to expect this trend to continue asthe price of smart been downloaded over 10,000 timesto date. We provedIt has popular with our customers and has Store facilitating banking through asmartphone. available from Store the Apple and Play the Google The Applaunched Sampath Mobile this year is through any network. secure partiesto smsservice transact whichenables to remit island-wide money and are delivered viaa can beusedby account holders aswell asothers the country cashproducts during2013. Ourmobile Telebanking volumes and values respectively in There was a20%and 23%increase and inMobile BankingMobile of banking to our customers. with technological advances the ease inenhancing during the year. We are committed to keeping pace locations and ATM the cardless first inthe country the foreign first currency exchanging ATMs atthree convenience of the commuters. We installed also at the Welipenna Interchange Zone, for the to withdraw money from 1,842 ATMs networks of banks, leading facilitating Sampath customers We successfully connected the ATM network to 10other ATM Branches 274 ATMs 212 61
Annual Report 2013 Sampath Bank PLC MANAGEMENT DISCUSSION & ANALYSIS
Remittances This year we focussed on expanding the overseas Sri Lankan migrant worker remittances surged over networks that facilitate these remittances to provide US$ 6.7 Bn in 2013 and increase of 11.7% from the greater accessibility to migrant workers coupled with US$ 6 Bn recorded in 2012. Migrant worker enhanced service delivery for local beneficiaries to remittances were the highest contribution from a gain market share in this growing business segment. single sector to the country’s foreign revenue and We grew the number of overseas business partners remittances amounted to over 9.9% of the country’s from 53 to 82 during the year covering key growth GDP. Remittances are expected to grow to US$ markets such as Italy, Cyprus, Dubai and Qatar and 10 Bn by 2017 with the implementation of stated also agressively expanded the partner network in Government policies to increase skilled worker Saudi Arabia, Kuwait, Bahrain and Oman. Additionally migration which attracts better salaries and perks. we have 10 Business Promotion Officers, who are At present it is estimated that there are over 1.7 Mn exclusive to Sampath Bank, in markets that have Sri Lankans working overseas which represents 17% high potential such as Saudi Arabia, Kuwait, Qatar, of the country’s working population. UAE and Italy. The launch of a new channel product to support this key customer segment by combining E-Remittance with Mobile cash meant that families can receive funds instantly to the receiver’s mobile which can be converted to cash through any Remittance Commission Income Sampath ATM. Deeper penetration in existing markets Growth was also a strategic priority which we achieved % through excellence in customer care and efficient 20 service. We were able to increase the volume of transactions by 22.3% which contributed to a growth of 20% increase in Commission Income. 13
Sampath Bank sponsored the Qatar Avurudu Festival, Padova festival in Italy and the Oman Vesak Festival
6 continuing its sponsorship of events celebrating Sri Lankan culture in migrant worker markets and also to gain brand association. We also conducted Cash Wasi loyalty raffle draws during the Ramadan season 2011 2013 2012 and the New Year season to reward loyal customers.
Our customers benefit from the ability to send and receive cash instantly, ability to withdraw around the Remittance clock, 24 hours call centre assistance, accessibility Transaction volume through a wide agent network, remittance notification Growth via sms to beneficiary and the support of an island % wide network of 212 branches. They also have a choice of transaction types to suit their particular 22 circumstances which include Pay on Identification, Sampath Bank account credits, other bank account credits, receive to mobile and withdraw from ATM and
12 payment to wow.lk and anything.lk to purchase goods 11 via internet. We will continue to increase accessibility and penetration into migrant worker markets and invest in product innovation to tailor solutions for this key customer segment. 2011 2013 2012 Credit and Debit Cards 25 Years in Cards Sampath Bank was the first bank to introduce Credit Cards to Sri Lanka soon after the launch of the Bank.
62 network. collaborative arrangements with our merchant throughlifestyle innovation insecurity, service and provide value to our customers and their enhance capital for urgentpersonal needs.We continue to transactionsday and provided easeof access to the SriLankans way shaped carryout to their day Our initiatives inboth Credit and DebitCards have
Infinite Card inSouth Asiawith Cirrus and Maestro Introduction of ATM Issue of Debit first MasterCard Credit Card inSriLanka (SET) facility to February 1989 Issue of first Signature Sri Lanka 1997 1988
Platinum Visa
Gold Credit Cards Silver exclusive internet payment Platinum Credit Card in Infinite Credit Cards to Launch of Visa first Signature and Visa Introduction of first Visa WEB Card to Co-Branded Issue of Visa first October 2010 Sri Lanka Sri Lanka Sri Lanka 2002 Gold 2002 franchises: Visa, MasterCard and American Express Sri Lanka to have the world’s three card leading Sampath Bank Bank in continues to bethe only Our Products the requirements lifestyle of our customers. security, transparency and convenience meet that issuer inthe country by providing superior value, We Debitand aimto bethe Credit leading Card MasterCard Silver
Affinity Launch of American first Express
Co-Branded Card franchises (Visa, First and Only Bank andFirst Only American Express in SriLanka with all three major Creditthree major “Travel Lite” Card MasterCard and American ®
Travel Lite ® Travel Prepaid 2013 Express 2012
Visa Debit Cards ® ) Web Card Pre-paid Cards 63 ® .
Annual Report 2013 Sampath Bank PLC
MANAGEMENT DISCUSSION & ANALYSIS } } Credit Card Acquiring Volume Rs Bn We aim to be the leading 40
Debit and Credit Card 35 issuer in the country by 30 providing superior value, 25 security, transparency 20 and convenience. 15 10
5 2011 2012 2013 Industry 2010 The number of active cards in the country decreased by 2.7% from 952,256 at the beginning of the year to 926,949 by the third quarter of 2013. Globally accepted cards account for 96.1% of the total active cards and cards accepted only locally account for Credit Card Portfolio the remaining 3.9%. Outstanding balances on credit Rs Mn cards recorded an increase of 5.6% by end of the first 6,000 half in 2013 from Rs 44.4 Bn as at end 2012 to 5,000 Rs 46.9 Bn as at 30th June 2013, despite the decrease in the number of cards reflecting an increase in 4,000 usage of cards. CBSL has a cap on the interest 3,000 chargeable on credit cards due to disparities of rates charged historically which was decreased from 2,000 28% to 24% during 2013 in line with the interest rate movements in the country. 1,000
0 Debit Cards have grown in popularity with over 12 2011 2012 2013 Mn active Debit cards in the country as at the end of 2010 the 3rd quarter reflecting a growth of 16.1% over the previous year.
Credit Card Usage Rs Mn
15,000
11,750
8,500
5,250
2,000 Sampath Bank is the only bank in Sri Lanka to have the 2011 2012 2013 world’s three leading card franchises. 2010
64 branch employees’ needsare identified through a beenlaunchedinitiative to ensure has the that with the Bank’s Human Resources Function. Anew These programmes are doneinco-ordination knowledge of the Bank’s systems and processes. a culture of risk awareness and ensure sufficient trainers products to and nurture e-learning also to face workshops with both internal and external invest intraining our all staff through amixof face motivatedon ahighly and productive team. We is astrategic imperative asour success depends of the Bank. Developing and motivating our staff which amounts to 63.9% of the total headcount the headcount highest totalling 2,357 employees the branch network of the Bank and therefore has The Personal Banking Divisionisresponsible for Investing inpeople up to itspromise of Choice. beingthe Responsible focus onsecurityaswell to ensure our card that lives facilitate merchant acquisition. We will continue to as well usingtechnology and customer service to The Bank will continue to grow itsmerchant network growth inlinewith consumer changing preferences. to enhancements our customerslifestyle to fuelour continue to focus onproviding convenience and present exciting opportunities for growth. We coupled with the pace of technological innovation believe the that country’s economic aspirations Our overall strategy will beto grow cards all aswe Outlook and hospital bills. schemefor payment consumer traveleasy durables, Fair, the Singer Fair Lifestyle and the zero interest retail events suchasthe Colombo International Book such as`Town sponsorship of the onSale`, largest Choice` and`Responsible our exclusive promotions the positioningof our cards inthe market asthe factors facilitated that our growth in2013 include environmental targets of the department. Key to e-statements 2013 inlinewith since July the 6,000 of our customers from printed statements terminal.point of We sale have converted more than the abilityas ithas to convert android to a mobiles facilitatedhas linkingSMEs to the merchant systems players.small The introduction of mPOS by the Bank service providers whoare aggregators linkingmany collaborative arrangements with e-commerce We promoted have also e-commerce through the needsof both the customer and the merchant. the superior service provided by beingresponsive to merchants inSriLanka onan exclusive basisdueto transactions. the chain Sampath sixlargest Bank has which facilitate e-commerce and pointof sale continue to focus ongrowing our merchant networks the industrywhile by increased 1%.We usage only increased also of usage by 2.7%. 13.7% Similarly 2013 despite the industry experiencing adecline Growth inthe number of active cards was 17%during Our Performance business inthe coming year in linewith trends. global cards are expected to bethe growth key areas of affecting marginsinthe industry. Remittances and the CASA expected mixisalso to continue the trend narrowing spreads inthe industry. The slow growth in competition and regulatory measures will that favour Margins isexpected to continue with intensified concentration ingoldloans. Pressure onNet Interest moderate dueto measures taken to reduce product personal banking credit to portfolio remain islikely generated from the Branch network. Growth of the segment through increased business volumes on increasing our market share ineachbusiness stimulate private sector growth. Ourfocus will be increases with the policy measures taken serve to intensify inthe coming year asdemand for credit We expect competition indeposit mobilisation to the country through innovation. upon our heritage of the shaping banking industry in have served uswell to date and we hope to build customer inorder to further customer enhance value delivery and channels taking our services to the convenience through extended hours, avariety of share ineach business line. Ourfocus, customer advances and remittances to increase our market We will continue to focus on growing our deposits, Future Direction branch ratios inthe sector of 11. The Bank continues to have oneof the lowest staff to was from the region covered by the allotted branch. branch network during2013 of whichthe majority in the branch network. We recruited 264staff to the them. Astaff turnover ratio of 2.5%was maintained programmespecial reaches proactively that out to 65
Annual Report 2013 Sampath Bank PLC MANAGEMENT DISCUSSION & ANALYSIS
CORPORATE BANKING
Aggressive business growth through superior customer service The Corporate Finance Division of the Bank Setting raised US$ 100 Mn through HSBC, the highest benchmarks for syndicated loan raised by a bank listed on the banking sector the Colombo Stock Exchange in a single US$ 100 Mn transaction. Leader in Development Banking has played a lead role financing non- in financing the non conventional renewable conventional energy (NCRE) sector of the country and renewable energy supported such projects to add over 24 Mw to 24 Mw added to National Grid sector the national grid during the year 2013.
Corporate Credit asset portfolios grew Corporate Credit Aggressive Asset significantly despite the sector experiencing a Growth moderation in credit growth 40% We were able to record a significant growth Growth Rate - Growth Rate – in export trade volumes through superior Growth in Export Bank Sri Lanka service and competitive pricing in a year when Volumes overall export volumes in the country shown a moderate growth 30% 6.9%
Corporate Overdraft Facilities Receivable Financing/Securitisation Money Market Loans Term Funding Credit Import / Export Financing Margin Trading
Development Short, Medium and Long Term Loans Development Finance Banking Sourcing and managing refinance funds
Syndication - Participation, Arrangement and Management Corporate Structuring and Investment in Corporate Debt Instruments Finance Custodian Services Fund Raising Activities
One Stop Shop for FCBU Clients FCBU Working Capital Financing Trade Finance Term Funding and Advisory Services
Trade Services International International Operations Bank Note Operations
66 ambition to bethe regional hubfor Energy, Aviation, efficiency. Ourstrategy was to support the country’s increasing while effectively their competency and the Departmentstomembers compete enabled and productivity of the Corporate Banking team training initiative tothe enhance knowledge taken toitsservice enhance levels. Anintensive competitive customer segmentdueto measures to increaseable itsmarket share inthis intensely growth observed in the Banking Sector. The Bank was deceleration indemand for private sector credit growth rate of the previous year despite an overall Banking grew by 38.2%in2013 surpassing the during 2013. The Advances portfolio of Corporate Income and 34.0% of the Bank’s Advances portfolio Corporate Banking accounted for 17.6% Interest of FCY notes. outward remittances and exchange income onsale trade related transactions, bank guarantees, inward from loans and advances, commission through Services. Ourincome isderived from interest income Foreign Currency Banking Unit(FCBU) and Trade Credit, Development Banking, Corporate Finance, divisionswhichcomprisespecialised Corporate and investment needsof our clientsthrough the Bank providing tailored solutions for the financing Corporate Banking business isakey lineof the drive towards Hub status Our corporate banking strategy isto support the country’s KNOWLEDGE, COMMERCIAL AND TOURISM. HUB FOR ENERGY, AVIATION, MARITIME, COUNTRY’S AMBITION TO BETHEREGIONAL OUR STRATEGY WAS TO SUPPORT THE quality loan book. quality in advances was achieved maintaining while a with the asset largest bookof the Bank. The growth to the overallsignificantly performance of the Bank by the team. The Corporate Branch contributed also clients through continuous marketing efforts made of existing clients’ wallets and canvassing of new the year which was dueto increasing the share to recordable a40%growth inadvances during theDespite Corporate the challenges, Branch was to adownwardleading trend rates. inthe lending and the excess liquidity circulation inthe market due to low demand for credit from the private sector year for corporate2013 was achallenging lending Corporate Credit providing service an enhanced to the customer. Vishwa improving the CASA mixfor the Bank while facilities through whichcan bemanaged Sampath branch networks were offered account collection security features were added. LargeCorporates with documentary credits was further streamlined and directed by the Central Bank. The onlineprocess for minimum of to the 10%lending agriculture sector as commodities and ensured also we that maintain a onthefocussing value additionto particularly these continuedalso our support to the agriculture sector, Maritime, Knowledge, Commercial and Tourism. We The Corporate Branch has the largestasset bookof the Bank 67
Annual Report 2013 Sampath Bank PLC MANAGEMENT DISCUSSION & ANALYSIS GROWTH IS PLANNED THROUGH DEEPER RELATIONSHIPS WITH THE EXISTING CLIENTS AS THEIR PREFERRED FINANCIAL SOLUTION PROVIDER
Though we anticipated a larger contribution from beneficial to both the Bank and the customer. trade financing towards the advances growth, the In order to achieve the business strategy our special year was not so conducive for importers. Most of the emphasis would be given towards generating low large corporates engaged in commodity sales took cost funds, reaping the benefits of the merger concentrated efforts to cut down on their imports with the Head Quarters Branch in 2012. We will due to selling and collection constraints in the market endeavour to offer total solutions to corporate clients resulting from slack economic conditions which covering investments, deposits, collection and cash prevailed during the year. Heavy rains and drought management which will be mutually beneficial to had adversely affected certain segments of the the Bank and the client as this effort will help us to agriculture sector resulting in a drop in the fertiliser offer competitive rates to our prime clients while and chemical imports. Food and consumer durable attracting a fair share of their business. We will add imports closed the year with a positive growth. more staff to the business development team to Accordingly, we were able to record a growth of 14.4% facilitate identifying opportunities and converting in import turnover compared to 2012. them to business while increasing back office support to deliver superior service standards. Export turnovers grew by 37.7% despite the setbacks in the Middle East region. A larger quantum of tea Development Banking exports was to this region but with the constraints The Development Banking Division (DB) recorded an experienced in the said market, our exporters have impressive 55% advances growth over the last year taken measures prudently by market diversification mainly fuelled by the Renewable Energy sector which and new markets development to retain their due contributed 56% of the total Development Banking share. Our customised export financing solutions to loan book. exporters by sharing the benefit of low cost funding available in the market enabled us to acquire market share during the year. The following illustrates the sector wise lending of DB;
Future Outlook Sectorwise lending The Corporate Branch will focus on business strategy of DB to contribute actively towards the economic 1.03 0.04% renaissance of the country to reach beyond middle 0.10% 0.18% income status by 2016. Growth is planned through 1.67% deeper relationships with the existing clients as their 8.01% 9.81% preferred financial solution provider by catering for 7.65% growth while developing new targetted relationships 11.93% to increase market penetration. Accordingly, 59.58% we will identify potential clients in the selected priority sectors, namely, energy, aviation, maritime, education, commercial & tourism and expand our exposure to those sectors maintaining the risk and Agriculture Other Customers return in line with the Bank’s defined risk appetite. We Construction Other Services will also enhance our market share in trade financing Infrastructure Tourism by offering structured trade financing solutions to Manufacturing Traders the importers and exporters which will be mutually New Economy Transport
68 national gridduringthenational year 2013. These projects have added over 24 Mwto the ways aswell aslow headand highheadprojects. projects include run-off the river and regulated water wind power and bio-mass projects. The hydro power the prominent most beinghydro power together with includes projects relating NCREsources, all to almost (NCRE) sector of the country and our portfolio financing the non-conventional renewable energy large commercial ventures. We in take role alead project financing for medium,largeand extra The Development Banking Divisionprovides Project Financing above activities. have beendevelopedspecialists to carryout the priorities and adedicated team skilled of highly development to aligned national banking isclosely The Bank’s overall strategic direction for network. to capital for business growth through the branch reportingfinancial to provide increased access to develop their technical capacityand improve withWe especially Micro engage entrepreneurs also administrated by the DB. the Bank’s Investment Fund Account are also Entrepreneurs) sectors. Lending activitiesutilising schemes for the MSME (Micro, and Small Medium DB sources refinance and subsidisecredit medium, largeand extra largecategories. Division isto carryout project financing activitiesfor activityunderThe the major Development Banking ActivitiesKey Greener Way Mul Oya Hydro -Powering Project the Nation -The Cleaner & Total Loans Granted under IFA (Rs Mn) 03-R n21 -R n%Change 2012 -RsMn 2013 -RsMn under-served Provinces suchasNorth, Uva, East, training programmes conducted included the and trading sectors. Customer awareness and agriculture, livestock, domestic/cottage industries enterprises or expanding existing enterprises in approximate value of Rs123Mn to start upmicro 442 loans by December 31st 2013 amounting to an to inclusiveness” “financial where we disbursed Under Micro financing, dueattention was given Developing Micro Entrepreneurs cover the balance amount. approved under IFA and pending disbursementcan issued this year since the total value of facilities to the Consolidated Fund asper the CBSLdirection therefore itwill not benecessary to transfer funds can disburse the balance 4%to loans and qualifying (CBSL) isaround 96%.The Bank isconfident it that the sectors identified by Central Bank of SriLanka The Bank’s utilisation of the IFA funds to inlending the country priorities for increasing provincial GDP. above credit linesto the SME sector inlinewith country strength beenakey has inpromoting the representingbranches virtually partsof all the on the SME sector. The Bank’s reach across 212 further strengthening the Bank’s strategic focus introduced in2011 continued itsgrowth momentum Furthermore, the Investment Fund Account (IFA) SME project financing. from the branch network and 21regional offices on included training 200credit officers nearly selected officers across regional offices and branches. These initiatives competencies by enhancing of credit through the branch network, taken DBhas several to promote refinance and lending SME financing Coconut Cultivation Board during the year. Inorder Finance, Ministry of Industry &Commerce and the Bank, Central Bank of SriLanka (CBSL), Ministry of externally from the World Bank, Asian Development under refinance and subsidisedcredit linessourced We have facilitated Rs6.3Bn of the lending nearly Refinance and Subsidized Funding 2,339 Rs to Micro Projects 123 1,356 Mn 72.5 69
Annual Report 2013 Sampath Bank PLC MANAGEMENT DISCUSSION & ANALYSIS
Sabaragamuwa, North Central and North Western. Future Outlook A special focus was given to the branch network Development Banking will continue to drive business in the Northern and Eastern provinces covering volumes through financing the energy sector, Vavuniya, Mannar, Kilinochchi, Jaffna, Manipay, Kayts, infrastructure development, agriculture, ICT and Nelliady, Chunnakam, Chankanai, Mallavi, Thirunelveli, software development. We will also focus on selected Chavakachcheri, Oddamavady, Chenkalady, investments in the education sector for tertiary Batticaloa, Kaluwanchikudy, Kinniya, Trincomalee, education, tourism and healthcare in line with the Kantale, Muttur and Ninthavur. country’s identified areas of growth. The focus on entrepreneurship development and capacity building During 2013, we continued the “Specialised Micro activities will continue particularly focussing on Entrepreneurs Development Project” to inculcate support for MSMEs engaged in priority sectors and and improve entrepreneurial and technical skills with persuade them to follow and comply with the norms the assistance of German Technical Corporation of social and environmental concerns and statutory (GTZ) and Competency-based Economies through requirements. Internal programs aimed at enhancing Formation of Enterprise (CEFE) Net Sri Lanka for 300 competencies and knowledge of team members of micro entrepreneurs who are ex-LTTE combatants branches and regional offices will be continued to and war widows to help them to start up or expand sustain the support towards the vital MSME sector. existing businesses in the Kilinochchi, Mullaitivu and Vavuniya Districts. Identified entrepreneurs were financed through credit lines at concessionary rates.
International
International Bank Notes Trade Services Operations Operations
Back Office Inward and Bank Notes functions of Outward Repatriation Imports and remittances Operation of Exports SWIFT Pay Offices at Operations Katunayake and Correspondent Mattala Airports Banking
The International Division is responsible for Trade processing of documentary credits on the same Services, International Operations and the Bank day. The centralised department also established Notes Operations. Trade Services and International an office dedicated to Imports within the Old Moor Operations function as cost centres as the revenue Street branch to cater to the specific needs of the is accounted for in the respective marketing functions customers of this branch. This structure has enabled while the Bank Notes Operations functions as a us to provide competitive rates to our customers profit centre. for both foreign currencies and tariffs due to productivity efficiencies. We have also minimised Trade Services processing times and errors using robust IT platforms Trade Services continued to operate extended which form the backbone of our infrastructure. Banking hours to facilitate later cut-off times and Improvements were also made to Sampath Vishwa
70 collected from exchanges, banks, money our own dueto increasedmainly volumes of currency notes of 12.6%over the previous year. Income growth was amounted to Rs140Mnin2013, reflecting agrowth exchange income from these operations which foreign currency notes from the country. We derive the country and isthe bank repatriating largest Sampath Bank imports foreign currency notes to Bank Notes Operations (BNO) year 2012. Straight Through Process (STP) for for payments the awards of excellence inachieving avery highrate of (USA) and CitiBank (USA) have presented uswith increasedto volumes handle of business. HSBCBank the branches and departments of the Bank inorder Unit to offer amore and flexible efficientservice to division. We introduced also shiftwork for the SWIFT process and the enhanced knowledge also within the theenhanced efficiency and effectiveness of the at the centre. resulted This has lapsesand inminimal Outward TTs utilising by the fully expert knowledge implementation of the centralisation process for head count of the business unit. We completed also the increasedhandle volumes without addingto the of the team and efficientprocesses usto enabled business volumes. Itisnoteworthy productivity that growth was 47% during2013 dueto the increased products inthechannel banking sector. Income price competition and development of alternative environmentdespite with achallenging intense Imports to Advance and Open Payment Account methodspayment of Exports to Open Account and TTs’ by 20%duringthe year dueto the shiftingof of Inward TTs’ have grown by 15%and Outward Telegraphic Transfers (TT)of the Bank. Volumes centralised processing unit for Inward and Outward The International Operations Departmentisthe International Operations processes. productivity, efficacy and effectiveness of the growth was 14.5%for 2013 dueto increased team imports decreased by 0.7% respectively. Income exports by increased 6.9%and expenditure only on during the year although country earningsfrom export volumes by 30%and import volumes by 2.3% the year. These usto initiativesincrease enabled of correspondent grown also banks has by 32during offer expert advice to our customers. Ournetwork Documentary Credit whoare to Specialists able unique to Sampath Bank. Ourstaff includes Certified higher levels of and specialisation expertise is that centralised meant also onestopshopconcept has environmentfriendly for trade customers. The refurbished to create amore spacious customer Additionally, the Trade Service Departmentwas monitoring of documentary credits/collection online. Corporate Trade facilitating submission and exporter of foreign currency notes inthe country. consolidate our positionasthe leadership largest Operations will usto retain enable and further the initiatives taken to strengthen the Bank Notes from the above migration. We are confident that toalso attract higher business volumes resulting to provide amore efficientservice to customers and for both Inward and Outward remittances inorder process automated of fully processes implementing and openPayment account methods. We are inthe related transactions migrating towards Advance grow asInward and Outward TTs increase with trade International Operations Departmentisexpected to increase intrade volumes as well. Consequently, years whichwill contribute towards positively an construction and tourism sectors inthe coming in trade volumes. We expect also aboominthe growth of imports and consequentially, agrowth the tightening measures whichhave curtailed the economy isimport driven, we expect in changes due to trends. global However, asthe SriLankan Exports are shiftingto also Open Account method removal of exchange control restrictions in2011. and OpenPayment Account methods with the shifting from other methods payment to Advance are to decline asimports likely to SriLanka are However, business volumes for documentary credits growth to remain islikely inthe digits. low single and aslightincrease inimports aswell although with the trend observed inthe of second 2013 half We expect the exports to increase in2014 in line Future Outlook expensive counterfeit detecting hardware. notes minimisederrors whichhas and investment in and skill levels to detect any type of counterfeit FCY BNO Team acquired has the knowledge specialised helped increasealso the volumes of bank notes. The authorised to changers our operation money which exchange money companies andleading somenew bank notes and we were to canvass able oneof the foreign currency ATMs provided anew source of to increase business volumes from branches. The on foreign currency notes within the branch network Negombo and conducted awareness programmes second Bank Notes Operations unit in Collection us to consolidate our position.We opened the were implemented duringthe year thus enabling our positioninthis leadership business segment impacted the income levels. Actions to maintain currencies of the duringthe half year first also in narrowing margins.The volatility of foreign to new entrants into the market resulted whichhas Competition increased inthis business linehas due branch network and the foreign currency ATMs. 71
Annual Report 2013 Sampath Bank PLC MANAGEMENT DISCUSSION & ANALYSIS
Foreign Currency Banking Unit (FCBU) Corporate Finance has also raised short term working The FCBU advances grew by 21.7% from US$ 133.8 Mn capital funds from foreign banks on both bilateral to US$ 162.9 Mn during the year despite the relaxation terms as well as via structured Trade backed Bankers of exchange controls allowing easier access to foreign Acceptance loans for the Bank enabling the Bank to currency loans for local companies, thus reducing offer competitive rates for onward foreign currency the demand for FCBU loans. Lending to apparel lending on a needs basis. and related sectors contributed to 28.0% of asset growth with the rubber-based manufacturing sector We have also been active in the growing market for accounting for a further 26.0%. Profitability increased corporate debt instruments and grown this portfolio by 18.9% due to increased interest income and by over 100%. Renewed interest in debenture issues sourcing low cost funds from foreign borrowings. The following 2013 Budget proposal to exempt withholding unit continued to be one of the leading providers of tax on interest income earned by investing in listed trade finance services to this sector, and was the main corporate bonds and debentures to create a more contributor of the growth in trade volumes in the Bank. vibrant corporate debt market provided many opportunities. Accordingly we invested in listed Taking advantage of an influx of interest from debentures totalling to over Rs 1.3 Bn based on a risk / overseas banks to lend to local banks, especially rewards assessment in line with the Bank’s investment from the Middle East, our funding base shifted from policies. reliance on deposits to very competitively priced borrowings. The Bank was the co-arranger for a securitised note issue of Rs 3 Bn for a top rated Finance Company in At the same time FCBU operations were also which the Bank also invested Rs 1 Bn. The Bank also impacted by intense competition for trade finance entered into Syndicate partnerships for an off-shore business from the foreign banks domiciled locally, power project, a hotel development project in Colombo which directly utilised their own low cost fund base to as well as a PET processing plant in the South of the offer lower rates to attract higher business volumes. country which we expect to disburse fully in 2014. As a result Corporate Finance was successful in recording an Whilst FCBU’s lending for overseas projects did not outstanding growth of 56%, with its portfolio reaching have a significant growth, several facilities in the Rs 17.4 Bn. pipeline are expected to be booked during the first half of 2014. TREASURY OPERATIONS The Bank Treasury concluded another successful Corporate Finance year under trying circumstances and as the central Corporate Finance handles the fund raising to meet administrator of all fund movement of the Bank the requirements of the Bank and also arranges short managed to provide all stakeholders with the much term working capital lines for specific requirements of needed support to carry out their daily functions corporate clients. During the year this division raised while achieving the desired profit levels to improve US$ 120 Mn for the Bank in two separate transactions. the profitability of the Bank. In doing so the Treasury A syndicated loan of US$ 100 Mn was arranged also ensured that all regulatory requirements in through HSBC which took the deal to the market for maintaining liquidity and statutory ratios were met. US$ 45 Mn and closed the deal at US$ 100 Mn in view of the very vibrant appetite for the syndication. This One of the main challenges the Bank had to face was the first such successfully concluded deal over during the year was balancing excess liquid funds the US$ 100 Mn mark among the Sri Lankan private throughout the year. This was mainly due to the fact sector banks. We also arranged a credit line of US$ that with the confidence the depositors had with 20 Mn from Proparco, the ‘private sector’ arm of the Bank, they continued to deposit funds to the the French Development Agency (AFD) in which the Bank despite the Fixed Deposit rates being reduced French government has a majority stake. These long throughout the year. As a result the Treasury had the term funds are specifically earmarked for renewable task of managing the excess liquidity while providing energy projects: expected to be a key growth area the best rate of return to the Bank. This task proved for the country. a further challenge as the yields of Treasury Bills, the main source of investment for liquid assets was on a downward trend for most part of the year.
72 levels. to maintainmanaging the required profitability positions inthe correct side of the market thus Throughout the year the Treasury to have managed the market movements were anticipated correctly. provides opportunities to make substantial profits if per US$by December. This continued volatility to seeitappreciating to Rs130.75 only again August Rupee then depreciated to Rs133.20 per US$by year end rate of Rs127.65 per US$.The SriLankan Rs 2.25to Rs125.40 per US$by April, from the 2012 throughout the year whichsaw itappreciating by The SriLankan the Rupee US$ was volatile against during the year were lower. significantly Liquid Funds asthe reinvestment yieldsof maturities pressure onthe Net Interest Marginof the Bank’s to 8.29%by December. This brought significant 3.09% from 11.38%atthe beginningof the year TreasuryThe 364day Bill dropped Yield by had USD/LKR Movementin2013(Rs) Rs 127.65 Dec-12 126.20
Jan-13 Interest Rate 12 7. Derivative Exchange 53 Products Products
Feb-13 Products 126. Foreign
Mar-13 75 126. Apr-13 70 126.45
May-13 130.40
Jun-13
Jul-13 131. 132.95 75 Aug-13 132.05
Sep-13 FX Hedging Customer Forward Contracts FX Dealing LKR and FXOptions Forward Rate Agreements FCY and Interest Rate Swaps Interest Rate Hedging TransactionsRepurchase inGovernment Debt Fixed Income Securities MarketMoney Products 130.90
Oct-13 131.25 Nov-13 130 .7
Dec-13 5 movements inthe foreign global currency markets done by the Treasury monitoring continuously the maintainingwhile the profit margins. This was Bank Notes Operation to bringinthe largevolumes provide the muchneeded competitive rates for the in the history of the Bank. The Treasury continues to achieved in2012 thus recording the volume highest 2013. The to Bankexceed managed the repatriation Treasury continued itsimpressive performance in The Bank Notes Operation under the purview of the providing more funds for the Treasury to manage. rates too the meant that liquidityfurther increased by 2.0% to 6.0% inJuly. The reduction of these Requirement whichstoodat8.0% too was reduced respectively inDecember. The Statutory Reserve by and9.0% 0.5% again inMay to 6.5%and 8.5% at 7.5% and 9.5% were reduced by 0.5% to 7.0% and Rates and Reverse rates Repurchase whichstood by the Central Bank. The mainCBSLRepurchase The year saw also several policy rate adjustments One year Tr %
Dec-12 11.7 11.3 Jan-13 11.1 Feb-13 easury bill ra Mar-13 11.4
Apr-13 11.3 10.9 May-13
Jun-13 10.7 te 10.6
Jul-13 movement in2013 10.6 Aug-13 10.6 Sep-13
Oct-13 10.0 9. 7
Nov-13 8.3
Dec-13 73
Annual Report 2013 Sampath Bank PLC MANAGEMENT DISCUSSION & ANALYSIS THROUGH THIS EFFECTIVE OPERATION THE BANK MANAGED TO MAINTAIN ITS DOMINANCE IN THE BANK NOTES OPERATION DESPITE INCREASED COMPETITION FROM NEW ENTRANTS.
and also the local factors that govern the Bank Notes The Treasury will continue with its current policies Operations and quoting rates accordingly. Through to the year 2014 as well which aims to provide a these rates provided from the Treasury the Bank superior service to all stake holders through efficient Notes Operations department and special units set service standards and products suited for individual up at Colombo and Negombo acted as effective customer requirements. collection points for Bank Notes. Through this effective operation the Bank managed to maintain RECOVERIES its dominance in the Bank Notes Operation despite The Recoveries Department is key to the overall increased competition from new entrants. performance of the Bank as its main function is to manage overdue advances with the objective The Treasury was instrumental in facilitating the of minimising Non Performing Advances through growth in the Remittance business by providing intervention with the customer and other relevant competitive rates to all Foreign Currency Remittance divisions of the Bank such as the branch network, houses especially in the Middle Eastern Region. As a credit and legal divisions. result the Bank’s overseas representatives managed to canvass more business to the Bank and enhance Performance the status of Sampath Bank as one of the major The Recoveries Department continued its focus forces in the remittance business. on minimising new entrants to the Non Performing portfolio through constant monitoring of arrears The Treasury was instrumental in coordinating the and initiating prompt action in collaboration with raising of a listed Debenture Issue from the market in Branches to prevent arrears escalating to the December, 2013. non performing category. Greater automation of monitoring activities using software developed within the Bank has facilitated tracking of recovery actions AWPLR (Monthly) Movement in 2013 (%) and provides up to date information to all involved in recovery process, greatly enhancing decision making % and follow up activity. The department also focussed 14.1 13.9 on providing reports customised for branches and 14.4 automation of arrears letters and reminders with 13.1 13.6 communications in all three languages to ensure to 11.8 11.8 facilitate greater understanding of the customer. 12.5 11.9 10.9 We create more customer friendly mindset among 11.5 9.9 the staff of Recoveries Department thereby the 10.3 borrower is made to feel that whatever the steps we are taking is in his own interest. The Bank goes to the clients / business venues to negotiate for settlement 13 13 v- y- n-13 arrangements, without waiting them to visit the Bank. Jul-13 Apr-13 Jun-13 Oct-13 Feb-13 Ja Dec-12 Dec-13 Mar-13 Aug-13 No Sep-13 Ma Officers of Recoveries Department made highest number of visits during last 12 months to have direct interaction/discussion to provide “solutions” to the
74 EMPLOYEES Statue of prosperity that brings success or ill motivated. theactions, unless borrower isnotoriously inflexible and offering repayment terms easy instead of filing to rehabilitate the borrower by reviving the business mortgage bond action.The Bank made every effort through action,parate normal legal execution and negotiated settlement process can beescalated of advances cannot that beresolved through the and encourage the customer to repay. Recovery of interest to expedite the normalising processes empowered to negotiate and recommend waivers everyhas to chance repay. Officers have been method of recovery to ensure the that customer Negotiated settlement continues to bethe preferred customers inarrears instead of “pressurising” them. Talent Developing Creating awinning culture through effective management talent of SriLanka. organised by Institute of Personnel Management Award atthe HRConference National 2013 andManagement Training and Development Sampath Bank won awards for Talent the past. team reaping the benefitsof our investments in We promoted have also 243 members of our 2013. programmes covered 90%of our employees in external training programmes. The training training our employees through internal and We invested Rs40.7 Mnindeveloping and impairment provisions made duringthe year. to curtail exposure to pawning and the extensive our credit to quality improve with the actionstaken losses and levels of escalating attention. We expect of duesasthere isprompt recognition of possible provisioning policiesprovide impetus to recovery successful strategies for recovery of NPAs. Prudent minimising new entrants to NPA and implementing The Bank will continue to improve itsprocesses for Outlook order to improve the recovery process. on aregular basisto promote knowledge sharing,in programmes for itsdivisionand Branch Managers The Recoveries conducts Departmentalso training the Bank’s credit granting policiesand procedures. from thelearning recovery processes to improve Policy Review Committee to ensure there that is The Recovery Divisionfeeds backto the Credit previously. been incurred had the Bank asimpairmentcharges properties whichcontributed to the profitability of Department was successful indisposingacquired The Acquired Assets Divisionwithin the Recoveries In Rs Mn ve 2010 26.0 stment inTr stment
2011 62.2
2012 34.9 aining
2013 40.7 75
Annual Report 2013 Sampath Bank PLC MANAGEMENT DISCUSSION & ANALYSIS
EMPLOYEES CONTD.
Creating a winning culture through effective talent management Sampath Bank has a high employee retention Retention rate rate due to: Retaining high levels of employee engagement 97% Talent opportunities for career progression an organisation culture that lives the values a platform that allows employees to realise their potential We are an equal opportunity employer and have Female Female participation Diversity a diverse team as regards to gender, age and participation at in Labour Force ability. Sampath Bank
We encourage fluency in all three languages and provide opportunities to learn English and Tamil 37% 36.3% as the majority are fluent in Sinhala. Employee productivity has increased over the Productivity years in terms of revenue per employee. The Revenue per profit per employee is also on an upward trend if Employee the impairment charge for losses on gold loans Rs Mn Rs Mn is disregarded. A commitment to develop our 13 team, efficient systems and processes combined with investments in technology are the key 11 drivers of employee productivity. 46,526
9 38,797
27,57 7 * 2011 2012 2013
Revenue Revenue per Employee
1 Source: Sri Lanka Labour Force Statistics, Quarterly Bulletin, 2nd Quarter 2013
Sampath Bank relies on a highly motivated team of The Board HR and Remuneration Committee has 3,688 Employees who serve in Head Office and in oversight responsibility and the Managing Director the Branch Network island-wide to deliver results on has executive responsibility for the functions of our defined strategic goals in line with our values. the HR Department. Annual plans, policies and Our team includes 372 new employees recruited in recruitment of Key Management Personnel (KMP) are 2013 of which 195 were to fill new positions created approved by them. during the year. Growth of our employees was limited due to the high level of recruitment over the past The HR model which has been developed internally three years and was limited to 5% for 2013. The Bank encapsulates the vision and the values of the Bank has invested Rs 40.7 Mn on training and leadership and provides a framework for HR planning and development which covered 90% of our team activities. members. Retention remains high at 97% due to high satisfaction levels in our team.
76 strategic business needsand nurture aperformance oriented culture. acomprehensiveThe Bank has framework of HRpoliciesformulated to develop employees inlinewith its
Talent Acquisition OUTCOMES: Effective Processes /HighPerformance /Customer Delight/Corporate / Image Management Management Recruitment Policy
Talent Career and Succession
Leadership Development Transparent and Consistent HRPolicies +Employee Value Proposition
Benefit Management Vision: The Growing Force inSriLankan Services Financial
Training and Learning Training and Development Development Policy
Knowledge Management Customer Focus
HR Policy Framework Continuous Process – Improvement Governance /Compliance Winning Culture Sampath Values Employee Relations Profit,People, Planet Winning Culture
Innovative Solutions Motivated Team Policy (Cost, Quality, Delivery, Flexibility, Customer Service)
Performance Effective Performance Management Reward Results Management Policy Rewards and Recognition
High Productivity
T Internal Communication eam W Performance Management Policy Interpersonal Relations ork
Industrial Relations Professional Standards Code of ethics
Industrial Relations Policy Responsible and Sensitive Individuals 77
Annual Report 2013 Sampath Bank PLC MANAGEMENT DISCUSSION & ANALYSIS
The above policies are reviewed once in three years Our Reward and Recognition Policy was extended and updated whenever necessary. Application of to children of employees for the first time in policies in a consistent manner is key to effective two programmes - a scholarship scheme to management of an ambitious and able team of reward outstanding academic and national level professionals that make up the Sampath Team. achievements and a contest which encouraged the development of talents and rewarded those with Employee Engagement outstanding performance. A high level of employee engagement is key to a highly motivated team and we have provided many We also encourage our employees to acquaint platforms for formal and informal engagement themselves with the financial performance of the among our employees. Bank as key stakeholders. Quarterly results of the Bank are circulated to all staff to keep them apprised As the majority of team members are assigned to the of the financial position and performance against Branches we implemented a new programme named key indicators of the Bank. As a large number of team Regional HR Coordinator Programme to proactively members are shareholders of the Bank, they get the reach each individual team member, to identify opportunity to air their voices at the Annual General their issues and growth potential in order to provide Meeting. appropriate HR solutions. This has enabled us to improve their motivation and performance Diversity levels by addressing the issues identified together Sampath Bank is an equal opportunity employer and with the line managers. We achieved 70% coverage we have a team that is diverse in terms of gender, on this programme in 2013 and will continue it on an age and physical ability. Overall female participation ongoing basis. on our team of 37% is higher than the country’s female participation in the labour force which stands A structured Employee Communication Plan was at 36.3% as at September 2013, as per the most implemented with the following elements to facilitate recently published Sri Lanka Labour Force Statistics, knowledge sharing and ideation in addition to the Quarterly Bulletin, 2nd Quarter 2013. There is female general communication. The elements include a participation at all levels of management although monthly knowledge sharing publication, in the the participation rate declines in the higher levels of Business forum to share creative business proposals management. with the Managing Director and Team Brief inputs to Heads of Departments to discuss with teams at Our team includes employees whose ages vary from monthly meetings. In addition, the Sampath Bank the lowest band of 19 to 21 years to those who are Employee Handbook was re-designed to be more over 55 years. The majority of the employees are in comprehensive. The Employee Grievance Handling the 21 - 30 year category as many were recruited process was also re-designed for better alignment during the rapid expansion phase which took place with the HR policy framework in order to strengthen within the last four years. There is more external the process. We also established an employee recruitment at entry level than at other stages due counselling cell branded as “Helping Hands” which to the Bank’s policy of giving preference to internal is to ensure that employees have access to internal candidates in selecting employees for higher expert advice on handling issues that may arise. positions. All employees have access to the intranet to increase the ease of communication, knowledge We are conscious of the need to ensure that our sharing and knowledge management. Sampath staff is able to communicate in all languages and Sandeshaya, a quarterly newsletter updates team therefore have provided opportunities to improve members on events and achievements of the Bank their English and Tamil language proficiency. We have and its employees. 10 team members with hearing impairments who work in identified areas of the business where their The Bank launched a competition to gather creative impairments do not affect the quality of work ideas on future banking operations titled ‘Banking carried out. industry 2020’ encouraging our staff to visualise what the banking sector would be in 2020.
78 Central Province byNew Geographical Region Recruits analysed Uva Central Province by GenderEmployees analysed and Geographical Region Management Corporate by CategoryEmployees analysed and Gender December asat31st 2013 oal Tota Departments Western Eastern Northern North Western North Central Sabaragamuwa Southern Eastern Senior Management Northern Management Executive North Central Middle Management Middle North Western Junior Management Sabaragamuwa Operational Staff Southern Other Grades Uva l Tota Western Sampath Bank % of Employees of oal Tota aeFemale Male aeFemale Male 2,334 2,334 1,252 485 654 383 100 737 737 140 179 147 137 96 36 63 63 89 89 63 74 74 15 81 Number 372 372 142 30 34 37 37 27 16 18 61 61 1,354 7 ,5 3,688 1,354 584 383 258 733 154 155 36 88 88 39 39 37 22 75 75 14 41 41 17 17 4 Male oal Tota oal Tota 1,238 3,688 1,120 320 1,985 228 267 222 159 128 137 117 56 26 32 25 27 743 537 537 100 98 14 16 136 91 191 7 77 19 Participation % Participation % Female Male Male Male Male 66 66 70 70 86 63 83 53 67 25 52 81 61 65 63 63 82 79 74 0 19 8 3 5 5 71 2 2 2 Participation % Participation % Female Female Female Female % 100 30 30 34 34 39 33 47 37 14 19 17 38 79 26 29 35 37 37 10 17 18 81 21 4 9 8 5 2 7
Annual Report 2013 Sampath Bank PLC MANAGEMENT DISCUSSION & ANALYSIS
Employees analysed by Type of Employment Contract and Gender Male Female Male Participation Female Participation % % Permanent 1,795 1,231 59 41 Employment Trainees 523 106 83 17 Probationers 11 15 42 58 Fixed Term Contract 5 2 71 29 Tota l 2,334 1,354 63 37
No of Employees Employees analysed by period of service
300 304 1,354 1,656 281 2,334
1,147
Above 21 years Male 16 -20 years Female 11 - 15 years 6 - 10 Years Below 06 Years
Employees analysed by Age Age Number Percentage Above 55 05 0.14 51 - 55 63 1.70 41- 50 430 11.66 31 - 40 817 22.15 21 - 30 2,341 63.48 Below 21 32 0.87 Tota l 3,688 100.00
Development in their fields. The faculty consists of 150 resource The Bank has a comprehensive development persons maintaining a healthy ratio of 1 resource plan which encompasses technical and soft skills person for every 25 employees of the Bank. We training, leadership development, on the job training, maintain two Auditoriums and a Computer Lab at experiential learning and counselling. This forms the the Head Office and facilities to conduct Regional blue print for training and development activity in training in 13 locations. We regularly upgrade our the coming year and the achievement of outcomes is training facilities to create a conducive environment assessed at regular intervals to monitor progress in for learning. Our efforts in developing and nurturing line with the plan. The Bank’s training faculty includes our staff have been recognised by the Institute of internal and external professionals who are experts Personnel Management which awarded Sampath Bank
80 various of stages implementation whichhave been hours There of e-learning. are 25business projects at man hours of training and atotal of 60,515 man conducted 466class room sessions with 106,894 the plans relevant to their Departments.We have Heads of Departmentswhoare then provided with exercise iscarriedout incollaboration with the and developments inthe Banking sector. This competency assessments, customer expectations results of the Training whichincludes NeedAnalysis TrainingAn Annual plan isdesigned basedonthe 2013. Development Award atthe HRConference National the Talent Award Management and the Training and Average Training Time per Employee (Hours) Total Training Hours Education (Rs Mn) Total investment inTraining and Professional Investment inTraining (RsMn) Investment InProfessional Education (RsMn) Investment inTraining and Professional Education Geogr an New Recruits 167,000 North We Nort Northern Eas Cent al te y h Cent ra sed by Training 142 rn aphical Regio aphical l Hrs of More than than 16 st ra er l n
We Sabar Uv Southern 2737 61 a st 30 er 7 ag 34 18 n amuw n a 2013 multi professionals. skilled sufficient branch benchstrength and to also develop rotation was implemented to ensure there that is skills.leadership Aprogramme to monitor job to motivate and inspire them and their enhance newly promoted Executives and Junior Executives separate Leadership Development programmes for with CRISILLtd of India. We instituted have also Development Programme for Branch Managers Leadership courses. We conducted also aLeadership the performance to follow Harvard Business School of the five best projects will basedon beselected the University National of Singapore in2011. Owners Leadership Development Programme conducted by initiated by senior whoparticipated managers inthe Staff training sessions inprogress 167,409 40.7 27.2 13.5 45 2012 91,623 34.9 10.8 24.1 26 2011 104,489 54.4 62.1 7.7 32 81
Annual Report 2013 Sampath Bank PLC MANAGEMENT DISCUSSION & ANALYSIS
Productivity, Work Life Balance and Rewards Retention Employee productivity as measured by revenue Sampath Bank prides itself in its high retention per employee has continued to increase over the rates which we believe are due to a combination years driven by higher levels of skill and efficient of factors that increase employee satisfaction processes as we gain more employee participation which include a framework of policies that promote in streamlining them. Profit per employee which career progression, personal development, diversity, was trending upward declined only due to the high meritocracy & recognition, a stimulating & ethical impairment loss incurred on the pawning portfolio in environment, high standards of professionalism, 2013. We are confident that the team will continue to rewards and benefits, many of which have been deliver on these bench marks not by compromising discussed above. We provide a number of benefits work life balance but through higher participation to our permanent staff in addition to statutory in streamlining, re-engineering and automating benefits which include pension plans, productivity processes to eliminate unproductive tasks and and profit related bonuses, staff loan schemes on improve service standards. The Bank initiated several special interest rates to cater to a variety of needs, programmes to promote a sustainable work life comprehensive medical scheme, payment of fees for balance for employees and commenced programmes professional education, reimbursement of training that employees have expressed interest in such courses and examinations, fully furnished staff as yoga and sport activities play a major role in quarters, travelling and accommodation allowances balancing worklife at Sampath Bank. An in-house for staff attached to outstation branches and holiday gymnasium provides our staff with an opportunity for bungalows. exercise in order to maintain physical well - being.
Winners of the Annual Athletic Meet 2013 Winners of the Annual Quiz competition 2013
Employee Service Analysis Period of Service Tota l % Above 20 years 300 8 Above 15 – 20 years 304 8 Above 10-15 years 281 8 Above 6 – 10 years 1,147 31 Below 6 years 1,656 45 3,688 100
82 Card Systems and Treasury Systems were linked our internet banking product, for retail customers. We features enhanced also of Sampath Vishwa, with the other competitive global banking Apps. already passed the 10,000+ download mark,onpar App, whichwasMobile launched recently, has features are that extremely useful. Sampath Bank customers and the many general publicasithas AppStorethe Apple Store and Play the Google by features, free of Itcan bedownloaded charge. from andtheir mobiles tablets with unique and versatile allowing customers to dotheir banking through The Appwas Sampath launched Mobile in2013 Focus onCustomer Convenience the Private Sector Category. at the ProjectAwards National Management 2013 in ‘Sampath Vishwa’ was asthe selected “Runners Up” House category. Further our internet banking solution Software Quality the Best National Award inthe In- winner for the Sampath e-Reconciliation System at Award 2013 inthe Category Financial and Merit Award Software Quality Appatthe Best National Mobile becoming the Silver winner Medal for the Sampath 2013. The Bank gainedindustry-wide recognition by information technology we were in unchallanged operational efficiency increases. Astrend setters in importance incustomer interfaces and achieving to provide the Bank acompetitive edgeasits We continue to invest inInformation Technology INFORMATION TECHNOLOGY Banking Volumes Growth inInternet Focussed IT Customer theShaping Banking industry through ITinnovation to customers. during 2013 demonstrating the convenience increased by 22.3%and 41.5% respectively eRemittance and Sampath Vishwa have The volumes of transactions for our passedand the 10,000 has download mark. Storethe Apple store and Play the Google customers aswell. The Appisavailable from anumber ofhas useful features for non- through and their mobiles tablets. Italso year enablingcustomers to dobanking We launched the Appthis Sampath Mobile frauds. application combats whichalso cardbased payment issuance, standard aglobal for asmart card chip- compliance with the EMVstandard for ATM card performance improvements, service availability and several architectural advancements focusing on The ATM switch was upgraded to include transactions over 22%and 31%respectively. the growth of volumes and values of e-Remittance cost and to improve the efficiency. This facilitated Administration system to lower the operational process improvements were doneto e-Remittance of onlinereal timefund transfer facility. Further holders and nonaccount holders to obtain the use exchange house both systems and account enabled Industry. This system connected enhanced major through aweb service to the SriLankan Banking of onlinereal timefund transfer for the time first The e-Remittance system, introduced the concept value of transactions over 40%and 50%respectively. usto grow enabled enhancements the volume and which facilitated asuperior customer service. These to improve the efficiency of the administration process improvements related to Sampath Vishwa computers. Further we were to implement able theirall routine banking transactions from their to Sampath Vishwa to helpcustomers to manage Payment Va Payment Internet Banking Rs Mn Mobile AppDownloadsMobile
2010 873 10,000+
2011 1,217 lue
2012 1,579
2013 1,861 83
Annual Report 2013 Sampath Bank PLC MANAGEMENT DISCUSSION & ANALYSIS AS A KEY STRATEGIC INITIATIVE, SAMPATH BANK EMBARKED ON A PROCESS RE-ENGINEERING DRIVE TO IMPROVE THE PROCESS EFFICIENCIES AND TO REDUCE COSTS.
Sampath Vishwa Corporate was improved by adding improvements to the hunting charges system various online features to be used by corporate improved the fee collection of the Bank leading to customers such as adding EPF and ETF online improvements in profitability. We also integrated the payments. Corporate customers are able to pay their Treasury system with other trading platforms such EPF and ETF payments online real time 24 X 7 without as Bloomberg which streamlined the e-remittance visiting the authorities which saves time and money. payment module. An in-house system was developed We also implemented the Documentary Credit to implement and launch ‘Hire Purchase’ product amendments module enabling corporate customers during the year 2013 which was launched within a very to amend their documentary credits online without short period since initiation and with a minimum cost. visiting the Bank. Improvements were made to the Risk Management systems as well which facilitate compliance with the Driving Operational Efficiency Basel II requirements which are more fully described in As a key strategic initiative, Sampath Bank embarked the Risk Report on pages 160 to 187. on a process reengineering drive to improve the process efficiencies and to reduce costs. These Quality Assurance initiatives included automation of key reconciliation Quality assurance processes have been further processes, a form management system which enhanced by streamlining the development and facilitates documentation, an automated Board testing process. The Software development process Paper Approval system, server virtualisation which has also been improved by implementing industry enhances process efficiencies and optimisation of standards and frameworks in order to achieve IT Equipment Life Cycle Management through the maximum efficiency into software development. Managed Services. We also effected improvements Automating and multi phase testing has been to enhance process efficiencies of the Documentary introduced to minimise bugs creeping into the final Credits module which facilitated further operational product which has led to produce high quality efficiencies in Trade Services. Availability of customer software products. delivery channels was improved by providing a specially managed storage environment to lift Future Outlook the benchmarks set for availability in the industry We will heavily use Near Field Communication (NFC) enabling them to receive up-to-date information technology in 2014 which is an evolving technology eliminating a number of manual processes. and new innovative products and services will Additionally, the functions of the Internal Audit be launched using the same. Sampath Systems Department were successfully automated using a Development methodology which will focus on agile world renowned software solution. methodologies to cater to future demand in servicing on time delivery within the cost budget. IT also implemented further automation of month end processes which increased the accuracy and The Bank’s core banking system will be upgraded the efficacy of support services departments. The to meet the requirement of the current business automation of the specific provisioning process environment. This will further strengthen the optimises the utilisation of security values for the capabilities of the Bank to serve customers more provision calculation directly impacting the Bank’s efficiently and facilitate introduction of innovative profitability. At present no other local commercial products to the banking industry. We will continue bank has a similar system. Automation of the loan our focus on enhancing customer convenience which interest provisioning was another such project which includes incorporating new features to Sampath facilitated a smoother month end process. Process Vishwa to enable eCommerce activities. Expanded
84 license to operate asaregistered finance company identity following the successful application for a Leasing and Factoring Ltd, astrategic in change Siyapatha Finance Ltd isthe successor to Sampath LEASING AND FACTORING LTD SIYAPATHA FINANCELTD -FORMERLY SAMPATH our stakeholders. progress duringthe year issummarisedbelow for complementary service financial companies. Their the Group profits and comprise support services or The subsidiariescontribute approximately 6%of Performance of Subsidiaries generation. will beopened for the Bank to increase itsincome Once this product isimplemented another avenue Factoringto handle Services for itscustomers. commenced work asoftware implementing solution new product development and have already at the Bank, we will continue to focus onsupporting beenatthe heartofAs IThas product key roll outs in terms of power utilisation. Green ITinitiatives by reducing the operational costs facilitate the end-user computing needsaswell as cloud commenced. technologiesalso This will has Development Banking Division.Aproject to adopt and other records are that maintained by the about the refinances received, provisions payments, automate the process of maintaining the records which include aRe-finance System whichwill through process improvements and planned projects We will continue to drive operational efficiency protectscontinuously the bottom line. model, to an immediate, proactive approach, that processes —moving from areactive traditional the transactional data underlying their business Control professionals to gainimmediate insightinto allowing Audit, Risk, and Compliance, ITor Financial and compliance aspects of the Bank include asystem Planned ITprojects for strengthening the regulatory forbanking channels greater customer convenience. maintain highservice standards onour electronic availability are onthe also radar to ensure we that DNS anddelivery loadbalancing enhancing channel Total Assets Profit after Tax Profit before Tax Revenue Rs Mn Performance -Siyapatha Finance Ltd 2013 interest rates and corporate governance. accommodations, debt instruments, liquidassets, guidelines covering structural writingoff changes, Regulation was strengthened asCBSLissued six the company’s profits increased by 10.1%. recorded anegative profit growth of 21.6%,whereas decreasesto sharp inprofit. the sector Consequently increased for impairmentwhichcontributed charges deterioration of the asset of quality the portfolio and exposure to pawning. This inturnresulted in as anumber of players inthe significant sector had was impacted adversely by declining goldprices the effective borrowing cost.However, the sector to AWPLR were re-priced duringthe year reducing Net Interest Marginsof the company asloans linked The decline ininterest rates helped increase also permits asreflected inthe asset growth of 54.6%. and the issuance of transferable motor vehicle increased with the relaxation of import dutyrates previous year. The company’s business volumes somereliefhad during2013 incomparison to the account for 6.9%of the sector Financial assets Other deposit taking which Institutions Financial Industry Overview Mr Ranjith Samaranayake Mr Aravinda Perera Mr MAAbeynaike Mr WMPLDeAlwis Ms MAKarunaratne Dr HSDSoysa Mr PMASirimane (DeputyMr SGWijesinha Chairman) Mr IWSenanayake (Chairman) Board of Directors Banks for this growth key sector of the economy. finance requirements are that not addressed by the beenthe SMEhas sector asthere are anumber of factoring. The target key market for the company the company have and beenmotor leasing, vehicle fund mobilisation programs. business Key linesfor Leasing company under itsprevious identity and focussed ongrowingmainly the business of a of the license isrecent, activitiesduring2013 were 42 of 2011 from September 2013. Asitsacquisition as per provisions of The Finance Business Act No 8,986 1,753 301 221 2012 5,811 200 252 1,112 Change % Change 54.6 57.6 19.4 10.5 85
Annual Report 2013 Sampath Bank PLC MANAGEMENT DISCUSSION & ANALYSIS
The company achieved a milestone in its history as it in our core lending products, leasing and factoring. obtained a licence to operate as a finance company Mobilising deposits is expected to increase both in September 2013 and it is now geared to expand profitability and growth as our ability to compete its operations as permitted by the license with a effectively on price is enhanced. The business particular focus on deposit mobilisation. Fitch Ratings environment is expected to remain challenging due Lanka has affirmed the company’s rating as National to the high border tariffs and margin requirements Long-Term rating at ‘A(lka)’ with a stable outlook on imports of motor vehicles in place. We will look and the outstanding senior unsecured redeemable to further grow factoring as the expertise and debentures at National Long-Term ‘A(lka)’ in March systems developed within the company add value 2013. The branch network expanded with the to corporates. We also plan to obtain a listing on upgrading of windows to branches in Kuliyapitiya the Colombo Stock Exchange through an initial and Anuradhapura. Three pawning windows were public offering in the coming year as required by the opened in Kandy, Kalmunai and Kurunegala in Finance Business Act. anticipation of an aggressive drive on pawning on which we have now adopted a risk averse approach SAMPATH CENTRE LTD following the decline in gold prices since April. Sampath Centre owns and manages the Head Office Asset growth was satisfactory at 54.6% which was building occupied by Sampath Bank and derives incidentally higher than the industry growth rate of revenue from rental paid by the parent company. 17.9% despite operating in an intensely competitive market. A key contributor was the growth of the Directors factoring portfolio as corporates were attracted Mr I W Senanayake (Chairman) by the debt or management facilities provided by Mr S G Wijesinha us which enabled them to improve their working Mr S P Kannangara capital management. There was little impact from Mr L R Jayakody declining gold prices as pawning was added as a business line only in February 2013 and the issues Turnover declined during the year due to the loss of with price volatility after which we curtailed growth rental income from 7th and 8th floors for nearly 6 of this product. We have now limited exposure to months as there were no occupied tenants. Rentals the agriculture sector due to the inherent risks of were revised during the year. Extensive renovations the sector. Profitability improved from Rs 200 Mn in were carried out on several floors to improve the 2012 to Rs 221 Mn in 2013 due to declining borrowing office interiors which enhanced the value of the costs as loans linked to AWPLR were re-priced more landmark commercial building resulting in a fair value favourably during the year. gain of Rs 76 Mn. This has substantially increased the total assets of the company as at the year’s end. Future Outlook We will focus on expanding our business lines to Future Outlook include innovative deposit products that cater to a We will focus on improving the energy efficiency wider clientele and also look to increase market share of the building in 2014 which relies on plant and
Performance
Sampath Centre Ltd 2013 - Rs Mn 2012 - Rs Mn Change % Revenue 194 196 (1.0) Profit before Tax 103 123 (16.3) Profit after Tax 95 117 (18.8) Total Assets 3,203 2,230 43.6
86 to September 2013 on a year on year basis enhanced ofmost 2013, Corporate earningsfor the period up sentiment whichweighed markets down through a relatively narrow dueto the bandnegative mainly Share Price Index and the S&P20fluctuatingwithin Stock Exchange was disappointingwith both the All The performance of equities listed onthe Colombo Industry Overview Mr MNRFernando Dr SKelegama Mr NHKFernando (Executive Director /CEO) Mr DJGunaratne (Chairman) Directors investing inthe share market inthe regions. the convenience of itsretail clients and to promote company two branches has inKandy and Matara for research team and acompetent backoffice. The team of investment advisors are backed by askilled Colombo Stock Exchange (CSE). SCSecurities’ and Exchange Commission of SriLanka and the by the regulatory framework of the Securities of the Colombo Stock Exchange, and isgoverned Sampath Bank. Itisadebt and equitymember firm the Sampath Group owned and afully Subsidiaryof Ltd,SC Securities(Pvt) isthe stockbroking armof SC SECURITIES (PVT) LTD our parent company. generate savings inenergy costsatthe sametimeto increase thesignificantly value of the building and architecture of itssurroundings. These projects will withenhanced claddinginkeeping with modern savings and the exterior of the building will be system whichisexpected to generate significant spaces. We intend also to install anew lighting of heatrequiring energy to less cool the interior glaze the building to minimisethe pass through is expected to costover Rs250Mn.We will also conditioning to amore energy efficientmodel which costs, itisimperative we that replace the air country’s policy of greater pass through of energy efficiency was atalower benchmark.With the inan eramachinery installed where energy Performance Total Assets Profit after Tax Profit before Tax Revenue LtdSC Securities(Pvt) 03-R n 2012 -RsMn 2013 -RsMn (30) performance of the CSE. which inturnwill have apositive impactonthe policy measures implemented by the Government economic situationto improve in2014 dueto the trading will increase over time. We expect the showing interest and itisexpected secondary that to increase with both retail and investors institutional attractive returns. Activity incorporate debt islikely are trading atattractive prices with potential for backed by strong fundamentals, asmany of these We expect investor interest are onequitiesthat Future Outlook network to expand our clientbase. focus ongroup by synergies usingthe Sampath Bank strengthened our retail operations and continue to continue to bewary of equityinvestments. We have houses continue unabated investors asinstitutional 2013. The intense competition amongthe broking the lacklustre performance of the CSEin2012 and companies continued to beseverely impacted by withSC Securitiesalong other stockbroking equity trading. tofailed spurhigher levels of investor activityin lower rates. Corporate earningswere moderate and context slower that GDPgrowth will imply likely equities in2014 to bestrong, inthe particularly consecutive year and we expect prospects for Interest rates declined in2012 for the second trading activityondebt. investors buyand holdto maturity, there islittle on interest earnedondebentures. However, asmany issued dueto the exemption from withholding tax a significant increase inthe number of debentures The Debtmarket was relatively vibrant asthere was the indices. key through 2013, despite the lacklustre performance of Foreign inflows to the bourse remained buoyant December at15.3xrelative to 15.9xayear earlier. withhave decreasedPERs marginally the at end- PER moderately butremained expected. than less Market (42) 362 25 (34) (17) 301 33 Change % Change (76.5) (24.2) (23.5) 20.3 87
Annual Report 2013 Sampath Bank PLC MANAGEMENT DISCUSSION & ANALYSIS THE COMPANY HAS GROWN ITS OPERATIONS CONSIDERABLY DURING THE YEAR WITH REVENUE AND PROFITABILITY INCREASING DUE TO NEW BUSINESS LINES AND OPERATIONAL EFFICIENCIES WHICH CONTROLLED EXPENSES.
SAMPATH INFORMATION TECHNOLOGY clientele comprises the financial sector in Sri Lanka SOLUTIONS LTD (SITS) including the parent company and other subsidiaries. SITS key business lines include business consulting, software application development, project Directors management, software quality assurance and testing, Mr L J K Hettiaratchi (Chairman) hardware provisioning, infrastructure maintenance Mr D J Gunaratne and document management solutions. Its main Mr M V Indrasoma Mr K M S P Herath
Performance
Sampath Information Technology Solutions Ltd (SITS) 2013 - Rs Mn 2012 - Rs Mn Change % Revenue 102 54 88.9 Profit before Tax 25 4 525.0 Profit after Tax 24 3 700.0 Total Assets 132 86 53.5
The company has grown its operations considerably during the year with revenue and profitability increasing due to new business lines and operational efficiencies which controlled expenses.
The new initiatives included a secondment agreement with Infosys for supporting and implementation of their core banking product Finacle. We also developed a business partnership with Fiserv Inc, a leading IT solutions provider for the financial services sector to provide business development and implementation support in Sri Lanka. Managing outsourced IT functions for clients was also a growth area for the company which enabled us to grow beyond the financial services sector and improve profitability. Managing working capital was a key New Head Office Building - SITS challenge due to growth of managed IT facilities
88 provide uswith competitive akey edge. of talented and ambitious ITprofessionals who footprint whichwill serve also to facilitate retention businesskey partners to extend our geographical overseas business opportunities together with our to companies inSriLanka. We will explore also to SITS within itsmandate of providing ITsolutions opportunities will that increase the source of income hardware. SITS reviewing isalso other business capital intensive dueto the needto invest in to the companypresent asitisrelatively challenges to grow inthe rapidly coming years whichwill We expect of the managing outsourced ITfunctions Future Outlook resources. this by optimisinggrowth inlinewith available movement of the current ratio. We have managed which iscapital intensive and this isevident inthe Secondment Agreement Infosys with
89
Annual Report 2013 Sampath Bank PLC BRANCH NETWORK
CENTRAL PROVINCE Branch Branch name Address Telephone No Fax No E-mail Code Dambulla No 622, Anuradhapura Road, Dambulla (066) 2283085/87 (066) 2283067 [email protected] 90 03 No 42, Mahiyangana Road, Digana, Digana (081) 2376765 (081) 2376765 [email protected] 85 Branches Rajawella Galewela No 31C, Kurunegala Road, Galewela (066) 2287725/6 (066) 2287727 [email protected] 190 Matale District Gampola No 06, Panabokke Mawatha, Gampola (081) 2350564/5 (081) 2350571 [email protected] 101 Hatton No 173, Dimbula Road, Hatton (051) 2225403/5 (051) 2225405 [email protected] 80 Kandy - (081) 2232778 - Kandy District No 19, Dalada Veediya, Kandy (081) 2232779 [email protected] 7 DaladaVeediya 2233838 13 Shop No L 1-6 Level One, Kandy City Centre Branches Kandy City Centre (081) 2205825/6 (081) 2205827 [email protected] 123 Building, Dalada Veediya, Kandy Kandy - Metro No 29, Cross Street, Kandy (081) 2200096/8 (081) 2200098 [email protected] 100 Nuwara Eliya District Katugastota No 187, Madawala Road, Katugastota (081) 2498932/4 (081) 2499123 [email protected] 32 Kundasale No 232, Digana Road, Kundasale (081) 2421763/4 (081) 2421767 [email protected] 133 03 Matale No 184 - 186, Trincomalee Street, Matale (066) 2223861/2 (066) 2224094 [email protected] 25 Branches Menikhinna No 54A, Madawala Road, Menikhinna (081) 2376547/8 (081) 2376549 [email protected] 184 Nawalapitiya No 92, Gampola Road, Nawalapitiya (054) 2223277/700 (054) 2223920 [email protected] 195 Nuwara Eliya No 01, Lawson Street, Nuwara Eliya (052) 2222946/7 (052) 2222948 [email protected] 84 Peradeniya No 676 A, Peradeniya Road, Kandy (081) 2387876/7 (081) 2384054 [email protected] 51 Pussellawa No 551, Nuwara Eliya Road, Pusselllawa (081) 2478034/5 (081) 2478036 [email protected] 152 Pilimatalawa No 246, Colombo Road, Pilimatalawa (081) 2577341, 336 (081) 2577396 [email protected] 150 Rikillagaskada No 120, Kandy Road, Rikillagaskada (081) 2365021/2 (081) 2365023 [email protected] 163 Wattegama No 134/A/1, Kandy Road, Wattegama (081) 2476876/7 (081) 2470600 [email protected] 105
EASTERN PROVINCE Branch Matale District Branch name Address Telephone No Fax No E-mail Code No 61, Sulaiman Shopping Complex, Main 04 Akkaraipattu (067) 2279197/8 (067) 2279199 [email protected] 111 Street, Akkaraipattu Branches
Ampara No 9, D S Senanayake Road, Ampara (063) 2223840/1 (063) 2223444 [email protected] 62 Batticaloa No 32, Thamaraikeny Road, Batticaloa (065) 2227581/2 (065) 2227583 [email protected] 107 Batticaloa 02 No 395, Trinco Road, Batticaloa (065) 2228240/1 (065) 2228242 [email protected] 139
Chenkalady Main Road, Chenkalady (065) 2241348/9 (065) 2241350 [email protected] 121 Batticaloa Dehiattakandiya No F 79, New Town, Dehiattakandiya (027) 2250418/9 (027) 2250420 [email protected] 167 District Kalmunai No 18, Police Station Road, Kalmunai (067) 2220448/9 (067) 2222020 [email protected] 112 (065) 2251177, Kaluwanchikudy Hospital Road, Kaluwanchikudy (065) 2250208 [email protected] 125 2250807 06 Kantale No 70/1, Agrabodhi Road, Kantale (026) 2234490/1 (026) 2234492 [email protected] 172 Branches Kattankudy No 57,59, Main Street, Kattankudy 03 (065) 2247930/2 (065) 2247932 [email protected] 115 No 106, 108 ,110 Main Road [Right Side], Kinniya (026) 2236348/9 (026) 2236350 [email protected] 177 Kinniya 03 Muttur No 67, Main Street, Muttur (026) 2238181/2 (026) 2238183 [email protected] 208 Ninthavur No 45/4A, Main Street, Ninthavur (067) 2251388/9 (067) 2251390 [email protected] 185 07 Colombo Road, Mavadichenai, (065) 2257372, Oddamavady (065) 2258211 [email protected] 124 Branches Oddamavady 2258210 Cassim Moulavi Building, Main Street, Ampara District Pottuvil (063) 2248190/4 (063) 2248196 [email protected] 130 Pottuvil Sainthamaruthu Main Street, Sainthamaruthu - 16 (067) 2225310/320 (067) 2225330 [email protected] 126
Trincomalee No 262, Central Road, Trincomalee (026) 2225387/9 (026) 2225389 [email protected] 66
NORTHERN PROVINCE Jaffna District Branch Branch name Address Telephone No Fax No E-mail Code 08 Chankanai Main Street, Chankanai (021) 2250072/3 (021) 2250072 [email protected] 164 Branches Chavakachcheri Kandy Road, Chavakachcheri (021) 2270091/2 (021) 2270093 [email protected] 169
Chunnakam No 160, K K S Road, Chunnakam (021) 2240721/2 (021) 2240723 [email protected] 128 Kilinochchi District No 56/16, Link Road, Off Stanley Road, Jaffna (021) 2221025/6 (021) 2221027 [email protected] 120 01 Jaffna Branch Mullathivu District Kayts Suruvil Road, Kayts (021) 3215432/4 (021) 3215428 [email protected] 171 Kilinochchi Unit 1-4, Antonipillai Building, Kilinochchi (021) 2285340/1 (021) 2285342 [email protected] 148 01 Manipay No 103, Jaffna Road, Manipay (021) 2255041/2 (021) 2255043 [email protected] 147 Branch Mallavi Thunnukai Road, Mallavi (021) 3734802/3 (021) 3734804 [email protected] 174 01 02 Branches Mannar No 28, Field Street, Ward No.06, Mannar (023) 2251320/1 (023) 2251322 [email protected] 119 Branch Vavuniya District Mannar District
90 Vavuniya District Mullathivu District SABARAGAMUWA PROVINCE NORTH WESTERN PROVINCE NORTH CENTRAL PROVINCE NORTHERN PROVINCE CONTD. enpuaN 9/,ClmoRa,Wnapw 01 262/ 01 262 enpuamrsmahl 30 [email protected] (031) 2256926 (031) 2256925/7 No191/A, Colombo Road, Wennappuwa Wennappuwa Wariyapola Puttalam Pannala iaeaiaN 3,Krngl od iaeaia(3)26989(3)[email protected] (037) 2260920 (037) 2260918/9 No136,Kurunegala Road, Nikaweratiya Nikaweratiya Nattandiya Narammala aahgm No95, Kurunegala Road, Mawathagama Mawathagama aaaoaNo95, Kandy Road, Warakapola Warakapola Marawila uawlaNo4,Veyangoda Road, Ruwanwella Ruwanwella Ratnapura Maho Thambuththegama Rambukkana Madampe ohhygm o6,Ptaa od ohhygm 05 273/ 05 273 [email protected] [email protected] (025) 2257334 (025) 2257332/3 No62,Puttalam Road, Nochchiyagama Nochchiyagama Pelmadulla uueaaSprNo31,NegomboRoad, Kurunegala Kurunegala Super Kekirawa Mawanella Kuliyapitiya Kahatagasdigiliya Kegalle Hettipola Kaduruwela Kalawana Giriulla Hingurakgoda Dankotuwa [email protected] (024) 2226229 (024) 2226227/8 No:7A,Horowpatana Road, Vavuniya Vavuniya Super Embilipitiya rlgniaNo113,New Town, Aralaganwila Aralaganwila Chilaw Vavuniya hlygd o0,RtauaRa,Eeiaoa(3)25012(3)2501eeiaoamrsmahl 20 [email protected] (036) 2258031 (036) 2258031/2 No02, Ratnapura Road, Eheliyagoda Eheliyagoda New Town Anuradhapura eaiaaaNo63, Noori Road, Deraniyagala. Deraniyagala 143 [email protected] (032) 2263044 (032) 2263042/3 No69, Road, Galgamuwa Anamaduwa Anamaduwa Thirunelveli Balangoda Address Branch name Alawwa Address Branch name Anuradhapura Address Branch name Nelliady Address Branch name Kalugamuwa Road, Wariyapola Nawinna Office &Shopping Complex, No 114A,Kurunegala Road,Puttalam No 100, NegomboRoad, Pannala o19 uiaiiaRa,Ntady 02 206/ 02 206 [email protected] (032) 2250265 (032) 2250263/4 No 149, Kuliyapitiya Road, Nattandiya Narammala KuliyapitiyaNo 77&89 1/1, Road, No 87, Chilaw Road, Marawila No 180–82,MainStreet, Ratnapura [email protected] (037) 2275172 (037) 2275170/1 No 112-114, Road, Maho Moragollagama Thambuttegama No 255C,Anuradhapura Road, Rambukkana New Pradeshiya Building, Sabha Madampe No 16,New Town, Road, Medagama No 77B,MainStreet, Pelmadulla No 56,MainStreet, Kekirawa o29 e ad od aael 05 266/ 05 266 [email protected] (035) 2246963 (035) 2246961/2 No 209, New Kandy Road, Mawanella No 259, Madampe Road, Kuliyapitiya Kahatagasdigiliya No 67, Anuradhapura Road, No 142,142A,Kandy Road, Kegalle Kurunegala Road, Hettipola Kaduruwela Building, MainStreet,No 626B,Dharmasiri No 54/B, 54/C, Manana, Kalawana No 103/A, NegomboRoad, Giriulla Hingurakgoda No 88,DSSenanayake Veediya, No 63, Nattandiya Road, Dankotuwa No 62,MainStreet, Embilipitiya No 64,Colombo Road, Chilaw No. 25,Station Road, Vavuniya Mawatha, New Town, Anuradhapura No 521/19, Maithripala Senanayake aayRa,Tiuevl ot,Jfn 01 240/ 01 240 [email protected] (021) 2224802 (021) 2224801/3 Road, Thirunelveli North,Palaly Jaffna Balangoda No 117, BarnesRatwatta Mawatha, No 9, 9/1 Giriulla Road, Alawwa Anuradhapura No 38,Rex Building, MainStreet, Road, Nelliady No. 169, Jaffna 07 280/ 07 284 [email protected] (037) 2268144 (037) 2268707/8 02 261/ 02 261 [email protected] (032) 2266314 (032) 2266312/3 2245270 (037) 2246250, 07 284/ 07 284 [email protected] [email protected] (037) 2248947 (037) 2248945/6 2296288 (037) 2296088/ 05 278/ 05 278 aaaoamrsmahl 205 [email protected] (035) 2267983 (035) 2267981/2 02 206/ 02 206 [email protected] (032) 2250861 (032) 2250862/3 06 267/ 06 267 [email protected] (036) 2266973 (036) 2266971/2 05 226/ 05 246 [email protected] (045)2224361 (045) 2232261/2 2275072 (025) 2276836, 2266466 (035) 2265641, 02 292/4 02 295 [email protected] (032) 2249555 (032) 2249222/444 05 252 05 252 [email protected] (045)2275922 (045) 2275920 -2 07 230/ 07 230 uueaamrsmahl 6 [email protected] (037) 2223509 (037) 2223500/2 05 256/ 05 256 [email protected] (025) 2265268 (025) 2265266/7 2281866 (037) 2281860/1, 05 278/0(2)[email protected] (025) 2247069 (025) 2247087/70 05 209/8(3)[email protected] (035) 2230519 (035) 2230597/ 8 [email protected] (037) 2291084 (037) 2291082/3 07 256/ 07 256 auueamrsmahl 38 [email protected] (027) 2225569 (027) 2225567/8 05 259/ 05 259 [email protected] (045)2255795 (045) 2255793/4 [email protected] (037) 2289482 (037) 2289482 07 250/ 07 250 igrkoamrsmahl 110 [email protected] (027) 2245302 (027) 2245300/1 01 216/ 01 216 [email protected] (031) 2261360 (031) 2261361/2 07 210/ 07 210 miiiiamrsmahl 43 [email protected] (047) 2261205 (047) 2261203/4 07 270/ 07 270 rlgniamrSmahl 154 [email protected] (027) 2257206 (027) 2257204/5 02 227/ 02 227 [email protected] (032) 2222777 (032) 2222677/8 [email protected] (024) 4589500 (024) 2222959 05 269/ (025) 2226192 (025) 2226190/1 06 290 06 290 [email protected] (036) 2249500 (036) 2249500 05 289/ 05 289 [email protected] (045)2288795 (045) 2288793/5 2279463 (037) 2279209, 21 [email protected] (025) 2235028 (025) 2235026/7 2264950 (021) 2262474, eehn o FxN E-mail FaxNo Telephone No E-mail FaxNo Telephone No E-mail FaxNo Telephone No E-mail FaxNo Telephone No 07 257 [email protected] (037) 2245272 07 268 [email protected] [email protected] (037) 2296088 05 257 [email protected] 48 [email protected] (025) 2275072 05 264 abkaamrsmahl 188 [email protected] (035) 2266244 07 216 uiaiiamrsmahl 23 [email protected] (037) 2281861 07 290 [email protected] (037) 2279209 [email protected] (021) 2264951 sampath.lk anuradhapura_newt.mgr@ 44 156 166 102 132 194 201 197 33 189 103 149 160 203 64 187 41 95 196 170 108 55 168 186 49 97 53 129 Code Branch Code Branch Code Branch Code Branch Puttalam District Kegalla District Anuradhapura District Branches 06 Branches 06 Branches 06 Branches 08 Ratnapura District Kurunegala District Kurunegala Branches 11 District Polonnaruwa Branches 03 91
Annual Report 2013 Sampath Bank PLC BRANCH NETWORK
SOUTHERN PROVINCE Branch Branch name Address Telephone No Fax No E-mail Code Ahangama No 71A, Matara Road, Ahangama (091) 2282902/3 (091) 2282904 [email protected] 182 Hambantota District Akuressa No 14/16, Pitabeddara Road, Akuressa (041) 2284650/1 (041) 2284652 [email protected] 179 09 07 Branches Branches 06 Ambalangoda No 118 A, New Road, Ambalangoda (091) 2255571/3 (091) 2255573 [email protected] 72 Galle District Branches Ambalantota No 138 D, Tissa Road, Ambalantota (047) 2225506 - 8 (047) 2225508 [email protected] 104 Matara District Baddegama No 112, Diyawagura, Kumme, Baddegama (091) 2293230/1 (091) 2293232 [email protected] 118 Beliatta No 53/1, Dickwella Road, Beliatta (047) 2251551/2 (047) 2251553 [email protected] 180 (041) 2273225, Deniyaya No 28-30, Main Street, Deniyaya (041) 2273255 [email protected] 14 2273255 No 10, Royal Building, Ambalangoda Road, Elpitiya (091) 2291961/2 (091) 2291963 [email protected] 204 Elpitiya Galle Super No 5, Wackwella Road, Galle (091) 2245646/7 (091) 2245645 [email protected] 35 ‘Krishna Building ‘, No:69, Old Matara Road, Galle Bazaar (091) 2248582/3 (091) 2248584 [email protected] 159 Pettigalawatte, Galle No 1270, ‘Lanerolle’ Super Centre, Matara Habaraduwa (091) 2282772/3 (091) 2282774 [email protected] 181 Road, Habaraduwa Kamburupitiya No 48, Mulatiyana Road, Kamburupitiya (041) 2294701/2 (041) 2294703 [email protected] 206 Karapitiya No 598F, Hirimbura Road, Karapitiya (091) 2248456/7 (091) 2248458 [email protected] 141 Matara Super No 3, Hakmana Road, Matara (041) 2223260/1 (041) 2223268 [email protected] 10 No 37, New Tangalle Road, Kotuwegoda, Matara Bazaar (041) 2234055/6 (041) 2234057 [email protected] 153 Matara ‘Abeysinghe Building’, Walasmulla Road, Middeniya (047) 2248231/2 (047) 2248233 [email protected] 158 Middeniya ‘Ranaweera Building’, Akuressa, Deniyaya Morawaka (041) 2282310/11 (041) 2282312 [email protected] 15 Road, Morawaka Neluwa Dellawa Road, Main Street, Neluwa (091) 3783010/11 - [email protected] 54 Sooriyawewa No 6719, Ambalantota Road, Sooriyawewa (047) 2288155/6 (047) 2288157 [email protected] 157 Tangalle No 61, Muhudu Mawatha, Tangalle (047) 2241865/6 (047) 2241870 [email protected] 116 (047) 2237056, Tissamaharama No 25 – 27, Main Street, Tissamaharamaya (047) 2237058 [email protected] 28 2237058 (041) 2253003, Weligama No 253, Matara Road, Weligama (041) 2254003 [email protected] 209 2254002
UVA PROVINCE Branch Branch name Address Telephone No Fax No E-mail Code Badulla No 14, Dharmadutha Road, Badulla (055) 2225450/1 (055) 2225452 [email protected] 93 Bandarawela No 253, 255, Main Street, Bandarawela (057) 2223720/1 (057) 2223722 [email protected] 46 Bibile No 31, Mahiyangana Road, Bibile (055) 2265398/9 (055) 2265400 [email protected] 161 ‘Madurapperuma Building’, Kataragama Buttala (055) 2273530/4 (055) 2273537 [email protected] 145 05 Road, Buttala Branches Mahiyangana No 28, 29, New Town, Mahiyangana (055) 2258180 (055) 2258181 [email protected] 56 Badulla District (055) Monaragala No 75, Pothuwil Road, Monaragala (055) 2277222 [email protected] 74 2277222/290/1 04 Passara No 187/1, Badulla Road, Passara (055) 2288311/2 (055) 2288313 [email protected] 146 Branches Welimada No 54, Nuwara Eliya Road, Welimada (057) 2244466/7 (057) 2244468 [email protected] 81 Monaragala District (055) 2274445/419/ Wellawaya No 70/D, Kumaradasa Mawatha, Wellawaya (055) 2274470 [email protected] 113 470
WESTERN PROVINCE Branch Branch name Address Telephone No Fax No E-mail Code Aluthgama No 405, Galle Road, Aluthgama (034) 2290861/2 (034) 2290863 [email protected] 79 (011) 2563612, Athurugiriya No 106, Borella Road, Athurugiriya (011) 2156080 [email protected] 67 2156081 Attidiya No 202, Main Road, Attidiya (011) 2725668 - [email protected] 89 Avissawella No 64, Yatiyanthota Road, Avissawella (036) 2222011/2 (036) 2222010 [email protected] 22 No 1-01, Majestic City, Station Road, (011) 2502686, Bambalapitiya (011) 2501829 [email protected] 11 Bambalapitiya, Colombo 04 2501829 Bandaragama No 61/A, Kalutara Road, Bandaragama (038) 2289898/9 (038) 2293056 [email protected] 59 Battaramulla No 157, Main Street, Battaramulla (011) 2861805/6 (011) 2861807 [email protected] 61 Boralesgamuwa No 192, Kesbewa Road, Boralesgamuwa (011) 2545245/6 (011) 2545248 [email protected] 142 No 1022, Maradana Road, Borella, (011) 2691121- Borella (011) 2686066 [email protected] 4 Colombo 08 3,2687222 No 55, D.R.Wijewardena Mawatha, (011) 2328569, City (011) 2434217 [email protected] 1 Colombo 10 2434431 Colombo Super No 103, Dharmapala Mawatha, Colombo 07 (011) 2336112/3 (011) 2336115 [email protected] 175 (011) 2738481, Dehiwala No 155, Galle Road, Dehiwala (011) 2738461 [email protected] 17 2738422 Delgoda No 351/1, New Kandy Road, Delgoda (011) 2403383/4 (011) 2403385 [email protected] 202 Divulapitiya No 69, Kurunegala Road, Divulapitiya (031) 2243431/13 (031) 2243423 [email protected] 198
92 WESTERN PROVINCE CONTD. Negombo aa aah o4/8 aa aah,Clmo0 01 352/ 01 352 [email protected] (011) 2305028 (011) 2305025/7 No46/38, Nawam Mawatha, Colombo 02 Nawam Mawatha Nawala Narahenpita Mutwal Mount Lavinia No 294, Galle Road, Mount Lavinia No294,Galle Mount Lavinia Moratuwa Moratumulla Mirigama iuagd o3/,NgmoRa,Mnwnoa(1)29112(1)2913mnwnoamrsmahl 65 [email protected] (011) 2299133 (011) 2299131/2 NegomboRoad, No31/1, Minuwangoda Minuwangoda Matugama Mattegoda Marandagahamula Maradana aiaat o6,MlgwteRa,Clmo1 01 620/ 01 620 [email protected] 191 [email protected] (011) 2672509 (011) 2672507/8 No65,Maligawatte Road, Colombo 10 Maligawatte Malabe Makola Main Street Singer Mega Maharagama aaaaaN 1 ihLvlRa,Mhrgm 01 805/// 01 815 aaaaamrsmahl 13 [email protected] (011) 2851352 (011) 2840950/1/2/3 No81,HighLevel Road, Maharagama Maharagama Sun Up Kottawa Laugfs Kottawa Kotahena Kollupitiya Kohuwala ohhkd No163, Chilaw Road, Kochchikade Kochchikade Kirulapone Kirindiwela Super Kiribathgoda iiahoaNo259, Kandy Road, Dalugama, Kelaniya Kiribathgoda Keselwatta aaapty No182/A, Hill Street, Dehiwela Karagampitiya Kaduwela Kandana Kalutara Kadawatha Ja-ela Ingiriya Horana oaaaN 6 s ae tto od oaaa(1)25956(1)[email protected] (011) 2855985 (011) 2855975/6 Lane, No46,1st Station Road, Homagama Homagama Hendala Head Quarters No 110, Sir James Peiris Mw, No110, SirJames Colombo 02 Head Quarters Hanwella Harbour View rgr’ odN 0,Wjrm aah,Clmo0 01 614 01 614 [email protected] (011) 2681145 (011) 2681144 No106,Wijerama Mawatha, Colombo 07 Gregory’s Road Grandpass o n Tow Gothatuwa New Gangodawila Ganemulla aph ue No150, Colombo Road, Gampaha Super Gampaha Gampaha Fort Embuldeniya Address Branch name No 293, MainStreet, Negombo No 143,Nawala Road, Nugegoda Colombo 05 No 193, Kirula Road, Narahenpita, o81 ltmwtaRa,Clmo1 01 507/ 01 507 [email protected] (011) 2540577 (011) 2540575/6 No 811,Aluthmawatha Road, Colombo 15 Moratuwa Road, Rawatawatta,No 653, Galle Mawatha,Moratumulla No 38,SriPremarathne No 54,Giriulla Road, Mirigama o24A ltgm od auaa(3)24234(3)[email protected] (034) 2247235 (034) 2247233/4 No 214A,Aluthgama Road, Matugama o124,Sla ucin atgd 01 184/ 01 184 [email protected] (011) 2178446 (011) 2178444/5 No 102/40, Junction, Salgas Mattegoda Marandagahamula No 86/A, MirigamaRoad, Road, Colombo 10 No 657, Kularathne Mawatha, Maradana No 895, Athurugiriya Road, Malabe No 94/3A, Makola South, Makola No 110,114, MainStreet, Colombo 11 o22 ihLvlRa,Mhrgm 01 824 01 824 [email protected] (011) 2842442 (011) 2842442 No 272, HighLevel Road, Maharagama o341,Hg ee od otw 01 730 01 730 [email protected] (011) 2783100 (011) 2783100 No 364/10, HighLevel Road, Kottawa No 124/8, HighLevel Road, Kottawa o15 ereRD iv w oob 3(1)28001(1)[email protected] (011) 2384012 (011) 2384010/1 No 165,George RDeSilva Mw, Colombo 13 Colombo 03 Road, Building, No01, Bagatale Ground Floor, PlatinumResidencies Kohuwala Mawatha, No 81,SDeJayasinghe Kirulapone No 136,138 &140, HighLevel Road, No 91, Gampaha Road, KirindiwelaNo 91,Gampaha No 139, Kandy Road, Kiribathgoda No 41A, Galle Road, Keselwatta,No 41A, Galle Panadura Kaduwela No 510/1 &510/2, Avissawella Road, No 72, Colombo Road, Kandana Kalutara No 314,MainStreet, Kalutara South, o143 aaaRa,Kdwta(1)220125(1)2201kdwtamrsmahl 60 [email protected] (011) 2921001 (011) 2921001/2/5 No 174/3, Road, Kadawatha Ragama No 165, Realty Plaza,NegomboRoad,No 165,Realty Ja-ela No. 68D, Panadura Road, Ingiriya o14 r oaad aah,Hrn 04 204/ 04 207 [email protected] (034) 2260377 (034) 2260345/6 No 114,SriSomananda Mawatha, Horana No 210, Hendala Road, Hendala, Wattala o18A aaaHnel,Hnel 06 244/ 06 244 [email protected] (036) 2254447 (036) 2254445/6 No 148/A, Hanwella, Pahala Hanwella Colombo 15 No 256,Srimath RamanathanMawatha, o6,JtaaaRa,Clmo1 01 429/ 01 429 [email protected] (011) 2472392 (011) 2472390/1 No 64,Jethawana Road, Colombo 14 New Town No 55/4, Kotikawatta Road, Gothatuwa Nugegoda No 374, HighLevel Road, Gangodawila, o37E aaah od aeul 03 243 01 365 [email protected] (011) 5336558 (033) 2264630 No 367/E, Kadawatha Road, Ganemulla No 8, Mangala Road,No 8,Mangala Gampaha No 98, Chatham Street,No 98,Chatham Colombo 01 Nugegoda No 282,OldKottawa Road, Embuldeniya, 01 244 7(3)[email protected] (031) 2224347 (031) 2224345 -7 01 823/ 01 823 [email protected] (011) 2812333 (011) 2812331/2 01 522/ 01 522 [email protected] [email protected] (011) 2552822 (011) 2552820/1 01 798/ 01 798 onlvnamrsmahl 199 [email protected] (011) 2719582 (011) 2719581/7 01 643/ 01 643 [email protected] (011) 2644739 (011) 2644737/8 01 644/7 01 644 [email protected] [email protected] (011) 2654048 (011) 2654040/075 03 260/ 03 260 [email protected] (033) 2276903 (033) 2276901/3 01 231/1 01 231 aaaauamrsmahl 183 [email protected] (031) 2243518 (031) 2243515/517 01 684/ 01 684 [email protected] (011) 2678543 (011) 2678541/2 01 722/ 01 722 [email protected] (011) 2762224 (011) 2762222/3 01 947/ 01 948 [email protected] (011) 2964980 (011) 2964978/9 01 363/ 01 363 [email protected] (011) 2386734 (011) 2386732/3 2782690 (011) 2782684/6, 01 508/ 01 508 [email protected] (011) 2590684 (011) 2590682/3 01 848/5 01 848 [email protected] (011) 2814480 (011) 2814480/455 01 294/ 01 292 [email protected] [email protected] (031) 2279522 (031) 2279647/8 01 532/ 01 533 [email protected] (011) 2513830 (011) 2513828/9 03 275 03 275 [email protected] (033) 2247150 (033) 2247150 01 906/ 01 906 [email protected] [email protected] (011) 2910367 (011) 2910368/9 2910514 (011) 2910457, 2299566 (038) 2299633, 011-2710472 011-2710462, 01 573/0(1)[email protected] (011) 2537541 (011) 2537539/40 01 291/ 01 294 [email protected] (011) 2229249 (011) 2229218/9 04 250/ 04 250 [email protected] (034) 2235602 (034) 2235600/1 01 259/ 01 259 [email protected] (011) 2245895 (011) 2245896/7 04 288/8 04 288 [email protected] (034) 2268588 (034) 2268288/488 2931021 (011) 2933098, 2358358 (011) 4730305/7, 01 331 01 331 [email protected] [email protected] (011) 2393017 (011) 2393017 01 410/0(1)[email protected] (011) 2411612 (011) 2411609/10 01 844/ 01 844 [email protected] (011) 2814149 (011) 2814147/8 033-2239772 033-2239771, 2222396 (033) 2226640/1, 2327379, 2436889 (011) 2447231/2, 01 861/ 01 861 [email protected] [email protected] (011) 2836412 (011) 2836410/1 eehn o FxN E-mail FaxNo Telephone No [email protected] (011)2782684 01 901 iiahoamrsmahl 5 [email protected] (011) 2910515 08 295 [email protected] (038) 2299550 1-709 [email protected] [email protected] 011-2710492 01 914 [email protected] (011) 2981644 01 318 [email protected] (011) 5331485 3-297 [email protected] [email protected] 033-2239773 03 264 [email protected] (033) 2226642 01 415 [email protected] (011) 2421453 24 9 82 193 31 86 106 176 144 39 207 42 92 87 52 37 134 94 117 83 151 162 76 50 98 140 57 69 96 29 137 70 127 173 135 78 16 12 Code Branch Branches 57 Gampaha District Branches 25 Kalutara District Branches 10 Colombo District 93
Annual Report 2013 Sampath Bank PLC BRANCH NETWORK
WESTERN PROVINCE CONTD. Branch Branch name Address Telephone No Fax No E-mail Code No 203D, Telwatte Junction, Colombo Road, Negombo 02 (031) 2221930/1 (031) 2227282 [email protected] 88 Negombo ‘Sri Ramya Building’, Kandy Road, Nittambuwa (033) 2295905/6 (033) 2295907 [email protected] 71 Nittambuwa No 79 A, Stanley Thillekeratne Mw, (011) 2856907 - 9, Nugegoda (011) 2856908 [email protected] 3 Nugegoda 2816288 (011) 2452490/2, Old Moor Street No 371, Old Moor Street, Colombo 12 (011) 2424074 [email protected] 27 2424075
Padukka No 15, Horana Road, Padukka (011) 2757731/2 (011) 2757733 [email protected] 192
Panadura Super No 373, Galle Road, Panadura (038) 2235100, (038) 2235101 [email protected] 26
Panadura - No 111B & 111C, Horana Road, Wekada, (038) 2244545, (038) 2244457 [email protected] 47 Wekada Panadura 2244534 No 452, Pannipitiya Road, Pelawatta, (011) 2787209, Pelawatte (011) 2786118 [email protected] 63 Battaramulla 2786119 (011) 2940279, Peliyagoda No 304, Negombo Road, Peliyagoda (011) 2940156 [email protected] 136 2938797 No 999, People’s Park, Bodhiraja Mw, (011) 2432324, 262, Pettah (011) 2432303 [email protected] 2 Colombo 11 2394596 Piliyandala No 61, Moratuwa Road, Piliyandala (011) 2614664/65 (011) 2614664 [email protected] 19 Pitakotte No 463, Kotte Road, Pitakotte (011) 2874574/577 (011) 2874574 [email protected] 91 Platinum Plus No 18, Cambridge Place, Colombo 07 (011) 2695073/237 (011) 2695196 [email protected] 131 No 26/05, 26/06, UDA Premises, Kadawatha Ragama (011) 2960659/629 (011) 2960659 [email protected] 73 Road, Ragama Rajagiriya No 620, Kotte Road, Rajagiriya (011) 2864922/944 (011) 2864988 [email protected] 122 Ratmalana No 261, Galle Road, Ratmalana (011) 2730820/1 (011) 2730819 [email protected] 18 011-2790457, Talahena No 557, Talangama North, Talangama 011-2790459 [email protected] 211 011-2790458 No 244/4, Pannipitiya Road, Thalawathugoda (011) 2796670/1 (011) 2796672 [email protected] 178 Thalawathugoda Thimbirigasyaya No 154, Havelock Road, Colombo 05 (011) 2505001/2 (011) 2505003 [email protected] 34 Veyangoda No 121, Negombo Road, Veyangoda (033) 2296330 (033) 2296330 [email protected] 77 (038) 2284960, Wadduwa No 555, Galle Road, Wadduwa (038) 2284505 [email protected] 75 2285132 (011) 2931569/70, Wattala No 280, 280/1, Negombo Road, Wattala (011) 2931568 [email protected] 8 2941526/7 Wellampitiya No 268, Kolonnawa Road, Wellampitiya (011) 2533498 (011) 2533498 [email protected] 45 Wellawatta Super No 591A, Galle Road, Colombo 06 (011) 2507607/8 (011) 2507609 [email protected] 36 (033) 2232670, Yakkala No 88, Kandy Road, Yakkala (033) 4674602 [email protected] 68 2234230
94 CURRENCIES MAINTAINED INSPECIFIC ACCOUNTS NOSTRO Germany Frankfurt amMain, Kaiserplatz, 60261 Institutions Financial COMMERZ BANK AG Main, Germany 60486, Frankfurt am Theodor-Heuss 70 Allee DEUTSCHE BANK AG GERMANY Denmark DK-1092 K, Copenhagen Holmens Kanal 2-12, COPENHAGEN DANSKE BANK A/S – DENMARK 200120, PRC Shanghai Trade Area ZuiFinance andLu Jia Road, No 33,HuaYuan ShiQiao 34F, Citigroup Tower SHANGHAI BRANCH, LTD CITI BANK (CHINA) CO CHINA M5B 2M8Canada, floor, Toronto, Ontario, 250, Yonge Street, 17th Services Correspondent Bank TORONTO BANK OFMONTREAL - CANADA Bangladesh Area, 1000, Dhaka Commercial2, Dilkusha BANK –DHAKA STANDARD CHARTERED BANGLADESH 3000, Australia Melbourne, Victoria 500, Bourke Street, BANK -MELBOURNE NATIONAL AUSTRALIA AUSTRALIA Bank &Address Country /Nameof the COBADEFF DEUTDEFF DKK DABADKKK CITICNSX BOFMCAT2 SCBLBDDX NATAAU33 Swift Code EUR EUR CNY CAD DOLLAR ACU- AUD CCY Bank &Address Country /Nameof the Verona, Italy 2 PiazzaNogara, 37121 COOP VERONA BANCA.POPOLARE SOC Italy 6th floor 20154 Milan B Tower 3 Aulenti Piazza Gae UNICREDIT SPA -MILANO ITALY Mumbai 400001, India Road, Gandhi90, Mahatma BANK -MUMBAI STANDARD CHARTERED 008 India Egmore Chennai-600 Second Lane Garden No 2(Old No11),Zerald Road No 20/21, CasaMajor CHENNAI BANK OFCEYLON - 008 India Egmore Chennai-600 Second Lane Garden No 2,(Old No11)Zerald Road No 20/21, CasaMajor CHENNAI BANK OFCEYLON - INDIA Kowloon, HongKong Road, Kwun Tong Tower, 388Kwun Tong 15/F, Standard Chartered BANK (HONG KONG) LTD STANDARD CHARTERED HONGKONG Germany D-80538 Munich, Am Tucherpark 1 (HYPOVEREINSBANK) MUNICH UNICREDIT BANK AG - Swift Code BAPPIT22 UNCRITMM SCBLINBB BCEYIN5M BCEYIN5M HKD SCBLHKHH HYVEDEMM CCY EUR EUR DOLLAR ACU- EURO ACU- DOLLAR ACU- EUR 95
Annual Report 2013 Sampath Bank PLC NOSTRO ACCOUNTS MAINTAINED IN SPECIFIC CURRENCIES
Country / Name of the Country / Name of the Swift Code CCY Swift Code CCY Bank & Address Bank & Address JAPAN OVERSEA CHINESE BANK OF TOKYO BANKING CORP LTD 65 Chulia Street, OCBC MITSUBISHI UFJ LTD – OCBCSGSG SGD TOKYO Centre, BOTKJPJT JPY 7-1, Marunouchi Singapore 049513, 2-Chome , Chiyoda -Ku, Singapore Tokyo 100-0005, Japan SWEDEN STANDARD CHARTERED SKANDINAVISKA BK – TOKYO ENSKILDA BANKEN AB 21st Floor, Sanno Park (PUBL) - STOCKHOLM ESSESESS SEK Tower, SCBLJPJT JPY Kungsträdgårdsgatan 8, 2-11-1 Nagatacho, 10640 Stockholm, Chiyoda-ku, Sweden Tokyo 100-6155, Japan SWITZERLAND SUMITOMO MITSUI UBS AG- ZURICH BANKING CORPORATION The Bank for Banks, Global Institutional P.O.BOX, CH-8098, UBSWCHZH80A CHF Banking Deparment, SMBCJPJT JPY Zürich, 1-2, Marunouchi Switzerland 1-Chome, Chiyoda -Ku, UNITED ARAB EMIRATES Tokyo 100-0005, Japan MASHREQ BANK PSC - NEW ZEALAND DUBAI BANK OF NEW ZEALAND- 3rd Floor Mashreqbank WELLINGTON Head Office, Omer Bin BOMLAEAD AED Bank Sector – Al Khattab Road, PO Box Institutional banking, BKNZNZ22 NZD 1250,Deira, Dubai, Level 5 Pier 1, Harbour UAE Quays, 60 Waterloo Emirates NBD Bank Quay PJSC Wellington, New Zealand 6 th Floor, Head Office NORWAY Building EBILAEAD AED DNB BANK ASA- OSLO Baniyas Road , Deira Head Office, Stranden DNBANOKK NOK PO Box 777, Dubai, 0021, Oslo, Norway UAE PAKISTAN UNITED KINGDOM STANDARD CHARTERED BANK OF CEYLON (UK) BANK - KARACHI LTD ACU- BCEYGB2L GBP PO Box 5556, 11, SCBLPKKX 1 Devonshire Square, DOLLAR Chundrigar Road, London, EC2M 4WD, UK Karachi 74000, Pakistan BARCLAYS BANK PLC SOUTH AFRICA Barclays Corporate, FIRSTRAND BANK LTD London Service Centre P O BOX 786273, PO Box 69961, 1 Churchill BARCGB22 GBP FIRNZAJJ ZAR Sandton 2146, South Place Africa London, E14 1NP, United Kingdom SINGAPORE UNITED OVERSEAS UNITED STATES OF AMERICA BANK LTD DEUTSCHE BANK TRUST 80 Raffles Place, UOVBSGSG SGD COMPANY AMERICAS NY UOB Plaza BKTRUS33 USD 60, Wall Street, New Singapore 048624, York, NY, USA Singapore
96 New York, NY 101152, USA 4080 375, ParkAvenue, NY WELLS FARGO BANK NA 10004, USA Suite 1500, New York, NY 50, Broadway, 15th floor, MASHREQ BANK PSC NY 10017-2014, USA York, 270, ParkAvenue, New NA JP MORGAN CHASE BANK York, NY 10018, USA 452, Fifth Avenue, New HSBC BANK USA NA York, NY 10022, USA 399, ParkAvenue, New CITI BANK NA Bank &Address Country /Nameof the NPSNY USD PNBPUS3NNYC USD MSHQUS33 USD CHASUS33 USD MRMDUS33 CITIUS33 Swift Code USD CCY 97
Annual Report 2013 Sampath Bank PLC CORRESPONDENT BANKS AND EXCHANGE COMPANIES
47 8 15 34 23 13 38 53 12 32 17 5 2 20 16 48 41 46 7 39 18 51 54 25 11 45 24 10 26 27 40 28 14 3 19 31 49 52 42 36 4 35 21 50 37 29 30 49 22 6
1
44 9
33
Country SWIFT Code Country SWIFT Code Country SWIFT Code 1. Australia ING Belgium SA/NV BBRUBEBB Deutsche Bank (China) DEUTCNSH Australia and New Zealand KBC Bank NV KREDBEBB Co Ltd ANZBAU2S Banking Group Ltd 6. Brazil HSBC Bank (China) Co Ltd HSBCCNSH Citibank NA CITIAU2X Deutsche Bank SA DEUTBRSP JP Morgan Chase Bank CHASCNSH Hongkong& Shanghai 7. Bulgaria (China) Co Ltd HSBCAU2S Banking Corporation Ltd UnicreditBulbank AD UNCRBGSF Standard Chartered Bank SCBLCNSX JP Morgan Chase Bank NA CHASAU2X 8. Canada (China) Ltd National Australia Bank Bank of Montreal BOFMCAT2 Wells Fargo Bank NA PNBPCNSH NATAAU33 Ltd HSBC Bank Canada HKBCCATT 11. Cyprus 2. Austria Royal Bank of Canada ROYCCAT2 SocieteGenerale SOGECY2N Raiffeisenlandesbank RWGAT2B Bank of Nova Scotia NOSCCATT Cyprus Ltd Unicredit Bank Austria AG BKAUATWW 9. Chile 12. Czech Republic 3. Bahrain Banco del Estado Commerzbank AG COBACZPX BECHCLRM HSBC Bank Middle East Ltd BBMEBHBX de Chile Unicredit Bank Czech 4. Bangladesh Citibank NA CITICLRS BACXCZPP Republic AS Dhaka Bank Ltd DHBLBDDH 10. China Standard Chartered Bank SCBLBDDX Bank of China BKCHCNBJ 13. Denmark 5. Belgium Citibank (China) Co Ltd CITICNSX Danske Bank AS DABADKKK Commerzbank AG COBABEBX Commerzbank AG COBACNSX DnB NOR Bank ASA DNBADKKX
98 Citibank Europe PLC Bank of Ireland 23. Standard Chartered Bank (Persero) PT Bank Mandiri Corporation Ltd Banking Shanghai The Hongkong and Deutsche Bank AG Citibank NA 22. State Bank of India Standard Chartered Bank Mashreq Bank ICICI Bank Ltd Banking Corporation Ltd The Hongkong& Shanghai Deutsche Bank AG Citibank NA Bank of Ceylon 21. Commerzbank AG CIB Bank Ltd 20. Wells Fargo Bank NA UBAF (HongKong) Ltd (Hong Kong) Ltd Standard Chartered Bank BankJP MorganNA Chase Banking Corporation Ltd Hongkong& Shanghai Deutsche Bank AG Commerzbank AG Citibank NA BNP Paribas 19. Greece SA Bank ofNational 18. DnB Nor Bank ASA Deutsche Bank AG Commerzbank AG (Hypovereinsbank) Unicredit Bank AG 17. Commerze Bank AG Deutsche Bank AG et Francaises (UBAF) Union de BanquesArabes BNP ParibasSA 16. EnskildaBanken Skandinevinska DnB NOR Bank ASA Danske Bank Nordea Bank Finland PLC 15. Mashreq Bank Arab International Bank 14. Nordea Bank DenmarkAS Country
France Finland Egypt Ireland Indonesia India Hungary Hong Kong Greece Germany
CITIIE2X BOFIIE2D SCBLIDJX BMRIID HSBCIDJA DEUTIDJA CITIIDJX SBININBB SCBLINBB MSHQINBB ICICINBBCTS HSBCINBB DEUTINBB CITIINBX BCEYIN5M COBAHUHX CIBHHUHB PNBPHKHH UBAFHKHX SCBLHKHH CHASHKHH HSBCHKHH DEUTHKHH COBAHKHX CITIHKHX BNPAHKHH ETHNGRAA DNBADEHX DEUTDEMM COBADEFF HYVEDEMM COBAFRPX DEUTFRPP UBAFFRPP BNPAFRPP ES DNBAFIHX DABAFIHX NDEAFIHH MSHQEGCA ARIBEGCX NDEADKKK SWIFT Code SIFIHX J A Banking Corporation Ltd The Hongkong& Shanghai Bank of Maldives PLC Bank of Ceylon 30. Bhd Malaysia Standard Chartered Bank Berhad HSBC Bank Malaysia Bhd Deutsche Bank (Malaysia) Citibank Berhad 29. Bank ofNational Kuwait Citibank NA 28. Standard Chartered Bank Ltd East HSBC Bank Middle 27. Wells Fargo Bank NA BankJP MorganNA Chase Mitsubishi UFJ Ltd The Bank of Tokyo – Corporation Sumitomo MitsuiBanking Standard Chartered Bank Mizuho Bank Ltd Corporation Ltd Banking Shanghai The Hongkong and Deutsche Bank AG Commerzbank AG, Tokyo LtdCitibank Japan Banking Group Ltd Australia and New Zealand 26. BancaPopolareSoc Coop UnicreditSpA HSBC Bank PLC Commerzbank AG Banca UBAE SPA LavoroSpA del BancaNazionale BancaIntesaSpA 25. –IsraelBank BM Leumi le 24. Country ANZ National Bank LtdANZ National 33. Commerzbank AG 32. LtdNepal Standard Chartered Bank 31. Banking Corporation Ltd The Hongkong& Shanghai Citibank NA Bank of New Zealand ING Bank NV Deutsche Bank AG
Israel Malaysia Italy New Zealand Netherlands Nepal Maldives Jordan Japan Kuwait
HSBCMVMV MALBMVMV BCEYMVMV SCBLMYKX HBMBMYKL DEUTMYKL CITIMYKL NBOKKWKW CITIKWKW SCBLJOAX BBMEJOAX PNBPJPJX CHASJPJT BOTKJPJT SMBCJPJT SCBLJPJT MHBKJPJT HSBCJPJT DEUTJPJT COBAJPJX CITIJPJT ANZBJPJX BAPPIT22 UNCRITMM MIDLITMX COBAITMM UBAIITRR BNLIITRR BCITIT22 LUMIILIT SWIFT Code HSBCNZ2A CITINZ2X BKNZNZ22 ANZBNZ22 INGBNL2A DEUTNL2A COBANL2X SCBLNPKA Mashreq Bank LtdEast HSBC Bank Middle 40. BNP ParibasPortugal 39. Nordea Bank Polska SA Warszawie SA Bank Handlowy w 38. Banking Corporation Ltd The Hongkong &Shanghai Deutsche Bank AG Citibank NA 37. (Pakistan) Ltd St Banking Corporation Ltd The Hongkong& Shanghai 36. LtdEast HSBC Bank Middle 35. Banken Scandinevinska Enskilda Nordea Bank Norge ASA DnB Nor Bank ASA 34. Country Deutsche Bank AG Citibank Korea Inc 45. Standard Chartered Bank Ned Bank Ltd FirstRand Bank Ltd ABSA Bank Ltd 44. United Overseas Bank Ltd et Francaises (UBAF) Union de BanquesArabes Standard Chartered Bank Corporation Ltd Ov Bank Ltd Mizuho Corporate JP Mo Banking Corporation Ltd The Hongkong &Shanghai Deutsche Bank AG DBS Bank Ltd Commerzbank AG Citibank NA Mitsubishi UFJ Ltd The Bank of Tokyo- 43. Bank Al Rajhi The SaudiBritishBank Bank The Commercial National Saudi Hollandi Bank 42. Bank Romanian Commercial 41. andard Chartered Bank
e
rsea-Chinese Banking rga Portugal Qatar Poland Philippines Pakistan Oman Norway South Korea South Africa Singapore Saudi Arabia Romania n Chase Bank NA n Chase
MSHQQAQA BBM BNPAPTPL NDEAPLP2 CITIPLPX HSBCPHM DEUTPHMM CITIPHMX SCBLPKKX HSBCPKKX BBM ESSENOKX NDEANOKK DNBANOKK SWIFT Code CHASSGSG DEUTKRSE CITIKRSX SCBLZAJJ NEDSZAJJ FIRNZAJJ ABSAZAJJ UOVBSGSG UBAFSGSX SCBLSGSG OCBCSGSG MHCBSGSG HSBCSGSG DEUTSGSG DBSSSGSG COBASGSX CITISGSG BOTKSGSX RJHISARI SABBSARI NCBKSAJE AAALSARI RNCBROBU EQAQX EOMRX 99 M
Annual Report 2013 Sampath Bank PLC CORRESPONDENT BANKS AND EXCHANGE COMPANIES
Country SWIFT Code Country SWIFT Code The Hongkong & Shanghai The Hongkong& Shanghai HSBCKRSE MIDLGB22 Banking Corporation Ltd Banking Corporation Ltd JP Morgan Chase Bank NA CHASKRSX JP Morgan Europe Ltd CHASGB2L Standard Chartered First Standard Chartered Bank SCBLGB2L SCBLKRSE Bank Korea Ltd Wells Fargo Bank NA PNBPGB2L Union de BanquesArabes 54. United States of America UBAFKRSX et Francaises (UBAF) Citibank NA CITIUS33 Wells Fargo Bank NA PNBPKRSX Deutsche Bank AG DEUTUS33 46. Spain Deutsche Bank Trust BKTRUS33 Banco Bilbao Company Americas BBVAESMM VizcayaArgentaria SA HSBC Bank USA NA MRMDUS33 Banco Santander SA BSCHESMM JP Morgan Chase Bank NA CHASUS33 Commerzbank AG COBAESMX MashreqBank PSC MSHQUS33 47. Sweden Standard Chartered Bank SCBLUS33 Danske Bank A/S DABASESX Wells Fargo Bank NA PNBPUS3NNYC Skandinaviska Enskilda ESSESESG Banken SvenskaHandelsbanken HANDSESG 48. Switzerland Credit Suisse CRESCHZZ UBS AG UBSWCHZH 49. Taiwan Citibank NA CITITWTX Deutsche Bank AG DEUTTWTP The Hongkong & Shanghai HSBCTWTP Banking Corporation Ltd JP Morgan Chase Bank NA CHASTWTX Mizuho Corporate Bank MHCBTWTP Ltd Standard Chartered Bank SCBLTWTP (Taiwan) Ltd Wells Fargo Bank NA PNBPTWTP 50. Thailand Citi Bank NA CITITHBX Deutsche Bank AG DEUTTHBK The Hongkong & Shanghai HSBCTHBK Banking Corporation Ltd Kasikornbank Public KASITHBK Company Ltd Standard Chartered Bank SCBLTHBX (Thai) PCL 51. Turkey HSBC Bank AS HSBCTRIX Turk EkonomiBankasi AS TEBUTRIS ING BANK INGBTRIS 52. United Arab Emirates Citibank NA CITIAEAD HSBC Bank Middle East BBMEAEAD Ltd MashreqBank PSC BOMLAEAD Standard Chartered Bank SCBLAEAD Habib Bank AG Zurich HBZUAEAD 53. United Kingdom Bank of Ceylon(UK) Ltd BCEYGB2L Barclays Bank PLC BARCGB22 Citibank International PLC CITIGB2L
100 New Zealand Malaysia Kuwait Jordan Bahrain Australia Country Italy Saudi Arabia Spain Qatar Oman Placid TransferPrabhu Money IME (M)SDN BHD Exchange CompanyBaharain Almulla International Exchange Co KSC Moneygram ARY Forex Limited Alawne Exchange Turbo Caash Zenj Exchange Co WL FinanceNational &Exchange Co WL Bahrain Financing Company Moneygram TSS World transfer Wide Money HCH Holdings(Ausi Spices ) Lanka Currency Converter TransferColombo Money Services Ltd Pty Remittance Ltd PlusPty Kapruka Ltd Pvt Name of Exchange Company Tahweel AlRajhi Moneygram NEC Transfer Money SA Spain Exchange Money Travelex Currency Exchange Al Jazeera Exchange Al Mirqab Exchange International Express Money TransferPrabhu Money Habib Exchange Al SaadExchange Exchange Doha Al Mana Ex Gulf Exchange Co Al Dar Exchange Works Lari Exchange Co Al Zaman Exchange WL Islamic Exchange Co WL City Exchange Co WL AlFardan Exchange Company Co LC Bank Doha Exchange Al Jadeed Travelex Currency Exchange Purshottam Kanji Exchange L C Oman &UAE Exchange Centre &Co Placid Exchange CompanyNational SRL Travelex Currency Exchange Moneygram Kapruka New Zealand Ltd Exchange SA Money
Global Companies;Global Sampath Bank PLC of actsasan agent following also Singapore UK/Canada Cyprus UAE Country
Prubu Gro Ria Financia TransferInstant Money CashGlobal ARY Speedremit Ez Remit Xpress Services Money Ltd Se Sigue Global Gram InternationalMoney Placid TransferPrabhu Money International Express Money Moneygarm Placid to Money Money Exchange SA Money Travelex Currency Exchange Exchange Joyalukkas Arab Link Multinet Trust Exchange International Express Money TransferPrabhu Money Delma Exchange Company U remit International Exchange LC Sharaf Mawarid Exchange ARY Forex Limited Lulu Exchange Al Rostamani ExCo Int’l Emirates India International Exchange Al AnsariExchange Est Exchange Bureau Money Al Ahalia LeelaMegh Exchange Co LC Alfalah Exchange Company LC Wall Street Exchange Centre LC Habib Exchange Company LC UAE Exchange Centre LC Name of Exchange Company up INC l Services rvices 101
Annual Report 2013 Sampath Bank PLC CORPORATE GOVERNANCE
Chairman’s Statement Risk management continues to be a key area of focus Corporate Governance at Sampath Bank is for the Board and the subcommittee tasked with embedded into how we do business through our oversight of the risk management function meets values, the policy framework of the Bank and the once in two months to ensure that sufficient attention governance structures in place which adhere to, and is given to this vital area. go beyond, statutory requirements and the voluntary Code of Best Practice on Corporate Governance. We The Board has focussed on succession planning are committed to maintaining the highest standards for Key Management Personnel and the Board of Corporate Governance in the Bank and accordingly, Nomination Committee and Board HR & Remuneration have taken note of the revised Code of Best Practice Committee have been tasked with addressing the on Corporate Governance issued during 2013 jointly concerns of the Board. Accordingly, a framework for by the Institute of Chartered Accountants of Sri Lanka managing talent and a succession plan has been and the Securities and Exchange Commission of Sri drawn up. Lanka for implementation in the near future. It is also necessary to ensure that similar standards of conduct The Board also sanctioned a donation to the Colombo are upheld throughout the Group and actions General Hospital totalling Rs 49.8 Mn in response have been taken to ensure harmonising of Group to the urgency of the need which will benefit many Corporate Governance practices. people in the communities we operate in.
Our commitment to shareholder engagement We will continue to revise, review and update our remains unparalleled in the country and these policies and governance structures that facilitate activities are spearheaded by a separate Board Sub good governance with the objective of ensuring that Committee which facilitates communication with high standards relevant to the industry are upheld shareholders using an inclusive approach. Our Annual by the Sampath Bank Group in line with our stated Report is printed in Sinhala and English with excerpts values. made available in Tamil. Concerns raised have been addressed and responses include priority service. We are encouraged by the participation of shareholders at the Annual General Meetings and continue to facilitate participation through the Shareholders Relations Forum held immediately after to provide a forum for raising concerns and discussions. We Dhammika Perera propose to further enhance shareholder engagement Chairman in the future with Regional Shareholder Relations Forums to provide a more conducive environment for Colombo, Sri Lanka dialogue in 2014. 18th February 2014
Diversity is key to good Corporate Governance and our commitment to maintaining diverse views is evident in the mix of skills and experience within the Board which includes entrepreneurs, professionals and academics. Gender representation at Board level is one of the highest in the country with three eminent female professionals on the Board who are key contributors at Board Meetings. We also continue to maintain the learning culture within the Board with regular briefings by management, participation at Director Forums and through guest presentations on key topics which provide an outside perspective.
102 Software Solutions&Maintenance Leasing, Factoring and Accepting Renting of Commercial Property ogy SolutionsLtd -Developing Sampath Information Technol- DGM -Finance Senior DGM- Executive Director / SC Securities (Pvt) LtdSC Securities(Pvt) - Fixed &Saving Deposits Financial OfficerFinancial Finance & Back Office Siyapatha Finance Ltd Planning Sampath Centre Ltd - Governance Structure Treasury Planning Finance Group Chief Subsidiaries Stock Broking of Hardware Central Cash Operations Operations Network Service Centre AGM - Administration Logistics & Logistics Premises AGM - Board of Directors - Subsidiaries Branches Regional Regional Offices Br.Cr I Personal Banking AGM Senior DGM- Branches Regional Regional Offices Br.Cr II AGM Commercial Credit International & Senior DGM- Development International Commercial Operations Services Banking Credit Trade Managing DirectorManaging Board of Directors - Shareholders Bank Front Office Dealer Unit Dealer Treasury Treasury Primary DGM - DGM - Market- ing &Business Card Centre Development Remittances Marketing & Mobilisation Electronic Banking Deposit Unit Recoveries Recoveries AGM - Board Committees External Auditors DGM HR Chief Legal Chief Legal Legal Unit Legal Officer Corporate Corporate Currency Banking Finance Finance Foreign AGM - Unit Board Shareholder Relations Committee Board Strategic Planning Committee Board Committee RiskManagement Board HR&Remuneration Committee Board NominationCommittee Corporate Board Marketing Committee Credit DGM - Board Credit Committee Board Treasury committee Board Audit Committee (8) Internal Control Steering Committee (7) IFRSSteering Committee (6) Procurement Committee (5) Credit Policy Committee Committee Steering IT (4) (3) Investments Committee (2) DepositMobilization Committee (1) Asset &Liability Committee Management CommitteesManagement Development Data Ware- house Unit IT/Systems Head of IT IT/EDP Group Company Secretary Treasury Middle Middle Risk Unit Office Chief Risk Officer Group Compliance Compliance Officer Group Unit 103
Head of Internal Audit
Annual Report 2013 Sampath Bank PLC CORPORATE GOVERNANCE
The Board of Directors of the Bank and its risk appetite and has oversight Sampath Bank is a public listed company and its responsibility of the Corporate Management Team affairs are governed by the Board of Directors. which is responsible for managing the performance Directors are elected by shareholders at the Annual of the Bank on a day-to-day basis. Strategic plans, General Meeting after the necessary approvals from governance structures, policies and procedures the Board Nomination Committee, Board and the are approved by the Board and its sub-committees Central Bank of Sri Lanka except for casual vacancies to provide a framework for decision making. which are filled by the Board with necessary Implementation of the strategies approved by the approvals from the Central Bank of Sri Lanka until Board is delegated to the Corporate Management led the next Annual General Meeting in accordance with by the Managing Director. Processes to address needs the Articles of Association. The main responsibility of other significant stakeholders are embedded into of the Board is to deliver sustainable value to our the organisation policy frameworks and procedures shareholders over the short, medium and long to ensure that there is long term value created for term. The Board determines the strategic direction all stakeholders.
Highlights - 2013
Re-election of the following Directors at the Annual General Meeting Mr Dhammika Perera Mr Sanjiva Senanayake Prof Malik Ranasinghe Mrs Dhara Wijayatilake Mrs Saumya Amarasekera
The Board appointed Alternate Directors to facilitate the smooth operation of business and minimise the bottlenecks that may arise due to temporary physical unavailability of Directors in the country due to overseas travel commitments.
Re-appointment of Messrs Ernst & Young, Chartered Accountants, as Auditors of the Company.
Engaging Messrs Ernst & Young, Chartered Accountants, to assess compliance with the Banking Act Direction No 11 of 2007 on Corporate Governance for Licensed Commercial Banks and subsequent amendments thereto.
Engaging Messrs Ernst & Young to provide assurance on the Directors’ Report on Internal Controls Over Financial Reporting on page 213.
Driving a programme to ensure succession planning for Key Management Personnel within the Bank.
104 Commercial Banks issued by the Central Bank of 11 of 2007 onCorporate Governance for Licensed the requirements of the Banking Act Direction No Central Bank with aCertificate of Compliance on Auditors, & Young, Messrs Ernst have provided the Lanka asreported 126to 140. onpages OurExternal Commercial Banks issued by the Central Bank of Sri thereto onCorporate Governance for Licensed Direction No 11of 2007 and subsequentamendments report. The Board complies with the Banking Act requirements isdetailed 112to 125of onpages this Stock Exchange. The Bank’s compliance with these forRules Listed Companies issued by the Colombo RequirementsListing onCorporate Governance Lanka in2008.We with comply also the Continuing and the Securities and Exchange Commission of Sri the Institute of Chartered Accountants of SriLanka Practice onCorporate Governance by issued jointly The voluntarily Board has adopted the Code of Best Governance Compliance with Codes onCorporate 26 hours per annum onmatters of the Bank. CommitteeRisk Management spend than not less members of the Board Audit Committee and Board 76than hours per annum onmatters of the Bank and performance. NonExecutive Directors spend not less monitoring the riskprofile and reporting of performance of Corporate and Management, direction, setting and goals targets, evaluating participation inproviding enhances also strategic constructive debate of the items onthe It agenda. on the Board provides an outside perspective for The greater number of NonExecutive Directors of the Bank and partof the Corporate Management. Executiveonly Directors whoare both employees Director and Group Officer ChiefFinancial are the Directors are Independent Directors. The Managing of experience to the Board. Five of the NonExecutive Directors whobringavariety of skills and awealth Executive Directors asare eightother NonExecutive skills. andare The Chairman Deputy Non witheffectively arightbalance of diversity and believe isthe number optimal required to function andChairman ten other directors, whichwe The Board comprises Deputy the Chairman, Composition and Structure COMMITTEE SPEARHEADED BY ASEPARATE BOARD SUB THE COUNTRY AND THESEACTIVITIES ARE ENGAGEMENT REMAINS UNPARALLELED IN OUR COMMITMENT TO SHAREHOLDER shareholder views are addressed by the Board. with statutory requirements and ensuringthat responsibleBank. for Heisalso ensuringcompliance an active contribution inthe interests best of the Directors all that are briefed properly and make the Board and ensures itseffectiveness by ensuring Accordingly, provides the Chairman to leadership CSE and the Banking Act Direction No11of 2007. the Code, the continuingrequirements listing of the whichincludes aspects specified all in Chairman a formal terms of reference during2012 for the MD isan Executive Director. developed The Bank has isaNonExecutiveThe Chairman Director the while MD to maintain abalance of power and authority. segregation of the positionof and the Chairman the The effectiveness of the Board by isenhanced the of and DirectorRole Chairman Managing its effective 2014. date, January 1st the ICASL and SECin2013 to ensure compliance by Practice onCorporate Governance by issued jointly requirements set out inthe revised Code of Best We are inthe also process of reviewing additional governance our and responsibilities. indischarging practice to gobeyond mere compliance inour Sri Lanka. The Board looksto international best the operating environment for business key areas and presentations onstrategy and developments in the Committees. The Board receives regular reports provide feedback to the Board onthe activitiesof attention. of Chairpersons the Board SubCommittees importantto to besufficiently warrant further guidance and exercise oversight over areas deemed Board SubCommittees to provide more detailed itsduties.The appointed Boarddischarge has 9 and internal controls of the Bank to effectively policies, procedures, strategic plans, risk appetite indicators and stakeholder relations. reviews Italso strategic performance plans, key riskmanagement, and reviews reports onprogress inimplementing byleadership oversight of performance of the Bank framework to guide Itprovides the management. governance structure and an appropriate policy risk appetite of the Bank and sets inplace arobust The Board determines the strategic direction, the How we operate 105
Annual Report 2013 Sampath Bank PLC CORPORATE GOVERNANCE from the Managing Director and other members of The Blue Book encapsulates the Bank’s values, ethics the Corporate Management. Regular reports are also and code of conduct and sets out the expectations provided to the Board and Board Sub Committees on from all employees to ensure that high standards the Group’s risk appetite profile, risk management, of conduct are maintained throughout the Bank credit exposures & the Group’s loan portfolio, asset & in conduct of business and our interactions with liability management, liquidity, litigation, compliance stakeholders. A Whistle Blowing Policy is in place to and reputational issues. The agenda and supporting ensure that high standards of conduct are upheld papers are distributed in advance of all Board and and to serve as a channel of early identification of Board Sub Committee meetings to allow time for corporate fraud or risk management. This policy appropriate review and to facilitate full discussion at facilitates voluntary escalation of legitimate concerns the meetings. All Directors have full and timely access on any potential “wrong doing” occurring within to all relevant information and may take independent the Bank by any staff member to the notice of the professional advice if necessary at the Company’s Chairman of the Audit Committee. The procedure is expense. Directors have free and open contact with clearly set out in the intranet to ensure that all staff management at all levels and Key Management members are aware of the procedure. Personnel regularly make presentations to the Board on matters relating to their work. Setting Strategic Direction The Board is responsible for setting the strategic Directors keep themselves updated on matters that direction of the Bank and has appointed a separate impact the Bank which include regulatory changes, Committee of the Board to ensure that sufficient economic factors, demographic changes, social attention is devoted to the Strategic Planning Process. trends and other matters that impact the business The Bank has a three year Revolving Strategic of the Bank. Additionally, Corporate Management Planning model which has been in force since 2009. briefings and external seminars including Central The process involves an assessment of the Bank’s Bank Director Forums which are attended by competitive strengths and areas for improvement, a members of the Board ensure that they are regularly review of the operating environment with emphasis updated on matters that impact the Bank from a on emerging trends in the local market and global regulatory perspective. industry trends with the overall objective of delivering sustainable stakeholder value through earnings, The Directors also attend external briefings, growth, stability and operational efficiency. The conferences and seminars which provide them strategic plan formulated is used to prepare the with insights into developing trends in business Annual Budget used to set the Key Performance and banking. Indicators for the year to commence. The Board
Business Growth Earnings Growth Credit Quality Return on Assets after Tax > 2% Deposits growth > 15% Return on Equity > 20% NPA Ratio (Net of IIS) < 2% Net Interest Margin > 4% Credit Growth > 20% Effective Tax & VAT rate < 34% Cost to income ratio < 55% Open Credit Position Dividend Payout Ratio > 25% Assets growth > 15% Exposure < 8%
Financial KPIs Minimum Dividend per share > Rs 6.00 Risk Management Human Resource Development Infrastructure Growth % of Completion of Risk & Control % Core areas of expertise to be Enhance online banking Self Assessment for Strategic covered in training services Business Units % of credit facilities risk ratings/ Enhance mobile banking proposals reviewed by RMU prior % training objectives met services to granting New staff recruitment cost vs current Increase ATM access points Quarterly Market Risk Stress staff skill enhancement cost to fill a through partnerships with Testing
Non Financial KPIs capability gap other banks
106 Additional Governance Committees this function key inlinewith the requirements of been tasked with the oversight responsibility for Board. The Board Audit Committee of the Board has facilitate the effectiveof dutiesby discharge the ensures reliable reporting whichisnecessary to with regulations, internal policiesand procedures supports business operations, ensures compliance An effective system of Internal Controls that Internal Control measure and monitor risks. facilitate implementation of systems to identify, consultants2013 and engaged also to adviseand the directions and guidelines issued by CBSLduring Additionally, the noted Board has and complied with Committee 150to 152 of onpages this Report. Annual 187 and the Report of the Board RiskManagement 160to Reportin the RiskManagement onpages framework and activitiesare more described fully and the compliance function. The riskmanagement responsibility for of the riskmanagement the Bank Committee oversight whichhas onRiskManagement the Bank and receives regular reports from the Sub of the Board. The Board sets the riskappetite for sufficient attention isdevoted to this function key a Committee to ensure onRiskManagement that value creation to stakeholders appointed and has indeliveringManagement sustained growth and The Board recognises the importance of Risk Strategic RiskManagement 2014 usingthe samemodel. approved by the Board with along the Budget for Strategic Plan for beenreviewed 2014-2017 has and PerformanceKey Indicators inthe above The table. and the Budget for 2013 duringthe year usingthe monitors progress Strategic against Plan 2013 –2015 netetCmiteInvestment Committee evaluates and decides onthe approval or rejection of Investment Committee Committee (ALCO) Asset and Liability Committees Additional Governance authority. else, submitsrecommendations to the Board, where the Board isthe approving new investment proposals received by the Committee, ifwithin their limits, or compliance. buying and sellingof securities,foreign exchange exposures and regulatory debt structures, theof magnitude the interest rate and liquidityrisks, of new asset and liability products, fixed versus floatinginterest rate structures, pricing, maintaining the appropriate mix of assets and liabilities, introduction and their implementation. These include decisions onadvances and liabilities Formulates monitors and reviews asset all and strategies liability management
v Other investments special suchasSecuritisations,private equityand Investment inSri Lanka Development Bonds (SLDB) Investment inDebentures Investment inEquity Stocks listed inthe Colombo Stock Exchange (CSE) enture capital investments. year ended December 31st 2013. the Internal Control Over Reporting Financial for the Bank’s External Auditors, &Young, Messrs Ernst for Direction, obtained the Bankareport has from the Act Direction No11of 2007. Asrequired by the Reporting (ICOFR) inaccordance with the Banking the effectiveness of Internal Control Over Financial The Directors’ undertake an assessment annual of and business models. managing the policiesand processes for identifying, assessing Control prior to itsendorsement by the Board and reviewedalso the Bank’s statement onInternal system of internal controls within the Bank. Ithas addressed and there that robust isasufficiently the External Auditors to ensure concerns that are Audit communications Departmentand with has Audit Committee reviews the activitiesof the Internal Governance and international practice. best The the Central Bank Directions, the Code of Corporate Governance framework. ofare the elements key Bank’s Operational regularly reviewed by the Board. These committees committees with written terms of reference whichare have beenestablished standing asprincipal Operations. Additionally, Committees Management are effective necessary to day-to-day enable by himinrespectdelegation of matters which Board to the Bank’s Director Managing for further predetermined authority limitsdelegated by the ofmanagement the Bank’s operation and include These matters relate principally to the operational and those matters bedelegated. whichmay which mapsout the internal approvals processes The approved Board has agovernance framework Other Aspects of Corporate Governance Purpose andPurpose Tasks 107
Annual Report 2013 Sampath Bank PLC CORPORATE GOVERNANCE
Additional Governance Committees
Additional Governance Purpose and Tasks Committees IT Steering Committee Takes responsibility for the feasibility, business case and the achievement of outcomes of operations, infrastructure, automation, development, procurement and security activities related to Information Technology at Sampath Bank, in line with the strategic vision and long term goals as stipulated by the Board of Directors. The Steering Committee will monitor and review the strategic alignment of the Bank’s overall vision and goals with that of the IT Department, as well as provide oversight of the deliverables and rollout of such strategies. Credit Policy, Risk and Determines the Credit Policy of the Bank. The Credit Policy Committee has Portfolio Review Committee the authority to make a final decision on approval or rejection of proposed transactions as well as to establish personal limits and client limits in accordance with its powers. Procurement Committee Evaluates and make recommendations to the Board with the concurrence of the MD, on the capital expenditure proposals, where the Board is the approving authority.
The Committee also acts as the approving authority on capital expenditure projects and purchases within certain delegated limits.
IT Governance about compliance of IT with the Bank’s policies, The business of banking relies on information and standards, procedures, and overall objectives. communication technologies for originating and recording transactions and for producing information Resource management - Regular assessments used for regulatory reporting and decision making. ensures that IT has sufficient, competent and Additionally, the investments in IT are among the efficient resources to meet the Bank’s demands. most significant investments made by the Bank and are directly linked to the Bank’s overall strategy. Risk management – Risk Management principles Therefore, it is vital that sound governance practices embedded in the responsibilities of the Bank, are put in place to ensure that there is value creation ensure that the Bank and IT regularly assess in line with the strategic objectives of the Bank. and report IT-related risks and organisational IT governance of the Bank ensures that the impacts. investments in IT generate value, avoid failure and mitigate IT-associated risks by ensuring well defined Strategic alignment – A shared understanding roles and responsibilities for IT stakeholders including between the Bank’s management and the IT Information System Auditors, within an organisational department, enables the Board and senior structure that adequately defines the role of management to understand strategic IT issues. information, business processes, applications and infrastructure. Such a framework ensures that Value delivery - The benefits achieved from IT investments are aligned and delivered in each IT investment is assessed prior to and after accordance with corporate objectives and strategies. implementation to ensure that expected value The following best practices in IT Governance have has been delivered. been successfully implemented by the Bank: Performance management reporting- Accurate, High-level framework – Defines leadership, timely, and relevant portfolio, programme, processes, roles and responsibilities, information and IT project reports to senior management, requirements, and organisational structures. provide a thorough review of the progress being made towards the identified objectives of the Independent assurance - Internal / external IT project. audits (or reviews), provide timely feedback
108 Membership of Sub-Committees of the Board the following table. focus areas and attendance atmeetings are given in and itsSubCommittees met 55times.Their main The Board of Directors met 19timesduringthe year Board Meetings Committees with the Group Company Secretary. Central Bank requirements are available for the Sub Code of Practice Best onCorporate Governance and Written Terms of Reference with comply that the the minutes of meetings are available inhiscustody. the Secretary for the all Board Sub-Committees and The Group Company Secretary is MrSSudarshan papers andagenda Circulation of Meetings Actual Noof Meetings Frequency of Planned Sooriyaarachchi Mr Deepal Reference Terms of Samaranayake Mr Ranjith Perera Mr Aravinda Amarasekera Mrs Saumya Pathirana Mr Ranil Senanayake Miss Annika De Mel Mr Deshal Wijayatilake Mrs Dhara Perera Mr Dhammika Senanayake Mr Sanjiva Palansuriya Mr Channa Ranasinghe Prof Malik
Directors Chairman Quarterly vial vial vial vial vial vial vial vial Available Available Available Available Available Available Available Available Available 7 days 7 days prior ü ü ü ü 12 Board Audit Committee Chairman
7 days 7 days Board Human Need basis prior ü ü ü ü ü 3 Resources and Remuneration Committee Chairperson 7 days 7 days Need basis prior Board ü ü 5 Nomination Committee Chairperson months 7 days 7 days in two Once prior Board Risk ü ü ü ü ü ü ü ü ü ü ü ü 8 Management Committee Others Shareholder Matters Succession Planning Governance Risk Related Items Strategy and Budget Performance Review Main Banking Operations Focus Area Chairman 7 days 7 days Need basis prior 13 ü ü ü ü ü ü Board Credit Committee Bi-annually Chairman 7 days 7 days prior Board Strategic ü ü 2 Planning Committee Bi-annually Chairman
7 days 7 days Board prior
1 Shareholder Relations Committee Chairman months 7 days 7 days in two Once prior ü ü ü 6 Board Treasury Committee 40 % 10 12 12 12 4 5 5 Chairman months 7 days 7 days in two Once prior ü ü 5 Board Marketing 109 Committee
Annual Report 2013 Sampath Bank PLC CORPORATE GOVERNANCE Directors Board Meetings Board Committee Audit Human Board and Resources Remuneration Committee Nomination Board Committee Risk Board Management Committee Credit Board Committee Strategic Board Committee Planning Shareholder Board Committee Relations Treasury Board Committee Marketing Board Committee Mr Dhammika Perera 17 4 2 Mr Channa Palansuriya 18 3 5 7 8 2 1 Mr Sanjiva Senanayake 19 12 8 13 2 6 Mr Deepal Sooriyaarachchi 19 11 3 5 Prof Malik Ranasinghe 19 11 13 2 6 Mrs Dhara Wijayatilake 19 12 8 Miss Annika Senanayake 19 3 5 12 5 Mr Deshal De Mel 18 3 10 2 1 6 5 Mr Ranil Pathirana 16 10 0 Mrs Saumya Amarasekera 18 5 5 Mr Aravinda Perera 18 3 6 13 2 5 Mr Ranjith Samaranayake 19 7 13 2 6 Total No of Meetings 19 12 3 5 8 13 2 1 6 5
Stakeholders’ Rights Framework which encourages active co-operation between The Board recognises the rights of all stakeholders, Bank and stakeholders. The Commitment of the Bank established by law or through mutual agreements towards this aspect, is as follows: and has in place a Corporate Governance framework
Stakeholder Bank’s Commitment The Bank is committed to enhancing long term shareholder value and facilitate the Shareholders exercise of shareholders’ rights The Bank is committed to providing fair returns, stability, security and be fair in Customers dealing with them to provide superior service. The Bank is committed to building a work environment where people can make a Employees difference both as individuals and as part of a team. The Bank is committed to meeting its corporate responsibility and decisions on Community social and economic issues concerning activities of the Bank are developed and adopted by its governing bodies with the participation of Bank personnel.
110 18th February 2014 Colombo, SriLanka DirectorManaging Aravinda Perera For Sampath Bank PLC ended December 31st 2013. the Banking Act Direction No11of 2007, for the year Board of Directors interms of Section3(8)(ii)(g) of of Conduct, to them applicable aslaiddown by the personnel have affirmedcompliance with the Code the Board of Directors and the Senior Management Bank PLC, hereby declare the all members that of I Aravinda Perera, Director Managing of Sampath Declaration imposed onthe Company by the authorities. markets duringthe year. have Nopenalties been the Stock matters Exchange onall related to capital The complied Company with has the requirements of Statutory Compliance and Penalties following mechanisms: We communicate with our stakeholders through the Means of Communication resolutionsspecial atthe AGM heldon4th April 2013. There were nomatters required that passing of Meeting (AGM) resolutionsSpecial passed General atthe Annual last The results quarterly are publishedinthe Management Discussion and Analysis (pages (pages Discussion and Management Analysis Business and leaders mediapersonnel through results Financial and business strategies of the The results financial are displayed on to the Colombo Stock Exchange [CSE] Newspapers three inall and languages released 40 to 101). Investor forums and press releases. Bank are explained to investors, devoted to Investor Relations www.sampath.lk inan area of the website 111
Annual Report 2013 Sampath Bank PLC CORPORATE GOVERNANCE
The Code of Best Practice on Corporate Governance issued jointly by the Institute of Chartered Accountants of Sri Lanka and the Securities and Exchange Commission of Sri Lanka
Code CSE Listing Principle Compliance and Implementation of Best Requirements Practice Board of Directors Effective Board The Board of Directors comprises 12 Directors of whom A1 ten are Non Executive including the Chairman. The two Executive Directors are the Managing Director and the Group Chief Financial Officer who are also part of the Corporate Management to whom the day-to-day running of the organisation has been delegated. The Board has appointed Sub Committees to assist in the discharge of their collective duties and also approve policies, governance structures and the delegation of authority to provide a conducive business environment for effective performance of the Bank. Additionally, the Board is closely involved in developing strategy and setting the short, medium and long term goals of the Bank and regularly monitors performance against pre-determined Key Performance Indicators which include both quantitative and qualitative measures on a regular basis. Regular meetings Board Meetings are held monthly while special Board A1.1 meetings are convened as the need arises. During 2013 the Board held 19 scheduled meetings, and 2 Strategic meetings. Additionally the following Sub Committees also met regularly:
Board Audit Committee Board Human Resources & Remuneration Committee Board Nomination Committee Board Risk Management Committee Board Credit Committee Board Strategic Planning Committee Board Shareholder Relations Committee Board Treasury Committee Board Marketing Committee
This year the Board was provided with iPads to access Board papers via secure connections. Details of Board Meetings, Sub Committee Meetings and attendance are given on page 110 of this report. Board’s responsibilities: The following procedures are carried out to strengthen the safety and soundness of the Bank Ensure the The Board is responsible for setting strategy, policies and A1.2 formulation and for monitoring performance against agreed goals and implementation KPIs. During the year, the Board had 2 strategic planning of sound business sessions where they reviewed the proposals of the strategy Corporate Management and re-aligned strategy
112 strategy theto implement and knowledge skills, experience team possess the and management Officer (CEO) Chief Executive Ensure the that Principle concerned of the business and complexity naturethe scale, as are vital, given Board functions Fulfill suchother regulations with financial compliance fostering policies and accounting appropriate on adopting set with emphasis and standards are company’s values Ensure the that decisions in corporate considered interests are stakeholder Ensure all standards and ethical laws, regulations compliance with Ensure management controls and risk internal of information, secure integrity systems to Ensure effective strategy succession management CEO and senior Ensure effective strategy. required skills, experience and knowledge to implement Members and Personnel Management Key have the The Board NominationCommittee ensures the that Board adopted by the Bank. with the law, regulations and goodgovernance practices The Board iscommitted to fulfilling their functions inline practice.best international and accounting local standards and industry line with the business model of the Bank and evolving accounting to ensure are they that policiesannually in The Board Audit Committee and the Board review interests of these stakeholders. key which sets out the Bank’s commitment to upholdthe a Shareholder Relations Committee and HRPolicy also the community. Additionally, there isaCustomer Charter, interests of the customers, shareholders, employees and Directors to make decisions taking into account the The Memorandum of and the Articles Bank require the Committee. will report to directly the Board RiskManagement have responsibility for compliance. Headof Compliance toDirectly the Board SubCommittee onriskwhichwill There will beaseparate Compliance function reporting Committee Board Audit Committee and Board RiskManagement Refer to Director’s Statement onInternal Control, the year and isinplace. Nomination Committee and approved by the Board during A succession beenrecommended plan has by the Board Compliance and Implementation Practice of Best Code A1.2 A1.2 A1.2 A1.2 A1.2 A1.2 A1.2 Requirements CSE Listing CSE Listing 113
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The Code of Best Practice on Corporate Governance issued jointly by the Institute of Chartered Accountants of Sri Lanka and the Securities and Exchange Commission of Sri Lanka
Code CSE Listing Principle Compliance and Implementation of Best Requirements Practice Act in accordance The Board has put in place a framework of policies, A1.3 with laws procedures and a risk management framework to ensure relevant to the compliance with relevant laws, CBSL guidelines and organisation international best practice with regards to the operations and procedure of the Bank. The Board obtains independent professional for Directors advice as and when necessary in accordance with the to obtain Board approved policy on independent professional independent advice and these functions are co-ordinated through the professional Group Company Secretary. Independent professional advice at services were sought on matters during the year in Company accordance with the above provision in 2012. expense Access to and All Directors have the opportunity to obtain the advice A1.4 appointment and services of the Group Company Secretary, Mr S or removal Sudarshan, who is a Chartered Corporate Secretary of Company which is an approved qualification under the Companies Secretary Act No 7 of 2007. He is responsible for ensuring follow up of Board procedures, compliance with rules and regulations, directions and statutes, keeping and maintaining minutes and relevant records of the Bank.
The Articles of the Company specify that the appointment and removal of the Company Secretary should be by resolution involving the whole Board. Independent The Directors of the Bank have no vested interests and A1.5 judgement take decisions on matters before them using independent judgement. Dedicate Dates of regular Board meetings and Board Sub- A1.6 adequate time Committee meetings are scheduled well in advance and and effort to the relevant papers are circulated a week prior to the matters of the meeting. Board and the Company, It is estimated that Non Executive Directors dedicate not less than 24 days per annum for the affairs of the Bank and those Directors who are also on Sub Committees dedicate not less than 30 days for the affairs of the Bank. The attendance at meetings for the Board and its Sub Committees are given in page 110 Training for The Group Company Secretary draws up the training A1.7 Directors curricula in consultation with the Chairman. The first item of the agenda is devoted to hearing an outside expert views on matters relevant to the Bank. During 2013 the following areas were covered;
Directors’ responsibilities State of the economy and future outlook
114 from Directors independence declarations of Annual Directors Non Executive Independence of number and sufficient calibre Directors of Non Executive Board Balance governance good corporate in preserving Chairman’s role Division of Responsibilities between and Chairman CEO Principle matters of finance offer guidance on and knowledge to acumen financial Availability of AcumenFinancial proper manner proceedings ina Conduct Board ofRole Chairman 2013. Independence have beenobtained from the Directors for declarationsAnnual of independence or Non exercise of their unfettered and independent judgement. beperceivedreasonably interfere to materially with the relationship could that interfere materially with or could andmanagement free of any business or other 5NonExecutive Directors are independent of significant weight inthe Board decisions. Non Executive Directors, their opinions and views carry ofsufficient calibre. the Board Asthecomprises majority in their respective fieldsand therefore deemed to beof academics/business holdingsenior leaders, positions Officer. The NonExecutive Directors are professionals/ are Director the Managing and the Group ChiefFinancial andincluding the Chairman 2Executive Directors who The Board comprises 10NonExecutive Directors Accountants,Management UK. Director isaFellow Member of the Chartered Institute of Two Directors, includingthe MDhave MBAs and one served onthe Boards of anumber of institutions. financial Perera MrDhammika the Chairman, Additionally has 2. Executive Director the MDisan while Executive Director. balance of power and authority. isaNon- The Chairman separated inlinewith practice best inorder to maintain a The positionsof and the Chairman the MDhave been to identify training needs. assessment by Directors covers also aspects ontraining Sri Lanka Institute of Directors. The self- annual organised by professional bodiesand the among the Directors. participate also They inthe sessions Additionally, the Board encourages knowledge sharing 4. 3. 1. institutions: financial positions relatedmanagement to finance inother leading careers of the following Directors whohave heldsenior attribute beenakey acumenhas Financial of successful CSE and the Banking Act Direction No11of 2007. in the Code, the continuingrequirements listing of the 2012 for whichincludes aspects the specified all Chairman developedThe Bank has aformal terms of reference in
Mr Ranjit Mr Rani Soo Mr Deepal Mr Sanjiv Compliance and Implementation l Pathirana h Samaranayake a Senanayake riyaarachchi Practice of Best Code 54Section2 A5.4 53Section 2 A5.3 A5.2 and A5.1 A4 A3 A5 A2 Section 1 Requirements CSE Listing CSE Listing 115
Annual Report 2013 Sampath Bank PLC CORPORATE GOVERNANCE
The Code of Best Practice on Corporate Governance issued jointly by the Institute of Chartered Accountants of Sri Lanka and the Securities and Exchange Commission of Sri Lanka
Code CSE Listing Principle Compliance and Implementation of Best Requirements Practice Annual evaluation The Board makes an annual evaluation of independence A5.5 Section 2 of independence of the Directors based on the submission of the annual declarations. Based on these, the following Directors are deemed to be independent:
Mr Sanjiva Senanayake Mr Deepal Sooriyaarachchi Prof Malik Ranasinghe Mrs Dhara Wijayatilake Miss Annika Senanayake
There were no Directors deemed independent where all criteria was not met. Senior Mr Sanjiva Senanayake has been appointed as Senior A5.6 Independent Independent Director in view of the requirements of the and Director Banking Act Direction No 11 of 2007. A5.7 Chairman to hold During 2013, the Non Executive Directors and the A5.8 meetings with Chairman met once without the Executive Directors. Non Executive Directors, without Executive Directors being present Recording Board Minutes are prepared in order to record any A5.9 of Directors’ concerns of the Board as a whole or those of individual concerns in Board Directors regarding matters placed for their approval/ Minutes guidance/action. These Minutes are circulated and formally approved at the subsequent Board meeting, Additionally, Directors have access to the past Board papers and Minutes in case of need via electronic means at all times.
If a Director resigns over an unresolved issue, the Chairman will bring the issue to the attention of the Board. The Director concerned is also required to provide a written statement to the Chairman for circulation to the Board. Supply of Relevant Information Provision of The management provides comprehensive information A6.1 appropriate including both quantitative and qualitative information and timely for the monthly Board Meetings generally 7 days prior to information the Board/Sub Committee meetings. The Directors also have free and open access to Management at all levels to obtain further information or clarify any concerns they may have. As described above, they also have the right to seek independent professional advice at the Company’s expense and copies of advice obtained in this manner are circulated to other Directors who request it.
116 new Directors appointment of shareholders upon information to Disclosure of composition assess Board Annually Committee Nomination established Board through an appointments procedure for new transparent Formal and Appointments to the Board prior to Meetings. circulated 7days toagenda be Board Papers and Meetings arising atBoard briefed onissues properly Directors are to ensure all Chairman Principle been translated into Sinhala. are 22to given 28inthis onpages report also whichhas traditions of the Bank. The profiles of the current Directors inkeeping languages in Englishand with Sinhala the shareholders viathe Colombo Stock Exchange both All new appointmentsare communicated to the and itcomplies issatisfiedthat with the criteria. Board match the strategic demands facing the Company whether the combined knowledge and experience of the assesses itscompositionThe to Board ascertain annually recommendations by the Board Nomination Committee. CFO are appointed by the Board uponconsideration of Accordingly, new Directors includingthe MDand Group Sub Committee 109of isgiven onpage the Report. Annual given inthe Code. Membership of this important Board whose Terms of Reference with comply the Specimen The established BoardaNominationCommittee has the rule. circulation butsuchinstances are the exception and not a shorter timeframe and for also approval of matters by rarely usedwhere of urgentpapers are circulated within before7 days the Meeting. There ispractice whichis As described above, Board Papers are circulated generally during and after Board Meetings. the opportunity to interact with senior management the meetings of Committees the Management and have Non Executive Directors have an open invitation to attend proceedings prior to the next Meeting through: Any Director whodoesnot attend aMeeting isupdated on Meetings. required by Directors or will make presentations atBoard team are onstandby for further be clarificationsasmay Additionally, the relevant members of the Management at Board Meetings through comprehensive Board papers. All Directors are briefed adequately onmatters arising
el Archived Minutes and Board Papers accessible as asepar Matters arisingfrom previous Meetings are taken up Formally documented Minutes of discussions. ectronically atthe convenience of the Directors. Compliance and Implementation ate item agenda and aBoard Paper. Practice of Best Code A6.2 A7.3 A7.2 A6.1 A7.1 Requirements CSE Listing CSE Listing 117
Annual Report 2013 Sampath Bank PLC CORPORATE GOVERNANCE
The Code of Best Practice on Corporate Governance issued jointly by the Institute of Chartered Accountants of Sri Lanka and the Securities and Exchange Commission of Sri Lanka
Code CSE Listing Principle Compliance and Implementation of Best Requirements Practice Re-Election All Directors As per the Articles, 1/3rd of the Directors should retire A8 should submit at each Annual General Meeting and be subject to re- themselves for re- election. Such Directors who retire are those who held election at regular office for the longest time period since the election/ intervals re-appointment. In accordance with this provision, the following Directors retire and offer themselves for re- election:
Mr Channa Palansuriya Mr Deshal De Mel Miss Annika Senanayake Mr Ranil Pathirana
A brief resume of Directors standing for re-election is provided in English and Sinhala to enable shareholders to make an informed decision.
The Board and the Board Nomination Committee is actively engaged in succession planning for both Executive and Non Executive roles to ensure that Board composition is periodically renewed and that the Board retains its effectiveness at all times. Non Executive Non Executive Directors are appointed with Central Bank A8.1 Directors are approval and stand for re election at the next Annual appointed for General Meeting (AGM). specified terms subject to re-election All Directors Described in response to A8 above. A8.2 including Chairman to be subject to re- election at first opportunity after appointment and re-election at least every 3 years thereafter Appraisal of Board Performance Appraisal of Board The Board annually appraises its own performance A9.1 Performance to ensure that it is discharging itsresponsibilities satisfactorily. This process requires each Director to fill a Board Performance Evaluation Form in line with the provisions of this section of the Code. The responses are reviewed by the Group Company Secretary who compiles a report which is discussed at a Board Meeting.
118 CEO to bemet by the targetsfinancial andfinancial non- Set reasonable Appraisal of ChiefExecutive Officer Directors Non Executive exclusively to comprise Committee Remuneration Committee a Remuneration Appointment of Directors’ Remuneration targets reference to the CEOwith performance of Evaluate Directors regarding information disclose specified ReportAnnual to Disclosure of Information inRespect of Directors Sub Committees Appraisal of Board Principle Directors of Executive Remuneration Directors Non Executive Remuneration for have also beensethave also atthe timeof reporting. of the Bank atthe beginningof 2013. The targets for 2014 reference to the short, mediumand longterm objectives targets to beachieved duringthe year by the MDwith The Board discussed and set and financial non-financial Mr Aravinda Perera Director the Managing : the following Directors whoare NonExecutives all except The Board HRand Remuneration Committee comprises Remuneration Committee 146and Report 147. onpages Remuneration Committee isgiven inthe Board HRand Further information regarding the Board HRand shareholder and enhancing responsibly value.sustainably andManagement Executive Staff for their contribution to a remuneration policy whichrewards Directors, the Committee to ensure the that Company adopts of the Code, other investor guidelines and requires The Terms of Reference complies with C Schedule Director isinvolved indeciding hisown remuneration. for the Directors, and Management Executive staff. No Committee to develop policy and determine remuneration The established BoardaHRand has Remuneration targets and achieved goals by the Bank. Board HRand Remuneration Committee with reference to Directors’The Managing performance isevaluated by the are disclosedwithin this Report Annual asfollows: Information specified inthe Code with regard to Directors Chairpersons. the reports are retained by the respective Committee The Board SubCommittees follow the sameprocess and discussed with the Chairman. Company informulating their proposals whichthen are access to professional advice from within or outside the the Board HRand Remuneration Committee which have Remuneration of Executive Directors isdetermined by approval of the Board inlinewith market practice. by the Board HRand Remuneration Committee for Remuneration of NonExecutive Directors isrecommended
pages 109 &110. pages Board Meetings and SubCommittee meetings on Membership o t Related partytransactions are given inNote No43to interests and briefprofiles 22to 28. onpages Name, qua Mr Aravinda Perera Mr Desha Miss Annika Senanayake Mr Cha Soo Mr Deepal he Financial Statementshe Financial 285to 288. onpages Compliance and Implementation nna Palansuriya l DeMel lifications, expertise, material business f SubCommittees and attendance at riyaarachchi (Chairman) Practice of Best Code A 10.1 A11.2 A9.2 a A11.1 B1.4 B1.3 B1.5 B1.2 B1.1 nd Section 4 Requirements CSE Listing CSE Listing 119
Annual Report 2013 Sampath Bank PLC CORPORATE GOVERNANCE
The Code of Best Practice on Corporate Governance issued jointly by the Institute of Chartered Accountants of Sri Lanka and the Securities and Exchange Commission of Sri Lanka
Code CSE Listing Principle Compliance and Implementation of Best Requirements Practice Level and Make-up of Remuneration Remuneration Remuneration for Executive Directors is designed to B2.1 for Executive attract, retain and motivate the Executive Directors as & Directors should determined by the Board HR & Remuneration Committee. B2.2 attract, retain and The Board HR & Remuneration Committee takes into motivate account market practices and seeks professional advice when required in order to discharge its responsibilities. Positioning The Board HR and Remuneration Committee reviews the B2.3 company Bank’s remuneration levels in relation to other Banks in the remuneration country annually. levels relative to other companies Performance- There are no performance-related elements of B2.4 related elements remuneration for Executive Directors. of remuneration for Executive Directors Share option The employees have a uniform employee share option B2.5 schemes scheme based on grade and salary of the employee. This scheme expires on 30th June 2014. Designing No schemes of performance-related remuneration have B2.6 schemes of been implemented in the Bank. performance- related remuneration Compensation There are no provisions for compensation for early B2.7 commitments in termination in the letters of contract/appointment. the event However, the Directors would determine this on a of early case-by-case basis. termination Dealing with early Directors determine this on a case-by-case basis. B2.8 termination
Levels of The Board HR and Remuneration Committee determines B2.9 remuneration for the levels of remuneration for Non Executive Directors Non Executive taking into account the time commitment and Directors responsibilities of their role and market practices. Remuneration for Non Executive Directors does not include share options.
120 at the AGM governing voting procedures Summary of shareholders documents to related notice of AGM and Circulation of AGM at Chairpersons Committee Board Sub- Availability of separate issue each substantially resolutions for Separate votes lodged Count of proxy all Meetings other General of the AGM and Constructive use Relations with Shareholders paid to Directors remuneration aggregate disclosure of Policy and Remuneration Committee, Remuneration Composition of Disclosure of Remuneration Principle shareholders 15working prior days to the AGM. AGM isprovided inthe proxy form, whichiscirculated to A summaryof the procedures governing voting atthe in accordance with the regulations. 15workingshareholders prior days to atleast the meeting Notice of the AGM and related papers are sentto respond whenrequested to dosoby the Chairman. AGM to answer any raised questions atthe AGM and will All Board SubCommittee are Chairpersons present atthe and accounts isproposed asaseparate resolution. separatesubstantially issue. The adoptionof the report A separate resolution isproposed atthe AGM for each resolution. shareholders present atthe AGM are considered for each All proxy votes lodged,together with the votes of participates inmany suchmeetings. with shareholders and also the the Chairman major In linewith market practice, regular the MDhas contact aremessages translated into Tamil eachyear. of shareholders. Additionally, the Chairman’sand MD’s published eachyear to meet the needsof adiverse group working prior days to the AGM version and is aSinhala The Report Annual iscirculated to shareholders all 15 year. with the shareholders after immediately the AGM each their concerns. This Committee conducts an open session building uprelations with the shareholders and addressing Relations Committee) beenset has up for the purposeof Sub Committee of the Board, (Board Shareholder between shareholders small and the Board. Aseparate The General Annual Meeting isthe mainforum of contact Financial StatementsFinancial 245. onpage Executive Directors are given inNote No14to the The aggregate remuneration to Executive and Non Committee and itspolicy146&147. isgiven onpages The composition of the Board HR&Remuneration Compliance and Implementation Practice of Best Code C1.4 C1.3 C1.5 C1.2 31Section4 B3.1 C1.1 C1 Requirements CSE Listing CSE Listing 121
Annual Report 2013 Sampath Bank PLC CORPORATE GOVERNANCE
The Code of Best Practice on Corporate Governance issued jointly by the Institute of Chartered Accountants of Sri Lanka and the Securities and Exchange Commission of Sri Lanka
Code CSE Listing Principle Compliance and Implementation of Best Requirements Practice Disclosure of major transactions Disclosure The Company’s future strategies and their potential C2 of major impact have been disclosed in the following sections of transactions this Annual Report.
Chairman’s Statement on pages 8 to 11 Managing Director’s Review on pages 12 to 21 Management Discussion and Analysis on pages 40 to 101 Disclosure of The Bank will comply with the regulation in case of need C2.2 all facts of but the situation has not arisen. transactions which have a material impact on net assets Accountability and Audit Present a The Company’s position and prospects have been `D1 balanced and discussed in detail in the following sections of this Annual understandable Report. assessment of the Company’s Chairman’s Statement on pages 8 to 11 financial position, Managing Director’s Review on pages 12 to 21 performance and Management Discussion and Analysis on pages 40 to prospects 101 Interim reports, Interim reports were circulated within 45 days of D1.1 price-sensitive each quarter end and included information to assist public reports, shareholders gain an understanding of the state of affairs regulatory reports of the Bank. and statutory information Price sensitive information was disclosed in a requirements comprehensive but concise manner to the Colombo Stock Exchange on a timely basis.
Reports required by the regulators including Central Bank, Inland Revenue, Registrar of Companies, Colombo Stock Exchange were all filed in a timely manner in compliance with their requirements and these provided a sufficient information for the user to obtain a balanced assessment of the Bank`s operations. Declaration in The Annual Report of the Board of Directors on pages 200 D1.2 Directors’ Report to 210 contains the declarations as required by the Code.
122 Function Internal Audit Review needfor assets. the Company’s investments and shareholders’ safeguard internal control to sound system of Maintain a Internal Control below 50% the company fall case net assets of shareholders in Notify going concern the business isa the Directors that Declar responsibilities their reporting Auditors about Statement by the Statements and Financial presentation of preparation and the Board for the Responsibilities of Principle Analysis Discussion and Management Include a ation of applicable. anAs theInternal Bank has Audit function, this isnot regular basisto the Board Audit Committee. out by the Internal Audit Departmentwhichreports ona effectiveness of these internal control systems are carried is sufficientand effective. Reviews of the adequacy and the Board to ensure the that system of internal controls systems. The Board Audit Committee responsibility has to appropriateimplementing and adequate internal control The Board isresponsible for formulating and This situation has not arisen. This situationhas Board of Directors 200to 210. onpages This information isprovided inthe Report Annual of the and 217respectively. reporting responsibilities are provided 215to 216 onpages of the Auditors whichincludes statements about their The Statement of Directors’ Responsibility and Report the Code asgiven below 40 to 101 andpages covers the information specified in isset DiscussionThe and out Management on Analysis
prospects for the future. r material developments inhuman resource /industrial performance;financial carried o andsocial environmental protection activities internal control systems and their adequacy; risks an opportunities and threats; industry structure and developments; elations and Compliance and Implementation d concerns; ut by the Company; Practice of Best Code D2.2 D1.4 D1.6 D1.3 D1.5 D2.1 Requirements CSE Listing CSE Listing 123
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The Code of Best Practice on Corporate Governance issued jointly by the Institute of Chartered Accountants of Sri Lanka and the Securities and Exchange Commission of Sri Lanka
Code CSE Listing Principle Compliance and Implementation of Best Requirements Practice Audit Committee Establish The Bank has established the Board Audit Committee in D3 Section 5 arrangements keeping with good governance since 1997. The principal for selection responsibility of the Board Audit Committee was oversight and application over financial reporting, internal controls and monitoring of accounting Auditor independence. Its duties include gaining policies, financial assurance on the control over financial processes and reporting and the integrity of the Bank’s Financial Reports, monitoring internal control the performance, objectivity and independence of the principles External Auditor and reviewing work of the internal auditor. The Board Audit Committee Report is given on pages 142 o 145 of the Annual Report. Composition The Board Audit Committee consists of Non-Executive D3.1 and Terms of Directors. Members are selected to provide a broad set Reference for of financial, commercial and other relevant experience Board Audit to meet the Committee’s objectives. The MD, CFO, DGM Committee Finance, Head of Internal Audit, Senior Manager Systems Audit and representatives of the External Auditors are invited to attend the meetings. Review of External The Committee has a key oversight role in relation to D3.2 Audit function and the External Auditor, Ernst & Young, whose primary relationship with relationship is with the Committee. The Bank’s Auditor External Auditors Independence Policy ensures that the independence and objectivity of the Auditor are not impaired. The Committee has responsibility for recommending to the Board the appointment/re-appointment of the External Auditors and reviewing the nature, scope and results of the annual external audit. The audit fee is determined by the Board Audit Committee which also assesses the effectiveness and the independence of the External Auditors. Terms of The Terms of Reference for the Board Audit Committee D3.3 Reference complies with the Code of Best Practice on Corporate Governance issued by the ICASL and the SEC and the Code of Best Practice on Audit Committees issued by ICASL. This document is available with the Group Company Secretary. Disclosures The Annual Report of the Board of Directors on pages 200 D3.4 regarding Audit to 210 provides the following disclosures: Committee The composition of the Board Audit Committee A statement regarding the independence of the Auditors Code of Business Conduct & Ethics Code of business Codes of conduct are in place as per Blue Book. D4.1 conduct and ethics
124 vote at the AGM participate and shareholders to Encourage advice independent or seek analysis to dotheir own are encouraged shareholders Individual Shareholder Relations –Individual Shareholders arrangements governance to relevant give dueweight investors to institutional Encourage investors institutional withdialogues Regular structured at AGM Encourage voting Shareholders Investors –Institutional Report Governance Corporate Corporate Governance Disclosures Ethics Conduct and Code of Business compliance with of Chairman declaration by Affirmative Principle Shareholder Relations Committee arethey encouraged to dosothrough the Board investors to participate and vote atthe AGM. Additionally, It isatradition of Sampath Bank to encourage retail this information onlineto investors/Shareholders. all website dedicated to Investor Relations whichprovides Additionally, there isaseparate partof the company the performance of the Bank. retail investors to make informed judgementsregarding each quarter, provide sufficientinformation the to enable together with the Interim Statements Financial provided to facilitate better understanding by retail investors. This, ReportAnnual and ispublishedinboth English Sinhala potential investor to carryout his/her The own analysis. The Report Annual contains sufficientinformation for a Governance. to ensure dueweightage that isgiven to goodCorporate any new initiatives are highlighted atregular meetings governance practices through the Report Annual and investorsInstitutional are kept apprisedof the Bank’s discussed at suchmeetings. meetings. Board members are briefed about the matters shareholders and often the Chairman participates insuch regularThe MDhas structured meetings with institutional it into practice. encouraged to state their intentions to vote and translate at general meetings and shareholders all are regularly ahistoryThe of Bank has active shareholder involvement Code of Practice Best onCorporate Governance. practices inthe Bank whichare incompliance with the provides information regarding Corporate Governance The Corporate Governance 102 Report to 140 onpages D4.2 This will beimplemented with along the Code of Conduct. Compliance and Implementation Practice of Best Code D5.1 E1.2 E1.1 F2 F1 E1 Requirements CSE Listing CSE Listing 125
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The Banking Act Direction No 11 of 2007 and subsequent amendments thereto on Corporate Governance for Licensed Commercial Banks in Sri Lanka issued by the Central Bank of Sri Lanka
Section Principle Compliance and Implementation 3 (1) Responsibilities of the Board The Board has strengthened the safety and the soundness of the Bank in the following manner: a. Strategic objectives The Bank’s strategic objectives and corporate values are determined by and corporate values the Board. These are communicated to all levels of staff through regular briefing sessions and reinforced by the Corporate Management Team. b. Overall Business The Bank strategy is set by the Board in consultation with the Corporate Strategy including Management and the Strategic Plan for the period 2014 -2016 has been Risk Policy and approved by the Board. The risk appetite, policy, management framework Management and mechanisms have also been approved by the Board in line with the strategic plan. Measurable goals for the Bank as a whole have been set and performance is measured in line with these goals regularly at monthly Board Meetings. c. Risk management The Board has appointed a Board Risk Management Committee tasked with approving the Bank’s Risk Policy, defining the risk appetite, identifying principal risks, setting governance structures and implementing systems to measure, monitor and manage the principal risks. The following reports provide further insights in this regard:
Risk Management Report on pages 160 to 187. Board Risk Management Committee Report on pages 150 to 152. d. Communication with The Board has approved and implemented the following communication all stakeholders policies: Shareholders – The Board has appointed a Sub Committee on Shareholder Relations tasked with identifying and addressing the shareholders concerns. It is the first listed company in Sri Lanka to have such a Committee. This Committee conducts an annual Shareholder Relations Forum to identify shareholder concerns. Additionally, the AGM is also a key forum for contact with shareholders and the Bank has a proud history of well attended AGMs where shareholders take an active role in exercising their rights. The Annual Report is translated into Sinhala and the Chairman’s and MD’s Messages are translated into Tamil as well to facilitate greater communication with shareholders.
Customers – Customers include depositors, creditors and borrowers. The Bank has a Customer Complaint Handling Policy which has been printed in all three languages and disseminated to all customer contact points of the Bank. This document outlines the complaints handling policy of the Bank, provides contact numbers of the Bank for this purpose and also of the Financial Ombudsman. There is customer hotline set up for this purpose and reports are reviewed by the Board Risk Management Committee. Additionally, a customer satisfaction survey is carried out by external consultants to evaluate service levels provided by the Bank.
Staff – Staff members who are members of the Sampath Bank Employees Association and their representatives are given access to the Management to voice their concerns.
126 HiringExternal m Regulatory l. Regular meetings with Succession plan for k. j. Assess effectiveness of i. Oversight of affairs h. Defineareas of g. f. e. Principle Section Auditors with regulator effective relationship maintaining an environment and Personnel Management Key personnel management key practices own Governance the Board of Directors’ Personnel Management Key of the Bank by Personnel Management Key for Directors and Responsibilities authority and Key Personnel Management Key Information Systems Management System and Internal Control Compliance and Implementation the necessity arises. Audit Committee and the Board isbriefed of any concerns inthis regard if to the Board. Oversight of the External Auditor iscarriedout by the Board regarding the hiringof the External Auditor and makes recommendations The Board Audit Committee carriesout the necessary duediligence strategic decisions of the Bank whenneedarises. the Board. and The Chairman the MDmeet CBSLofficials with regard to regulators are presented to the Board and quarterly monitored by closely Compliance Reports submitted to CBSLwhich includes returns all to facilitate effectiveof their discharge responsibilities. at Board Meetings to ensure their that knowledge isupdated regularly to Directors are briefed about developments inthe regulatory environment discussions onthe same. Personnel Management Key are regularly involved inthe Board level corporate objectives isaregular item agenda for the Board and the policy and other matters relating to their areas. Progress towards discussions at the meetings of the Board and itsSubCommittees on Personnel Management Key regularly present or infor are called by the Board NominationCommittee and will beapproved by the Board. A succession plan for Personnel the Management Key are beingreviewed Secretary and submitted to the Board for their review. of board members. The responses are collected by the Group Company Form by eachDirector inrelation to business strategy and contributions The Board appraises itsown performance by submission of SelfEvaluation the quorum a particular interest abstained from voting and he/she isnot counted in Directors’ interests are disclosedto the Board and suchaDirector whohas Nomination Committee basedontheir fieldof expertise of nominationand Directors election Selection, are made by the Board matters relating to their areas. matters under their purview and inby are the Board called to also explain Personnel Management Key make regular presentations to the Board on Directors and Personnel Management Key duringthe year 2013. Areas of authority and responsibilities key have beendefined for the Nomination Committee and approved by the Board. designated Personnel Management Key are recommended by the Board business activities,operations and Allappointmentsof riskmanagement. influence policy,who significantly direct activitiesand exercise control over International Accounting Standards and the SriLanka Accounting Standards, Personnel,The identified Management BoardKey asdefined inthe has Committee InformationManagement Systems will bereviewed by the Board Audit Committee and the also External Auditors incarryingout this function. The the Internal Audit Departmentwhichreports to directly the Board Audit information systems. Accordingly this SubCommittee reviews reports from the integrity of the Bank’s internal control systems and management The Board Audit Committee istasked with reviewing the adequacy and 127
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Section Principle Compliance and Implementation 3.1. (ii) Appointment of The Board has appointed the Chairman and the Managing Director and Chairman and MD also approved their functions and responsibilities maintaining the balance and defining and of power between the two roles. approving their functions and responsibilities 3.1. (iii) Regular Board Regular monthly Board Meetings are held and special meetings are Meetings scheduled as and when the need arises. The Board met on 19 occasions during 2013. We have minimised obtaining approval via circular resolutions and it is done only on an exceptional basis and such resolutions are ratified by the Board at the next meeting. 3.1.(iv) Arrangements for Monthly meetings are scheduled and informed to the Board at the Directors to include beginning of each calendar year to enable submission of proposals in the proposals in the agenda for regular meetings where such matters and proposals relate to agenda the promotion of business and the management of risk of the Bank. 3.1.(v) Notice of Meetings Notice of Meetings, Agenda and Board Papers for the Board meetings are circulated to the Directors 7 days prior to the meeting giving Directors time to attend and submit any urgent proposals. Additionally Notice, Agenda and all related Board Papers are loaded through a secure link to the iPad for the Directors to access. 3.1 (vi) Directors’ Attendance The Directors are apprised of their attendance in accordance with the Articles of the Company and the Corporate Governance Code. Detail of the Directors attendance is set out on page 110. No Director has been absent from 3 consecutive meetings and all Directors have attended at more than 2/3 of the meetings for the year 3.1 (vii) Company Secretary The Board has re-designated Company Secretary as Group Company Secretary w.e.f. June 2012 who satisfies the provisions of Section 43 of the Banking Act No 30 of 1988 and whose primary responsibilities shall be to handle the secretariat services to the Board and Shareholder Meeting and carry out other functions specified in the statutes and other regulations. 3. 1 (viii) Directors’ access to The Board approved processes in place to enable all Directors to have advice and services of access to advice and services of the Group Company Secretary All Company Secretary members of the Board have opportunity to obtain advice and services of the Group Company Secretary who is a Chartered Corporate Secretary and who is responsible to the Board for follow up on Board Procedures, Compliance with Rules and Regulations, Directions and Statutes and keeping and maintaining Minutes and relevant records of the Bank. 3.1 (ix) Maintenance of Board The Group Company Secretary maintains the minutes of the Board Minutes Meetings and circulates to all Board Members. The Minutes are approved at the subsequent Board Meeting. Additionally, the Directors have access to the past Board Papers and Minutes through a secure electronic link. 3.1 (x) Minutes to be of The Minutes of the Meetings include: sufficient detailed and (a) a summary of data and information used by the Board in its serve as a reference deliberations; for regulators and (b) the matters considered by the Board; supervisory authorities (c) the fact-finding discussions and the issues of contention or dissent (d) the testimonies and confirmations of relevant executives with regard to the Board’s strategies and policies and adherence to relevant laws and regulations;
128 eto Principle Section .2 v Alternate Independent 3.(2) (v) (iv) 3.(2) 3.(2) (iii) Period of service of a 3.(2) (ii) Asper CBSLGovernance Direction, the number of Directors should not be Number of Directors The Boards composition 3.(2) (i) 3.(2) Self-assessment of 3.1 (xvii) Corporate Publish 3. 1(xvi) The Board monitors capital adequacy and other prudential regulatory Capital adequacy 3.1 (xv) Inform Central Bank 3.1 (xiv) of Schedule matters 3.1 (xiii) with Dealing Conflicts 3.1 (xii) Directors’ ability to 3.1 (xi) Directors Executive Directors Independent Non Board Balance Director Directors ReportAnnual Governance Report in issues if there are solvency decision reserved for Board of Interest professional advice seek independent Compliance and Implementation (f) (f) (e) profiles asrequired asatthe year end. existing Directors duringthe year. maintain They similar independent Four Directors have beenappointed asalternate Directors from the complies with the requirement. The five Board Independent has Directors asatthe year end which 1/3rd of the total. well within the requirement to limit the number of Executive Directors to There are 2Executive Directors and 10NonExecutive Directors which is 22to 28. on pages exceeded 9years onthe Board. Details of their tenures of service are given Commercial Banks. There are noDirectors whosetenure of service has limited to 9years asper the Corporate Governance Code for Licensed The period of services of aDirector excluding Director the Managing is during the year 2013. 7nor than moreless 13.The than Bank’s Board comprised of 12Directors the Directors individually. Company Secretary. discusses Therelevant Chairman matters, ifany, with by eachDirector and records annually are maintained with the Group The adopted Board has aschemeof self-assessment to beundertaken Report.Annual The Board publishesthe Corporate Governance Report inthe Bank’s requirements. basis.The Bank isincomplianceon amonthly with the minimumcapital requirements, the Bank’s defined riskappetite and industry benchmarks other creditors not and arisenduringthe year. suchasituationhas become insolvent or about to to suspend itsdepositors payments and Supervision prior to taking any decision or actionifthe Bank isabout to The Board isaware of the need to inform the Director of Banking international practice. best Bank iswithin itsauthority inlinewith regulatory codes, guidelines and forthe itsdecision Articles to ensure the that direction and control of the ofThe aschedule Board matters has reserved specifically to itdefined in he/sheAdditionally isnot counted inthe quorum insuchinstances. their opinion or approving insituationswhere there isaconflict of interest. concerns. Directors abstain from participatinginthe discussions, voicing interests of the spouse, children under 18years ofand their age business PersonnelManagement Interests whichisregularly updated and includes of 2007. The Bank maintains an electronic register of Director’s and Key Association of the Bank and the Corporate Governance Direction No11 where there isaconflict of interest inaccordance with of the Articles The Directors are conscious of their obligationto deal with situations functions are co-ordinated by the Group Company Secretary. advice, asand whennecessary, their responsibilities. indischarging These them. Inaddition,Directors are to obtain able independent professional adviceSenior the Management Board onvarious matters relevant to The Board SubCommittees and various professionals inCorporate and
the d o matters regarding the risksto whichthe Bank isexposed and an Committees Board Committee; RiskManagement and verview of measures the riskmanagement includingreports of the ecisions and Board resolutions includingreports of Board all Sub 129
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The Banking Act Direction No 11 of 2007 and subsequent amendments thereto on Corporate Governance for Licensed Commercial Banks in Sri Lanka issued by the Central Bank of Sri Lanka
Section Principle Compliance and Implementation 3.(2) Criteria for Non Non Executive Directors are persons with credible track records and have (vi) Executive Directors necessary skills and experience to bring an independent judgment to bear on issues of strategy, performance and resources. These are detailed on pages 22 to 28.
The Bank has a specific documented Board approved process in place for appointing Independent Directors.
Directors nominate names of eminent professionals or academics from various disciplines to the Board Nomination Committee who peruse the profiles and recommend suitable candidates to the Board. 3.(2) More than half the This requirement is strictly observed and it is noteworthy that the majority (vii) quorum to comprise are Non Executive Directors. Non Executive Directors 3.(2) Identify independent The Independent Non Executive Directors are expressly identified as such (viii) Non Executive in all corporate communications that disclose the names of Directors of Directors in the Bank. The composition of the Board, by category of Directors, including communications the names of the Chairman, Executive Directors, Non Executive Directors disclose categories and Independent Non Executive Directors are given on pages 22 to 28 & of Directors in Annual 204 of the Corporate Governance Report. Report 3.(2)(ix) Succession planning The Board has established a Board Nomination Committee whose Terms and appointments to of Reference comply with the Specimen given in the Code of Best Practice the Board on Corporate Governance. Accordingly, new Directors including the MD and GCFO are appointed by the Board upon consideration of recommendations by the Board Nomination Committee. The Board is to develop a succession plan together with the Board Nomination Committee to ensure that the members are from various skills and disciplines 3.(2)(x) Re-election of Directors appointed to the Board since the AGM will stand for election Directors filling casual at the next AGM in accordance with the provisions in the Articles of vacancies Association. 3.(2) (xi) Communication of Resignations of Directors and the reasons are informed to the regulatory reasons for removal or authorities and shareholders as per CSE requirements together with a resignation of Director statement confirming whether or not there are any matters that need to be brought to the attention of shareholders. 3.(2)(xii) Prohibition of Directors The Board and the Board Nomination Committee take into account this or Employees of a requirement in their deliberations when considering appointments of Bank becoming a Directors. The Employee Code of Ethics (Blue Book) prohibits employees to Director at another be elected/nominated as a Director of another bank. Bank 3.(3) Criteria to Assess Fitness and Propriety of Directors 3.(3)(i) Age of Director should There are no Directors who are over 70 years of age. not exceed 70 3.(3)(ii) Directors should not None of the Directors hold office as a Director of more than 20 companies. be Directors of more than 20 companies
130 (vi) 3 (5) Responsibility for 3 (5)(v) (iv) 3 (5) Disclosure of identity 3.(5)(iii) Theof roles and the Chairman MDare separate. NonExecutive Separation of roles 3.(5)(ii) and The Chairman ChiefExecutive Officer 3.(5)(i) 3.(5) 3.(4)(iii) Extent of delegation 3.(4)(ii) Understand and Functions Management delegated by the Board 3.(4) (i) 3.(4) Principle Section adequate information and provided are briefed properly Ensure Directors that Company Secretary be delegated to butmay Chairman lieswithagenda manner. Board inatimely are discussed by the and appropriate issues (c) ensure key all that responsibilities; its discharges andeffectively the Board works (b) ensure that Board; to(a) leadership the to provideChairman members with the Board and any relationships of and Chairman CEO Director Senior Independent appointment of a andChairman operations of the Bank ensure relevance to to periodically arrangements Review delegation itsfunctions discharge Board’s ability to should not hinder arrangements delegation study Compliance and Implementation place to ensure this: regarding the matters arisingatthe Board. The following procedures are in ensuresThe Chairman the that Board briefed isadequately and informed consultation with the Chairman. The Group Company Secretary draws upthe for agenda the Meetings in and codes. and this documentincludes the matters identified inrelevant guidelines The Board approved and the roles key responsibilities of the Chairman regularly. the declarations annual and the register of directors Interests isupdated Director Managing the Chairman, and other members of the Board asper There are nomaterial business relationships financial, or family between 22to Report 28&204. Annual onpages The identity of Board the members Chairman, and MDare disclosedinthe Reference for the Senior Independent Director Independent Director asat24.12.2013 and there isadocumented Terms of Mr Sanjiva Senanayake asSenior Director become an whohas as heholdsmore 1%of than share capital. The appointed Board has isaNonExecutiveThe Chairman Director and not an Independent Director the Bank whilst enablingthe Boardtheir functions to discharge effectively. in place and ensures the that extent of address delegation the needsof reviewsThe Board periodically and approves arrangements the delegation
basis att Directors are to seekindependent able professional advice onaneeds Bank basis t informationManagement isprovided inagreed formats onaregular e Relevant members of team the Management are for on hand Board papers are circulated prior 7days to the Board Meetings xplanations and clarifications o enable Directorso enable to assess the performance and stability of the he Bank’s expense 131
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Section Principle Compliance and Implementation 3 (5) Encourage active This requirement is addressed in the Chairman’s Responsibilities (vii) participation by all document approved by the Board. Directors and lead in acting in the interests of the Bank 3.(5) Encourage Ten of the twelve member Board are Non Executive Directors which (viii) participation of Non creates a conducive environment for active participation by the Non Executive Directors Executive Directors. All Non Executive Directors participate in Sub and relationships Committees of the Board providing further opportunity for active between Non participation. The Bank has also appointed a Senior Independent Director Executive and which supports the participation of the Non Executive Directors. Executive Directors 3(5)(ix) Refrain from direct The Chairman does not get involved in the supervision of Key supervision of Management Personnel or any other executive duties. key management personnel and executive duties 3(5)(x) Ensure effective The Bank historically has active shareholder participation at the Annual communication with General Meeting and at the Shareholder Relations Meeting which is held shareholders immediately after the AGM where shareholder issues are discussed. A Board Sub Committee has been appointed to ensure that there is effective communication with shareholders. 3(5)(xi) CEO functions as the Day to day operations of the Bank have been delegated to the MD. apex executive in charge of the day-to- day operations 3.(6) Board appointed committees 3 (6)(i) Establishing Board Nine Sub Committees have been established by the Board with written Sub Committees, terms of reference for each. The Group Company Secretary serves as their functions and the Secretary for all Sub Committees and maintains minutes and records reporting with oversight by the respective Chairpersons. The reports of the Sub Committees are included in the Annual Report Board Audit Committee on pages 142 to 145 Board Human Resources & Remuneration Committee on pages 146 & 147 Board Nomination Committee on pages 148 & 149 Board Risk Management Committee on pages 150 to 152 Board Credit Committee on pages 153 & 154 Board Strategic Planning Committee on page 155 Board Shareholder Relations Committee on pages 156 & 157 Board Treasury Committee on page 158 Board Marketing Committee on page 159
The Chairpersons of the Sub Committees are in attendance at the AGM to clarify any matters that may be referred to them by the Chairman.
132 .Audit Committee c. b. to bean Chairman a. Audit Committee 3 (6)(ii) Principle Section f. e. Review and monitor d. functions Directors Non Executive of comprise solely Committee to audit accountancy and/or and experience in with qualifications Executive Director independent Non external audit Determines scope of auditor services by external Provision of non-audit audit processes effectiveness of the objectivity and the independence and external auditor’s Compliance and Implementation activities with other auditors. there was norequirement to discuss arrangements for co-ordinating audits withinAs all the Group are carriedout by the sameExternal Auditor, (i) (iv) (ii) (ii) (i) made the following recommendations: In accordance with the Terms of Reference, the Board Audit Committee has All members of the Board Audit Committee are NonExecutive Directors. Accountants,Management UK. Executive Director whoisaFellow member of the Chartered Institute of ofThe Chairman the Board Audit Committee isaNonIndependent Non (v) (i) nature and scope of the Audit to ensure itincludes: that The Committee discussed and with finalised the External Auditors the Further, there isaprocess inplace approved by the Board inthis regard obtained from the Board Audit Committee inaccordance with regulations. When suchservices are obtained from External Auditors prior approval is the Bank. independent since he/she report direct to the Board Audit Committee of accordance with the SriLanka Accounting Standards. External Auditor is Auditor onitsindependence and the that Audit iscarriedout in The Board Audit Committee obtains representations from the External
obligations; in accordance with relevant accounting and principles reporting Controls Over Reporting; Financial in relation to Corporate Governance and the Internal management’s The Boar the se the app from timeto time; the imp provided incompliance with the relevant statutes; the appointmento the pr an as the previous term before the expiry of three years from the date of the completion of and the that particular Audit partner isnot re-engaged for the Audit ofengagement the External not exceed Audit partner shall five years, Auditor sessment of the Bank’s compliance with the relevant Directions eparation of Statements Financial for external purposes rvice period, auditfee and any resignation or of dismissal the lementation oflementation the Central Bank guidelines issued to auditors lication of the relevant accounting standards; and d Audit Committee ensures the that service period of the f the External Auditor for auditservices to be 133
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Section Principle Compliance and Implementation 3 (6) (ii) Audit Committee g. Review financial The Board Audit Committee reviews the financial information of the Bank, information of the in order to monitor the integrity of the Financial Statements of the Bank, Bank its Annual Report, accounts and quarterly reports prepared for disclosure, and the significant financial reporting judgments contained therein. The review focuses on the following:
(i) major judgmental areas; (ii) any changes in accounting policies and practices (iii) significant adjustments arising from the Audit (iv) the going concern assumption (v) the compliance with relevant accounting standards and other legal requirements.
The Board Audit Committee makes its recommendations to the Board on the above on a quarterly basis. h. Discussions with The Board Audit Committee discusses issues, problems and reservations External Auditor on arising from the interim and final audits with the External Auditor. interim and final The Committee met once with the External Auditors in the absence of audits executive staff of the Bank. i. Review of The Board Audit Committee has reviewed the External Auditor’s Management Letter management letter and the management’s response thereto. and Bank’s response j. Review of Internal The Board Audit Committee has oversight of the Internal Audit function Audit function and carries out the following duties with regard to the same:
(i) Reviews the adequacy of the scope, functions and resources of the Internal Audit Department, and ensures that the Department has the necessary authority to carry out its work;
(ii) Reviews the Internal Audit programme and results of the audits and ensures that appropriate actions are taken on the recommendations of the Internal Audit Department;
(iii) Reviews appraisals of the performance of the head and senior staff members of the Internal Audit Department; (iv) Recommends any appointment or termination of the head, senior staff members
(v) Ensures that the Committee is appraised of resignations of senior staff members of the Internal Audit Department including the Chief Internal Auditor, and provides an opportunity to the resigning senior staff members to submit reasons for resignation;
(vi) Ensures that the Internal Audit function is independent of the activities it audits and that it is performed with impartiality, proficiency and due professional care
There are no outsourced functions of the Internal Audit at present and provisions in this regard are not applicable.
134 o. The Board Audit Committee regular scheduled has meetings quarterly Regular Meetings n. Explicit authority, m. Attendees atAudit The Board Audit Committee reviewed has findings of internal the major Internal Investigations l. k. Principle Section (b) Policy to determine (a) 3 (6)(iii) blowing Whistle policy q. p. Report Disclosure inAnnual to information resources and access Committee Meetings the management key the Directors, MDand Goals and targets for KMPs Directors, MDand the remuneration of Board Human Resources and Remuneration Committee External Auditor and relationship with Meetings Maintain Minutes of Compliance and Implementation (iii) (i) following: The Report of the Board Audit Committee 142to 145includes the onpages the Minutes of the meetings maintained by the Group Company Secretary. itsdutiesandconclusions responsibilities indischarging are recorded in Committee are served with duenotice of issues to bediscussed and the the Committee met 12,timesduringthe year. Members of the BoadAudit and meetings additional are asand scheduled when required. Accordingly, (iv) (iii) (ii) (i) The Board Audit Committee has: Directors beingpresent. The Committee met with the External Auditors without the Executive attend also may Management meetings uponinvitation of the Committee. External Auditors attend generally meetings. Members of the Corporate The MD, Group CFO, the ChiefInternal Auditor and representatives of the thethat recommendations of suchinvestigations are implemented. investigations and responses management’s thereto. ensured also Ithas (ii) documented under the Strategic plan/ Action plan for the year Goals and targets for the MDand Personnel the Management Key are the MDand the KMPs emoluments and will develop apolicy to determine the remuneration for The Committee revised has the basisfor Director’s fees and monthly regular this function. basisto discharge the Bank’s relations with the External Auditor and meets the Auditor ona The Board Audit Committee isthe representative key bodyfor overseeing will besubmitted for approval by the Board. is beingfurther reviewed by the BoardCommittee RiskManagement and Audit Committee whoaddresses the issue inan appropriate manner. Policy regard, includinganonymous communications, to of the Chairman the Group Company Secretary forwards communications all received inthis improprieties reporting, infinancial internal control or other matters. The employee of the Bank may, inconfidence, raise concerns about possible aBoardThe approved Bank has blowing whistle policy whereby an Committee and maintains minutes of the Committee Meetings. The Group Company Secretary serves asthe Secretary for the Board Audit
de the numbe de outsiders with relevant experience to attend, ifnecessary. autho full ac the r reference; exp given on page 110.given onpage tails of attendance of eachindividual Director atsuchmeetings are tails of the activitiesof the Board Audit Committee; licit authority to investigate into any matter within itsterms of esources whichitneedsto doso; rity to obtain external professional advice and to invite cess to information; and r of Board Audit Committee Meetings heldinthe year; and 135
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Section Principle Compliance and Implementation 3 (6) (iii) Human Resources & Remuneration Committee (c) Evaluations of the Performance evaluation process of the MD and the KMPs has been initiated performance of the MD by the Committee from year 2013. and Key Management Personnel against the set targets and goals
(d) “Terms of Reference” Terms of Reference of the Committee approved by the Board provides for provides MD is not this. present at meetings when matters relating to the MD are being discussed 3(6) (iv) Board Nomination Committee a. Select/appoint new Board Nomination Committee has implemented a procedure to select new Directors, CEO and Directors. A procedure will be implemented to select CEO and KMPs KMPs b. Re-election of Board makes recommendations regarding the re-election of current Directors Directors, taking into account the performance and contribution made by the Director concerned towards the overall discharge of the Board’s responsibilities. c. Eligibility criteria for The Committee sets the eligibility criteria to be considered, including appointments to key qualifications, experience and key attributes, for appointment or managerial positions promotion to key managerial positions including the position of the MD. including MD The committee considers the applicable statutes and guidelines in setting the criteria.
These have been documented during 2012 and job descriptions completed for the MD and Key Management Personnel approved by the Committee. d. Fit & Proper persons The Committee obtains annual declarations from directors, MD and Key Management Personnel to ensure that they are fit and proper persons to hold office as specified in the criteria given in Direction 3(3) and as set out in the Statutes. e. Succession Plan and The need for new expertise may be identified by the Board or its new expertise committees and brought to the attention of the Board Nomination Committee which will take appropriate action. Structural changes of the Bank are being currently reviewed by the Board Nomination Committee and thereafter the Committee and the Board will approve the succession plan for KMPs. f. Composition of the The Committee is chaired by an Independent Director as of 12.12.2013. Committee Among the other members one Director is Independent and other two members are Non Independent 3 (6) (v) Board Integrated Risk Management Committee/Board Risk Management Committee a. Composition of Board The Committee comprises three Non Executive Directors, MD, Group Chief Risk Management Risk Officer and Group Compliance Officer and other Key Management Committee Personnel supervising credit, market, liquidity, operational and strategic risk. The Committee works closely with Key Management Personnel within the framework of authority and responsibility assigned to the Committee.
136 7 i Categories of related Related PartyTransactions 3 (7)(i) 3 (7) Acompliance beenestablished to function assess has the Bank’s Compliance function Riskassessment h g. f. e. Corrective action d. Review of c. b. Principle Section conflict of interest parties and avoid report to Board action correctiveimplement specific risks or for failure to identify officers responsible Actions against Frequency of meetings levels exceeding prudential to mitigate risks Committees onrisk LevelManagement Subsidiary companies the Bank and the Risk Assessment of Compliance and Implementation to declare their transactions to the Bank and onaquarterly basis. annual Directors whohave related partytransactions requested are individually to avoid any conflict of interest in this regard. favourable treatment granted to saidpartiesinorder for Board members 2012 identifying related parties,type of related partytransactions and There isa documented process approved by the Board inJanuary (i) Committee and isresponsible for providing the following: is headed by adedicated Group Compliance Officer whoreports to the and approved areas policiesonall of business operations. This function compliance with laws, regulations, regulatory guidelines, internal controls information, views, concurrence or specific directions. Committee meeting by the Secretary of the Committee for their A detailed report of the meeting issubmitted to the Board after each and assuchdecisions are taken collectively Committees suchasALCO, Credit Committee and Investment Committee At the Bank specific risksand the limitsare identified by relevant of includingupdated riskmanagement business continuity plans. meetings whenrequired. The covers agenda matters assessing aspects all The Committee regular has meetings quarterly and additional schedules by the Committee will beapproved by the Committee and by the Board regulatory and supervisory requirements. The riskindicators key designed levels decided by the Committee onthe basisof the Bank’s policiesand of specific risksinthe casesuchrisksare atlevels beyond the prudent The Committee takes prompt corrective actionto mitigate the effects quantitative and qualitative risklimitsset by the respective Committees. effectiveness inaddressing specific risksand the samewithin managing the and Committee Liability Management to assess their adequacy and such asCredit Policy, Riskand Portfolio Review Committee and the Asset The Committee reviews the reports of level the committees management basis and Group basis. evaluate of the riskmanagement Subsidiarycompanies both onaBank for their review and actionifany. The Committee will initiate actionto risksofall the Bank and the findings and issues are submitted to the Board Terms of Reference. The Committee aprocess has to asses and evaluate reviewed by the Committee itsresponsibilities indischarging asper the Accordingly, information onpre-established monthly riskindicators is provides aframework for and management assessment of risks. Market and RiskManagement Operational which RiskManagement The Committee approved has the policiesonCredit RiskManagement, (ii)
heads to the Committee A monthl A de requirements indicating the status of compliance to the Board tailed report quarterly onstatutory and mandatory reporting y compliance certificate with sign-off from business unit all 137
Annual Report 2013 Sampath Bank PLC CORPORATE GOVERNANCE
The Banking Act Direction No 11 of 2007 and subsequent amendments thereto on Corporate Governance for Licensed Commercial Banks in Sri Lanka issued by the Central Bank of Sri Lanka
Section Principle Compliance and Implementation 3 (7) (ii) Related party Definitions of related party transactions covered by the above Board transactions covered process and declarations by Directors and Key Management Personnel by direction include:
a) The grant of any type of accommodation, as defined in the Monetary Board’s Directions on maximum amount of accommodation, b) The creation of any liabilities of the Bank in the form of deposits, borrowings and investments, c) The provision of any services of a financial or non-financial nature provided to the Bank or received from the Bank, d) The creation or maintenance of reporting lines and information flows between the Bank and any related parties which may lead to the sharing of potentially proprietary, confidential or otherwise sensitive information that may give benefits to such related parties. 3 (7)(iii) Monitoring of related The Bank has implemented a Board approved process to monitor such party transactions related party transactions and to ensure that the Bank does not engage defined as more in such transactions in a manner that would grant such related parties favourable treatment “more favorable treatment” as mentioned than that accorded to other constituents of the Bank carrying on the same transaction with the Bank. Additionally, the staff concerned are informed through operational circulars to refrain from granting accommodations as defined in the Banking Act Direction No 11 of 2007. Bank will further strengthen the monitoring process to avoid granting of favourable treatment to such related parties as required by the Direction 3 (7) Granting A procedure is in place for granting accommodation to Directors or to (iv) accommodation to close relations of Directors. Such accommodation requires approval at a a Director or close meeting of the Board of Directors, by not less than 2/3rds of the number relation to a Director of Directors other than the Director concerned, voting in favour of such accommodation. The terms and conditions of the facility include a proviso that it will be secured by such security as may from time to time be determined by the Monetary Board as well. 3. (7) Accommodations The Group Company Secretary obtains declarations/affidavits from all (v) granted to persons, or Directors prior to their appointment and they are requested to declare any concerns of persons, further transactions. or close relations of persons, who Employees of the Bank are aware of the requirement to obtain necessary subsequently are security as defined by the Monetary Board if the need arises. appointed as Directors of the Bank This situation has not arisen in the Bank to date. 3.(7)(vi) Favourable treatment No favourable treatment / accommodation is provided to Bank employees or accommodation other than staff benefits. Employees of the Bank are informed through to Bank employees or operational circulars to refrain from granting favourable treatment to other their close relations employees or their close relations or to any concern in which an employee or close relation has a substantial interest. 3.(7)(vii) Remittance of Such a situation has not arisen in the Bank to date. accommodations subject to Monetary Board approval
138 b. .Astatement to the a. (ii) 3. (8) and annual Publish Disclosures 3.(8) (i) 3 (8) Principle Section Total net e Details of Directors d. Assurance Report c. control mechanism on the Bank’s internal Report by the Board disclosures. inclusive of specific requirements, and regulatory accounting standards line with applicable been prepared in Statements have Audited Financial the effect that Annual Report Disclosures inAnnual Statements Financial quarterly capital Bank’s regulatory percentage of the parties and asa category of related granted to each accommodations fees paidby the Bank and remuneration/ 3050 SLSAE Engagements on Assurance Lanka Standard Auditors under “Sri issued by the regulatory requirements: beendoneinaccordancehas with relevant accounting and principles and the that preparation of Statements Financial for external purposes reasonable assurance regarding the reliability of reporting, financial theconfirms reporting that financial beendesigned to system provide has The Report Annual includes the following reports where the Board A statement to this effect isincluded inthe following: published inTamil. and English.FurtherSinhala Statements Financial quarterly are also standards, and Annual Statement Financial Quarterly are publishedin by the supervisory and regulatory authorities and accounting applicable are prepared and publishedinaccordance with the formats prescribed AuditedAnnual Statements Financial and Statements Financial quarterly Parties isgiven below Direct and Indirect accommodation granted to eachcategory of Related 285to 288 on pages Related Party Transactions are given inNote 43to the Statement Financial Statements 245 onpage Remunerations paidby the Bank are given inNote No14to the Financial & 210. Directors interests incontracts with the Company are 209 given onpages Details of Directors are 22to given 28. onpages Internal Controls Over 213 Reporting Financial whichispublishedonpage The obtained Board an has assurance report onthe effectiveness of Compliance and Implementation
Family MembersFamily Entities control by KMPs and their close Subsidiaries personnel Managerial Key (KMP) Category of Related PartyTransactions S Director’sManaging and Group Officer’s ChiefFinancial Responsibility R Annual Directors’ Responsibility to 215&216 Reporting Financial onpages tatement 214 onpage Annual R Annual Statement of Directors’ 215&216 Responsibility onpages eport of the Board of Directors 200to 210 onpages eport of the Board of Directors 200to 210 onpages ,3,5 10.9 3,531,454 ,6,7 5.5 1,763,675 Amount (Rs Mn) 59,877 0.2 % 139
Annual Report 2013 Sampath Bank PLC CORPORATE GOVERNANCE
The Banking Act Direction No 11 of 2007 and subsequent amendments thereto on Corporate Governance for Licensed Commercial Banks in Sri Lanka issued by the Central Bank of Sri Lanka
Section Principle Compliance and Implementation 3. (8) Disclosures in Annual (ii) Report f. Aggregate values of The aggregate values of remuneration paid to KMPs are given in Note remuneration paid , 43 to the Financial Statement on page 286 and the aggregate value of and transactions with transactions of the Bank with KMPs are given in Note 43 to the Financial Key Management Statements on pages 285 to 288. Personnel g. Confirmation by the Board has confirmed on the Annual Report of the Board of Directors on Board on the annual the Affairs of the Company that all findings of the Factual Findings Report Corporate Governance of Auditors have been incorporated in the Annual Corporate Governance report Report on page 208. h. Report confirming The Statement of Directors’ Responsibility for Financial Reporting on compliance pages 215 & 216 clearly sets out details regarding compliance with with prudential prudential requirements, regulations, laws and internal controls. There requirements, were no instances of material non-compliance to report on corrective regulations, laws and action taken during the year. internal controls i. Non-compliance There were no supervisory concern lapses in the Bank’s Risk Management Report Systems or non-compliance with these directions that have been pointed out by the Director of the Banks Supervision Department of the CBSL and therefore there is no disclosure required in this regard. 3.(9) Transitional and other The Bank has complied with the transitional provisions general provisions
140 OUR RELATIONSHIP WITH SAMPATH BANK HAS GROWN FROM STRENGTH TO STRENGTH. ITS SOLID PARTNERSHIP HAS GIVEN US THE CONFIDENCE TO OPEN OUR THIRD PROCESSING FACILITY IN THE NORTHERN REGION. THANK YOU, SAMPATH BANK.
MARIO DE ALWIS MANAGING DIRECTOR (MA’S TROPICAL FOOD PROCESSING PVT LIMITED) 17TH FEBRUARY 2014 BOARD AUDIT COMMITTEE REPORT
Composition of the Board Audit Committee Duties and Role of the Board Audit Committee (BAC) The BAC is responsible for: The BAC comprises of five Non Executive Directors, Reviewing financial information of the Bank, in who conduct Committee proceedings in accordance order to monitor the integrity of the Financial with the Terms of Reference approved by the Board. Statements of the Bank, its Annual Report, The following members serve in the BAC: accounts and quarterly reports prepared for disclosure; Mr Ranil Pathirana (Chairman) (NED) Mr Sanjiva Senanayake (IND/NED) Reporting to the Board on the quality and Mr Deepal Sooriyaarachchi (IND/NED) acceptability of the Bank’s accounting policies Prof Malik Ranasinghe (IND/NED) and practices; Mrs Dhara Wijayatilake (IND/NED) (IND - Independent Director and NED - Non Executive Reviewing accounting and financial reporting, Director) risk management processes and regulatory compliance; The Chairman of the BAC, Mr Ranil Pathirana who is a Non Executive Director, is a Fellow Member of the Reviewing of the Financial Statements Chartered Institute of Management Accountants, UK, (including quarterly interim statements) prior to and counts many years of experience in the financial publication to ensure compliance with statutory services industry. Brief profiles of the members are provisions, accounting standards and accounting given on pages 22 to 28 of the Annual Report. policies which are consistently applied;
The Group Company Secretary functions as the Reviewing internal audit reports and liaising with Secretary of the BAC. Corporate Management in taking precautionary measures to minimise control weaknesses, Terms of Reference procedure violations, frauds, and errors; The Charter of the BAC clearly defines the Terms of Reference of the Committee. The Board periodically Assessing the independence and monitoring the reviews the BAC Charter as and when required. The performance and functions of Internal Audit, Committee is responsible to the Board of Directors including overseeing the appointment of the and reports on its activities regularly. BAC also Head of Internal Audit. assists the Board in its general oversight of financial reporting, internal controls and functions relating to Overseeing the appointment, compensation, internal and external audits. resignation, dismissal of the External Auditor, including review of the external audit, its cost Regulatory Compliance and effectiveness and monitoring of the External The roles and functions of the BAC are regulated Auditor’s independence; by the Banking Act Direction No 11 of 2007, on the mandatory Code of Corporate Governance for Reviewing effectiveness of the Bank’s systems Licensed Commercial Banks in Sri Lanka, issued by of internal control over financial reporting the Central Bank of Sri Lanka, the Rules on Corporate to provide reasonable assurance regarding Governance as per section 7.10 of Listing Rules issued the reliability of financial reporting and the by the Colombo Stock Exchange and the Code of preparation of Financial Statements for external Best Practice on Corporate Governance issued jointly purposes has been done in accordance with by the Securities and Exchange Commission (SEC) applicable accounting standards and regulatory and the Institute of Chartered Accountants of Sri requirements; and Lanka (ICASL). Engaging independent advisors on specialised functions where it is deemed necessary.
142 documented by the respective process owners. For The Bank’s assessment was basedonprocesses Accountants of SriLanka (ICASL) in2010. Internal Control’, issued by the Institute of Chartered for Directors of Banks on‘The Directors’ Statement of 2013 basedonthe criteria set out inthe Guidance control over reporting financial asof December 31st The Bank assessed the effectiveness of itsinternal reportingfinancial asof December 31st 2013. assess the effectiveness of internal control over Banks issued by the Central Bank of SriLanka and Corporate Governance for Licensed Commercial (ii)(b) of the Banking Act Direction No11of 2007 on The Bank isrequired with to comply Section 3(8) Internal Control over Reporting Financial (ICOFR) year review and audit. annual the External Auditors onthe outcome of their half- Group Officer ChiefFinancial and reports also from BAC considered reports from the Executive Director/ reporting requirements. To facilitate their review, the thereto and other relevant and financial governance the Banking Act No30of 1988and amendments standards, the Companies Act No07 of 2007, and the extent of compliance with reporting financial policies and practices, the clarityof the disclosures included the and quality acceptability of accounting Statements prior to their release. The review Auditors the and quarterly the Financial annual discussed with and the Management the External of thebehalf Board of Directors, reviewed has and oversee the Bank’s reporting financial process on The Committee, aspart of itsresponsibility to ReportingFinancial concern. audits, and concluded there that was nocausefor impact onthe effectiveness of the external/internal of any incident whichcould anegative have had relation to the Audit and to allow for full disclosure to ensure there that was nolimitation of scope in presence of MDand the Corporate Management Internal Auditors once duringthe year without the Committee met the External Auditors and the andquarterly Statements. Financial annual The recommend to the Board of Directors the Bank’s Four of these meetings were heldto consider and Auditors attended also these meetings by invitation. Senior -Systems Manager Audit and the External General –Finance, Manager Headof Internal Audit, Director/Group Officer, ChiefFinancial Deputy Report.Annual Director, The Managing Executive meetings isgiven110of inthe onpage the table Attendance by the Committee members of these The Committee met twelve timesduringthe year. BAC Meetings activitiesofprincipal the BAC were asfollows: During the year ended December 31st 2013 the Financial ReportingFinancial isprovided 213. onpage Auditor’s Report onthe Bank’s Internal Control over of the internal control system of the Bank. External Board inthe review of the design and effectiveness understanding of the processes adopted by the the reporting financial isinconsistent with their to their attention causesthem that to believe that have reported to the Board come nothing that has Bank’s internal control over reporting financial and Auditors have audited the effectiveness of the is provided 211&212.The Bank’s onpages External the Bank’s Internal Control over Reporting Financial reportingfinancial iseffective. Directors’ Report on December31st 2013, the Bank’s internal control over assessments, the concluded asof Board that, has Based onInternal Auditors’ and External Auditors’ adequacy and commented where necessary. on the documented processes to establish their Audit Departmentcarriedout walk through tests continued to function in2013 aswell. The Internal the Bank’s External Auditor &Young) (Ernst which Heads was formulated in2010 with the guidance of andManagement other relevant Department OfficerChief Financial comprising of Corporate committee headed by the Executive Director/Group the successful implementation of this task asteering basis. The sections covered and the regularity of and monitored the implementation of itonaregular During the year, BAC reviewed the internal auditplan Internal Audit throughout the year. BAC necessary interactions had with the Headof requirements of the Internal Audit Department.The significant auditfindings and assessment of resource to takemanagement precautionary measures on the Bank’sagainst auditplan, advisingcorporate of updates onauditactivitiesand achievements Internal Audit Department.This included reviewing and effectiveness of the activityof the Bank’s The BAC monitored and reviewed the scope, extent Internal Audit 102 to 140.pages inconsistencies to those reported by the Board on matters disclosedabove and didnot identify any addressed to the Board are consistent with the presented intheir report dated 18th February 2014 Corporate Governance directive. Their findings 4750), to meet the compliance requirement of the of Chartered Accountants of SriLanka (SLRSPS Practice Statement 4750 issued by the Institute procedures set out inSriLanka Related Services The External Auditors of the Bank have performed Report for 2013 isprovided 102 to 140. onpages Bank of SriLanka, the Corporate Annual Governance Licensed Commercial Banks issued by the Central Direction No11of 2007, onCorporate Governance for As required by Section3(8)(ii)(g) of the Banking Act CorporateAnnual Governance Report 143
Annual Report 2013 Sampath Bank PLC BOARD AUDIT COMMITTEE REPORT audits depends on the risk level of each section, with Met with the External Auditors to discuss their higher risk sections being audited more frequently. audit approach and procedure, including matters relating to the scope of the audit and The Internal Audit Department comprises three broad Auditor’s independence. areas namely: Branch/Department/Relationship Manager Reviewed the audited Financial Statements Audits; with the External Auditor who is responsible for Trade Finance, Forex and Treasury Audits; and expressing an opinion on its conformity with the Forensic and Fraud Investigations. Sri Lanka Accounting Standards.
The Branch/Department/Relationship Manager Audits Reviewed the Management Letters issued by are distributed among 8 teams. the External Auditor together with management responses thereto. In 2013 BAC reviewed internal audit reports of 127 branches, 34 departments, 3 Subsidiaries and 13 Met the External Auditor twice during the Relationship Managers. Audit findings presented year without the Executive Directors and the in the reports are prioritised based on the level of Corporate Management to ensure that there risk. The Committee followed up on Internal Audit was no limitation of scope in relation to the recommendations with the Corporate Management. Audit and to allow for full disclosure of any Internal Audit reports are made available to External incidents which could have had a negative Auditors as well. impact on the effectiveness of the external audit. It was concluded that there was no cause The Internal Audit Department has maintained an for concern. average audit cycle of 15.4 months per audit. Reviewed the Non-Audit Services provided by Trade Finance, Forex and Treasury Audits are the External Auditor and was of the view that assigned with equal prominence and emphasis such services were not within the category of considering its complexities and importance in the services identified as prohibited under: context of current economic environment. 1. the guidelines issued by the Central Bank The Forensic and Fraud Investigation process has of Sri Lanka, for External Auditors, relating leaped into new approaches and is fast evolving with to their statutory duties in terms of Section the documentation of a procedure for Audit Inquiries 39 of the Banking Act No 30 of 1988 and hitherto not available. amendments thereto.
Along with the significant findings the Internal Audit 2. the Guideline for Listed Companies on Department has been engaged in sharing and Audit and Audit Committees issued by the providing knowledge through regular training to the Securities and Exchange Commission of Sri Bank’s staff on better control awareness. In keeping Lanka. with BAC recommendations the Internal Audit has also provided inputs to the Corporate Management Reviewed the Letter of Representation issued to for effective control and prevention of fraud, which the External Auditors by the Board. are regularly addressed to stay on course. Reviewed the Letter of Independence External Auditors Confirmation issued by the External Auditor With regard to the external audit function of the as required by the Companies Act No 7 of Bank, the role played by the Committee is as follows: 2007, confirming that they do not have any Undertook the annual evaluation of the relationship or interest in the company, which independence and objectivity of the External may have a bearing on their independence Auditor and the effectiveness of the audit within the meaning of the Code of Conduct and process. Ethics of the Institute of Chartered Accountants of Sri Lanka.
144 18th February 2014 Colombo, SriLanka -Board AuditChairman Committee Ranil Pathirana of theOn behalf Board Audit Committee concluded itsperformance that was effective. by the Board Audit Committee duringthe year and The evaluation annual of the BAC was conducted Board Audit Committee Evaluation were done with various parties. and from timeto timeduringthe year consultations professional advice onmatters within itspurview; The BAC the authority has to seekexternal Professional Advice BAC. looked at.This procedure isbeingmonitored by the confidential, aseven anonymous complaints are identity of the person raising the concern iskept authority. Concerns raised are investigated and the concern to the notice of an independent designated the Bank, to come forward voluntarily, and bringsuch potential “wrong doing”,doneby any person within concern alegitimate who has onan existing or The policymanagement. allows any Team Member to serve of asachannel corporate fraud risk Sampath Blowing Bank’s Whistle Policy isintended BlowingWhistle shareholders atthe next General Annual Meeting. December31st 2014 subjectto the approval of be reappointed for the year financial ending and Messrs Ernst that Young, Chartered Accountants, The BAC recommended has to the Board of Directors 145
Annual Report 2013 Sampath Bank PLC BOARD HUMAN RESOURCES AND REMUNERATION COMMITTEE REPORT
Composition of the Board Human Resources and Act Direction No 11 of 2007 Corporate Governance Remuneration Committee for Licensed Commercial Banks in Sri Lanka, the The Board Human Resources and Remuneration Committee at its meeting held on 9th August 2011 Committee comprises four Non Executive Directors decided on the following scope and responsibility: and one Executive Director. The Directors who serve in the Committee are: Scope and Responsibility The Committee shall determine the Mr Deepal Sooriyaarachchi - Chairman (IND/NED) remuneration policies (salaries, allowances and Mr Channa Palansuriya (NED) other financial payments) relating to Directors, Miss Annika Senanayake (IND/NED) Managing Director (MD) and Key Management Mr Deshal De Mel (NED) Personnel of the Bank. Mr Aravinda Perera (ED) (IND - Independent Director, NED - Non Executive The Committee shall set goals and targets for Director and ED - Executive Director) Directors, MD and Key Management Personnel.
Brief profiles of the members are given on pages 22 The Committee shall evaluate the performance to 28 of the Annual Report of the MD and Key Management Personnel against set targets and goals periodically and The Group Company Secretary functions as the determine the basis for revising remuneration, Secretary of the Board Human Resources and benefits and other payments of performance Remuneration Committee. based incentives.
Meetings The Committee shall take on any other areas During the financial year ended 31st December 2013, and enlarge its scope which in its view or in the three meetings were held. The attendance of the Board’s view is desirable if it were handled by members of these meetings is given on page 110 of the Committee. the Annual Report. The Group Chief Financial Officer & Deputy General Manager Human Resources as well The Committee shall advise the DGM - Human as other executive staff attend meetings by invitation Resources of the Bank with regard to revision to assist in their deliberations by providing relevant of salaries of Bank staff and of any major information and participating in the analysis of organisational changes needed for the Bank’s information, except when their own compensation purpose. packages or other matters relating to them are reviewed. Performance during the year/ key HR initiatives During the year under review the Committee has Duties and Roles provided the strategic direction for the following key The overall scope of the Committee is to provide initiatives. strategic direction to build an effective and efficient HR organisation for the Bank. 1. Career & Succession Planning The framework and guidance were provided to Based on the Direction issued by the Monetary Board develop a sustainable succession plan for the key of the Central Bank of Sri Lanka under Section 46(1), Managerial positions of the Bank and to set up a Banking Act No 30 of 1988 as amended and Banking continuous process to manage talent.
146 1. inSriLanka: Management Conference 2013 organised by Institute of Personnel two category special awards atthe HR National In recognition of HRinitiatives, key the Bank secured RecognitionSpecial team memberseligible under ESOPscheme2000. Ownership of 11,621,688shares was transferred to 921 Executive and higher grades. System (PMS)was designed and implemented for An objective-based Performance Management 5. internal communication programme of the Bank The Committee regularly reviews the multi-faceted 4. Academy” was set up. levels -acomprehensiveall “Sampath Leadership the LeadershipInstitutionalising Development at 3. submitted to the Board of Directors for review. performance indicators regularly and updates are HR Scorecard was redesigned to monitor HR key international benchmarks. practicesbest inthe industry with comparable given accordingly. These policies now reflect the policies were reviewed and directions were HRphilosophy and and challenges, probable 2. 18th February 2014 Colombo, Sri Lanka Remuneration Committee –Board HumanChairman Resources and SooriyaarachchiDeepal Remuneration Committee of theOn behalf Board Human Resources and 2. C
onsidering the current business context
the true potential of Human Resources Aw developing Human Resources exceptional contribution towards nurturingand Aw Pe Emplo Lead Review of HRpoliciesand Scorecard rformance Management ard for Talent for Management unleashing ard for Development People inrecognition of ership Development yee Relations 147
Annual Report 2013 Sampath Bank PLC BOARD NOMINATION COMMITTEE REPORT
Composition of the Nomination Committee The Functions of the Committee The Board Nomination Committee consists of four Continuously reviews the structure and Non Executive Directors as at 31st December 2013. composition of the Board. The Committee The following Directors serve in the Board Nomination also reviews the skills, knowledge, expertise Committee: and experience the Board of Directors require in comparison to the current position of the Miss Annika Senanayake - Chairperson - w.e.f. 12th banking environment. The Committee also December 2013 (IND/NED) makes recommendations to the Board with Mrs Saumya Amarasekera - Chairperson up to 11th regard to any changes they think fit for the December 2013 (NED) progress and success of the Bank. Mr Dhammika Perera (NED) Mr Channa Palansuriya (NED) Recommends suitable persons to the Board (IND - Independent Director and NED - Non Executive after careful consideration of the competency Director) required for a particular job.
Mrs Saumya Amarasekera who served on the Board Considers and recommends from time to time Nomination Committee as its Chairperson from 1st the requirements of additional/new expertise of December 2012 to 11th December 2013 stepped down existing Directors and to create succession plans in compliance of Central Bank of Sri Lanka’s rule on for Directors resigning or relinquishing their Corporate Governance for Bank’s on ceasing to be positions. an Independent Director and continues as a member of the Committee. The Committee is now chaired Carefully reviews management progression and by Miss Annika Senanayake. The Managing Director succession plan for the top management. The attends these meetings by invitation. committee ensures that management personnel of high calibre are appointed to guide the Bank Brief profiles of the members are given on pages 22 to achieve greater heights. to 28 of the Annual Report. The Committee sets criteria such as The Group Company Secretary acts as the Secretary qualification, experience and key attributes to the Board Nomination Committee. required for eligibility to be considered for appointment or promotion to the post of Committee Meetings Managing Director and other Key Management During 2013 the Committee held five meetings. The Personnel. attendance of the Committee members at each of these meetings is given in the table on page 110 of The Committee is also responsible for the Annual Report. nominating members to the Board for Board approval when and if a Board vacancy occurs. Scope of Work It is mandatory for the Board to evaluate The roles and functions of the Board Nomination the balance of skill, knowledge and general Committee are regulated by the Banking Act Direction experience on Board matters before any such No 11 of 2007, the mandatory Code of Corporate appointment is finalised. The Committee is Governance for Licensed Commercial Banks accountable to make a description of the role issued by the Central Bank of Sri Lanka. The Board that is vacated and should clearly analyse the Nomination Committee has the power and authority capabilities and skill set required for a particular to seek any needed information from any officer or appointment. employee in connection with matters coming under its purview. The Committee also has the authority to seek external professional advice on matters within its purview.
148 18th February 2014 Colombo, SriLanka -BoardChairperson NominationCommittee Annika Senanayake of theOn behalf Board Nomination Committee changes. effectively, and ifrequired recommends necessary terms of reference to ensure itisoperating that reviewsalso itsown performance, constitutionand and successful organisation. Further, the Committee the structure and skills needed for asteadfast, strong withwork closely the Board of Directors, inreviewing The members of the Board NominationCommittee Performance Board members to have access to them. meetings are atBoard tabled meetings enablingall The Minutes of the Board NominationCommittee Reporting to the Board
reappointment. Non Executive Directors are whenthey duefor r The Committee isaccountable to make d To make recommendation onany other matter in The Committee determine must the Dir The Committee report must to the Board of relevant Statues. Colombo Stock Exchange regulations and other norms set out inthe Central Bank Regulations, independence bebasedonstandards must and Committee meetings. members of the Board the minutes of the meetings, and make must available to the ecommendations after review, to reappoint elegated byelegated the Board of Directors. dependence of the Directors of the Board. The ectors onthe activitiesof the Committee 149
Annual Report 2013 Sampath Bank PLC BOARD RISK MANAGEMENT COMMITTEE REPORT
The Board of Directors has delegated overall risk Review and update of Risk Management policies management and compliance responsibilities to of the Bank pertaining to credit, market, liquidity, an independent Risk Management Committee, i.e. operational, outsourcing and reputational risks, The Board Risk Management Committee (BRMC) compliance risks, business continuity plan and established as a sub-committee of the Board in disaster recovery plan. compliance with the Banking Act Direction No Ensuring effective design and implementation of 11 of 2007, Corporate Governance for Licensed risk management framework with respect to Commercial Banks in Sri Lanka. integrated risk management and risk appetite, Internal Capital Adequacy Assessment Process The Bank’s risk management strategy is based on (ICAAP) and stress testing. a clear understanding of various risks, disciplined Review migration to the advanced approaches risk assessment and measurement procedures and under Basel II, risk return profile of the Bank, continuous monitoring. The policies and procedures outsourcing activities, compliance with CBSL established for this purpose are continuously bench guidelines pertaining to credit, market and marked with international best practices. operational risk management systems. Review the level and direction of major risks The Board of Directors has oversight on all the risks pertaining to credit, market, liquidity, assumed by the Bank. The BRMC has been constituted operational, compliance and capital at risk as to facilitate focused oversight of various risks. part of risk profile templates. Reporting and recommendation to Board of Terms of Reference Directors on risk management and The scope of activities of the Board Risk Management compliance related matters. Committee as mandated by the Board of Directors is: Ensuring compliance with laws / regulations including anti-money laundering.
Governance The governance structure of the management of risk at the Bank is set out bellow:
Authority Membership Responsibilities Board of Directors All members of the Board Determine risk appetite (BOD) Ensure that significant risks are competently managed Board Risk Mrs Dhara Wijayatilake Formulates risk policies and recommends to Management (Chairperson) Board for adoption Committee (BRMC) Independent, Non Executive Advises the Board and makes Director recommendations on: risk appetite and alignment with Mr Channa Palansuriya strategy Non Executive Director appointment of senior risk officers Reviews the effectiveness of the Group’s Mr Sanjiva Senanayake systems of risk management and internal Independent, Snr. Non Executive controls (Other than internal control over Director financial reporting) Monitors compliance Mr Aravinda Perera (MD) Monitors the progress on implementing Basel II Executive Director Reviews Disaster Recovery and Business Continuity plans Mr Ranjith Samaranayake Oversees the maintenance and development Executive Director of a supportive culture in relation to the management of risk
150 discharging itsresponsibilitiesdischarging duringthe year. The BRMCundertook the following activitiesin members are aware of any developments. are discussed ateachmeeting to ensure all that indicators andto the changes riskprofile of the Bank environment isapriority for the risk BRMC.Key to the operations of the Bank and itsoperating andin riskmanagement determining itsapplicability members inlinewith and local developments global Maintaining aculture of risk awareness among its Committee Activities defined and approved by the Board. identified riskindicators and the prudential limits been provided to the Board onthe performance of Risk Appetite Statement. Regular reports have its strategy and whichisset out inthe Group’s therisk that Bank isprepared to accept inexecuting appetite, whichdescribes the types and levels of advised by the BRMC,approves the Bank’s risk ofmanagement riskatSampath Bank. The Board, Risk appetite component isakey of the Risk Appetite responsibilities. and the Group Compliance its Officer indischarging of the Bank, headed by the Group ChiefRiskOfficer integrated and RiskManagement Compliance Units at these meetings. The BRMCissupported by the process,management matters onkey discussed the two executive committees involved inthe risk Credit Policy Riskand Portfolio Review Committee, Committee receives also updates from ALCO and and the next were reviewed by the Committee. The planned activitiesand projects for the current year compliance with regulatory requirements. Progress of risks within the Bank’s riskappetite and to facilitate Officer and reviewed actionstaken to maintain and compliance reports from the Group Compliance risk indicators from the Group ChiefRiskOfficer The Committee received reports bi-monthly onkey Risk Reporting and Monitoring Unit and Compliance Unit Management Integrated Risk Authority Group Compliance Officer Group ChiefRiskOfficer / Membership
Directors for their review. any deviations are escalated to the Board of are monitored periodically for compliance and policies were reviewed duringthe year. The f Risk Mana Risk Appe Risk Appe compliance and regulatory requirements. reviewed these to assess the extent of from the Group Compliance Officer and The C Compliance: ofallocation resources for this purpose. inthe Bankapprovedrisk management and has of ITSystems to support credit and operational The BRMCh IT Systems Support: meet the timelinesset by Central Bank. components to ensure to the that Bank isable monitors progress onimplementation of key The C Progress onBaselIICompliance: improve the Bank’s tolerance levels. and recommended appropriate actionto which include credit and market riskindicators Re Stress Testing:
viewed stress testing limitsfor identified risks practice Bench markingwit r Compliance with regulatory and supervisory Measuring an Committee recommending to Board RiskManagement mu Formulating the policy framework addressing Operational RiskManagement Market RiskManagement Credit RiskManagement Integrated RiskManagement Compliance Laundering and Anti-Money Strategic Risk Risk Legal Stress Testing equirements and ollowing and riskmanagement compliance ltiple andltiple inter-dependent risksand ommittee received compliance reports ommittee drawn has uparoad mapand tite limitsand RiskIndicators Key tite: gement Policies: as monitored the implementation Responsibilities d monitoring risk h international best 151
Annual Report 2013 Sampath Bank PLC BOARD RISK MANAGEMENT COMMITTEE REPORT
Internal Controls: Key Management Personnel supervising the Credit, The Committee reviewed internal loss event Market, Liquidity, Operational and Strategic risks also reports and the adequacy of internal control attend the meetings of the BRMC by invitation. and procedures (except internal controls over financial reporting) regularly and have A review of the integrated risk management process made recommendations for improvements has been detailed in pages 160 to 187 of the Annual to the Executive Management. Progress on Report. implementation of recommendations is also followed up by the Committee at its regular On behalf of the Board Risk Management Committee meetings.
Customer Complaints: The Committee reviewed customer complaints to assess their implications on the risk management of the Bank and recommended Dhara Wijayatilake actions where appropriate. Chairperson - Board Risk Management Committee
Outsourced Activities: Colombo, Sri Lanka Monitoring of outsourcing activities of the 18th February 2014 Bank through the outsourcing committee to ensure that such activities are within the CBSL directives and guidelines and due diligence tests are in place to monitor the activities of 3rd party service providers.
Meetings of the BRMC There were eight meetings during 2013. The attendance of the Committee members at each of these meetings is given in the table on page 110 of the Annual Report. The minutes of the BRMC were recorded by the Group Company Secretary and circulated among the members of the Committee. Minutes were submitted to the Board on confirmation.
152 Hence, itisthe responsibility of this Committee to: attention inthe to economic changes environment. counterparties, poor portfolio or lackof management linked to laxcredit standards for borrowers and of serious have bankingbeen directly problems the years for various causes reasons, the major have faced institutions financial difficulties over in keeping with the expansion of the Bank. While set upthe Committee and to increase itsauthority authority from the Board of Directors decision to The Board Credit Committee derives itsscope and and ResponsibilitiesRole participate atthe meetings asand whenrequired. of the of senior management the Bank are invited to 110ofReport onpage the Report. Annual Members members isstated inthe Corporate Governance occasions. The attendance of the committee During the year the Committee met onthirteen Meetings to the Board Credit Committee. The Group Company Secretary actsasthe Secretary to 28of the Report. Annual Brief profiles of the members are 22 given onpages Director and ED-Executive Director) (IND -Independent Director, NED-Non Executive Mr Aravinda Perera DeMel Mr Deshal Miss Annika Senanayake Mr Sanjiva Senanayake Palansuriya Mr Channa Prof Ranasinghe -Chairman Malik the Credit Committee. Committee meeting. The following Directors serve in two Executive Directors isthe quorum for aCredit A minimumof two NonExecutive Directors and Committee ischaired by aNonExecutive Director. Executive Directors and two Executive Directors. The The Board Credit Committee comprises of five Non Composition of the Board Credit Committee COMMITTEE REPORT BOARD CREDIT Mr Ra njith Samaranayake
(ED (ED) (N (IN (IN (NED (IND ED) D/NED) D/NED) ) /NED) ) 1.
2. 4. 3.
Operate asound credit granting process credits Identification a Maintain ad measuring and monitoring process Maintain appr
approval. modifications to the Board of Directors for recommend them with or without authorities. prescribed by the regulatory/supervisory policies w Ensure compliance of the Bank’s credit b Review credit initiated policy changes Board. beyond the Committee’s scope to the Where required, submitcredit requests policies a Review proposals with respect to credit appropriate. performance. portfolio reports and assess portfolio cr Monitor onan ongoingbasisthe Bank’s d Ensure stress tests are conducted, where in linew Monitor capital and allocation define limits risk adjusted rate of return. ac Ensure credit riskexposure iskept within Board approval. f Review and recommend to the Board, the Bank’s policy. assign credit delegated limitsinlinewith Define credit appr sect rapidRequest portfolio reviews or acilities that they believeacilities they that should have y the management ofy the management the Bank and eemed appropriate. edit quality, review periodic credit ceptable limitsto maximise the Bank’s or/industry reviews, where deemed equate controls over credit risk. ith the riskappetite. opriate credit administration, nd standards and approve them. ith the statutory requirements nd administration of problem oval framework and 153
Annual Report 2013 Sampath Bank PLC BOARD CREDIT COMMITTEE REPORT
Ensure post-credit monitoring and postmortem reviews are performed, where deemed appropriate
5. Proper evaluation of new business opportunities Ensure all new credit risk related products are reviewed from a credit risk management perspective
6. Aware of the cyclical aspects of the economy (both internal and external) Monitor the resulting shifts in the composition and quality of the loan portfolio
Reporting to the Board Minutes of the meetings of the Board Credit Committee are circulated to the Committee members by the Secretary and the confirmed minutes are reported to the Board of Directors for concurrence.
Review of the Committee Members of the Board Credit Committee work closely with the Board of Directors to maintain proper credit standards for the Bank. The Board undertakes a review of the Committee’s performance, objectives and responsibilities according to its terms of reference to ensure that it is operating effectively.
On behalf of the Board Credit Committee
Malik Ranasinghe Chairman – Board Credit Committee
Colombo, Sri Lanka 18th February 2014
154 1. and ResponsibilitiesRole Governance 110of Report onpage the Report. Annual the Committee members isstated inthe Corporate dedication to fulfill itsobligations.The attendance of occasions and the Committee members worked with During the year the Committee met ontwo Meetings to the Committee. The Group Company Secretary actsasthe Secretary to 28of the Report. Annual Brief profiles of the members are 22 given onpages Director and ED-Executive Director) (IND -Inde Mr Ra Mr Aravinda Perera Mr Ranil Pathirana DeMel Mr Deshal Prof Ranasinghe Malik Mr Sanjiva Senanayake Palansuriya Mr Channa PereraMr Dhammika -Chairman Planning Committee. The following Directors serve inthe Board Strategic Committee ischaired by aNonExecutive Director. Directors and two Executive Directors. The The Committee comprises of sixNonExecutive Committee Composition of the Board Strategic Planning implementation of the plan. for the includes Bank actionplans that and tools for provides aprofessionally authored Strategic Plan and execution. OurStrategic Planning initiative inthe regulatorychanges landscape, experience evolvedPlanning initiative has that with the its stakeholders. We have developed aStrategic helping the Bank to attain the expected goals by tool for monitoring the Bank’s progress and for Bank. The Strategic Plan of the Bank isapowerful planning isthe core foundation for the future of the The Board understands effective that strategic REPORT PLANNING COMMITTEE BOARD STRATEGIC 2.
and of goals key the Bank. opportunities relevant to the strategic vision issues: Examine and the external challenges Re to the Bank’s Strategic Planning process. and the strategic visionand provide guidelines t Strategic Vision &Mission of the Bank: Examine njith Samaranayake he Bank’s current mission, strategic positioning view of the impactof external trends and pendent Director, NED-Non Executive
(ED) (ED) (NED (NED (IND /N (IND /N (NED (N ED) ) ) ) ED) ED) Reporting to the Board 18th February 2014 Colombo, Sri Lanka –Board StrategicChairman Planning Committee PereraDhammika of theOn behalf Board Strategic Planning Committee when the needarises. extends to makingrecommendations to the Board operating and smoothly efficiently. Itsscope also constitution and scope of work to ensure itis that The Committee reviews itsown performance, with the strategy document. BudgetAnnual for 2014 whichwas developed in line information and approval was obtained for the was submitted to the Board of Directors for their Plan for this period. The three year rolling plan the basisfor the development of the Strategic of the Bank for the period 2014 to 2016 whichformed Planning Team to determine the strategic direction with the Corporate and Management Strategic direction. The Committee indiscussions engaged of concern instrategic whichneeded changes plan and budget annual for 2013 to identify areas during the yearthree against year rolling The Committee reviewed performance of the Bank Performance Directors for concurrence. the confirmed minutes are reported to the Board of to the Committee members by the Secretary and Minutes of the Committee meetings are circulated 3. 5. 4. 8. 7. 6.
leads to the formulationleads of the Strategic Plan. Management. of the Bank and give guidelines to the strategic decisions and investments. Make r growth targets. Bank’s capital structure inthe context of the Re the context of achieving itsstrategic objectives. Re achieving the and goals objectives. Examine t Ove Re view the internal strengths and weaknesses view the adequacy and composition of the view the Bank’s resources and capabilities in rsee and monitor the planning process that ecommendations to the Board onkey he effectiveness of strategies key for 155
Annual Report 2013 Sampath Bank PLC BOARD SHAREHOLDER RELATIONS COMMITTEE REPORT
Sampath Bank, became the first listed Company in The Shareholder Relations Forum was convened Sri Lanka to setup a Board Shareholder Relations after the Annual General Meeting providing a much Committee to identify and address shareholders’ awaited opportunity for shareholders to voice their concerns as deemed appropriate through dialogue opinions and suggestions to improve relations with shareholders/investors. between stakeholders and the Bank.
Composition of the Shareholder Relations Role played by the Board Shareholder Relations Committee Committee The Committee includes of two Non Executive Directors. The Executive Directors join the meetings Providing suggestions to the Board to improve when necessary. The following Directors serve on the shareholder/investor relations of the Bank. Board Shareholder Relations Committee: Organising forums that encourage dialogue between the Board of Directors and Mr Channa Palansuriya - Chairman (NED) Shareholders/Investors. Mr Deshal De Mel (NED) Providing guidance to the Board on matters of (NED - Non Executive Director) investor relations.
Brief profiles of the members are given on pages Activities of the Committee 22 to 28 of the Annual Report. The Group Company The Board Shareholder Relations Committee is a Secretary acts as the Secretary to the Committee. vital Board Committee established to facilitate a smooth and continuous dialogue between the Board Mr Channa Palansuriya was appointed as the and shareholders to address their concerns, if any. Chairman of the Committee with effect from 1st The Committee concentrates on developing and January 2012, Mr Deshal De Mel serves as a member preserving a good rapport with the shareholders. The of the Committee. Mr Ernst Gunasekera, a former Committee ensures that the Bank’s latest information Director and an advisor of the Committee decided to and financial results are swiftly communicated to the step down from the Committee this year. The Board shareholders through Interim and Annual Reports, Shareholder Relations Committee wishes to place on notifications to the Colombo Stock Exchange and record its appreciation for the service rendered by timely press releases. In addition to these avenues Mr Ernst Gunasekera. Mr W M P L de Alwis, also a of information, our shareholders have easy access former Director and advisor of the Committee too through our corporate website, www.sampath. decided to step down. However due to the requests lk to all relevant information, which also gives our made by the Committee members Mr W M P L shareholders access to the Bank for any query. de Alwis decided to stay on the Committee. The Shareholders can freely raise any questions to the Committee places on record its appreciation of the Board of Directors at the Shareholder Relations services rendered by Mr de Alwis and also thanks him General Forums. These forums also encourage our for agreeing to stay on the Committee. shareholders to openly voice concerns and make suggestions and requests. Frequency of Meetings Meetings are held when deemed appropriate. The This year has seen regular two-way dialogue Committee met once during the year attended by between the shareholders and the Board of Directors. all the members. By invitation of the Shareholder The Group Company Secretary has played a vital Relations Committee, the Managing Director and role in the accomplishment of many goals of the Executive Director/Group Chief Financial Officer, Board Shareholder Relations Committee. The Board also attended the Shareholder Relations Committee of Directors are kept informed of shareholder outlook Meeting. through regular reports.
156
Committee duringthe year: Board. The following activitieswere initiated by the necessary and reports onthe activitiesto the relations. The Committee meets asand when The mainobjective isto facilitate better shareholder Performance opinion inperson. another avenue to the shareholders to express their concern or view regarding the Bank whichgives any Director of Sampath can Bank, express they any Shareholders write can also to and the Chairman 18th February 2014 Colombo, Sri Lanka Chairman Palansuriya Channa of theOn behalf Shareholder Relations Committee
Central Province. outside the Western Province are from the since the number largest of shareholders Province for itsinaugural provincial meeting stepfirst identified the the Bank Central has to holdprovincial get-togethers island wide. As Shareholder Relations Committee isplanning 2013. Asdiscussed duringthe meeting the t Shareholders’ Forum was heldsoonafter sh The following concessions are given to he Annual Generalhe Annual Meeting on4th April
areholders onbanking transactions. deposit requirement. deposit will be50%of the normal initial On opening o ent All commissions to cost basis, beonactual transaction fee. However, this doesnot include per SET cards ar cr 50% on for the fee VISA annual charged and postal charges. This excludes cheque return commissions the costwill actual charges, becollected. foreign and bankother charges bank local will bewaived off. However, inthe caseof edit cards will bewaived off. ailing internal all commission charges e issued free of charge. f current accounts, the initial 157
Annual Report 2013 Sampath Bank PLC BOARD TREASURY COMMITTEE REPORT
Composition of the Board Treasury Committee Monitor the management of foreign exchange The Board Treasury Committee comprises three Non and interest rate risks by the Bank Executive Directors and two Executive Directors. The following Directors serve in the Treasury Committee. Monitor compliance with Central Bank regulations managed by the Treasury including Mr Sanjiva Senanayake - Chairman (IND/NED) capital adequacy, statutory reserve ratios, and Prof Malik Ranasinghe (IND/NED) statutory liquid assets. Mr Deshal De Mel (NED) Mr Aravinda Perera (ED) Provide guidance to the Asset and Liability Mr Ranjith Samaranayake (ED) Management Committee (ALCO), consisting (IND - Independent Director, NED - Non Executive of corporate management, to optimise Director and ED - Executive Director) performance
Brief profiles of the members are given on pages 22 Establish internal pricing of funds to provide to 28 of the Annual Report. desired incentives internally and better evaluate performance of business units. Development of Mr Manjula Ekanayake of the Bank’s Treasury new products Department serves as the Secretary. Other officials of the Bank were invited to attend as deemed During 2014 efforts will focus on instituting more necessary. Minutes of the Board Treasury Committee sophisticated revenue analysis of the Bank’s were regularly reported to the Board of Directors and products/customers, managing risks in volatile approval sought for policies recommended and other market conditions, further stabilising the Bank’s matters. liquidity management and assisting in joint initiatives with other departments of the Bank to help the Meetings Treasury achieve stable profitability. During the year the Committee met on six occasions. The attendance of the Committee members is stated On behalf of the Board Treasury Committee in the Corporate Governance Report on page 110 of the Annual Report.
Role and Responsibilities The Board Treasury Committee is instituted to provide guidance to the Treasury in carrying out its functions and to monitor its performance with a Sanjiva Senanayake view to optimising earnings, stability and growth Chairman - Board Treasury Committee of the Bank. Colombo, Sri Lanka The main responsibilities of the committee are: 18th February 2014 Establish Treasury Management policies on behalf of the Board of Directors
Ensure Treasury Dealing Room operations are carried out in accordance with those policies.
Monitor the liquidity position of the Bank and advise Treasury accordingly
158 3. 2. 1. Committee are to: effectiveness. The Terms Key of Reference of the on the Marketing Strategies of the Bank and their This Committee was set upto have acloser focus Terms of Reference the Report. Annual these meetings isgiven110of inthe onpage table Attendance by the Committee members ateachof The Committee met five timesduringthe year. Meetings Secretary of the Board Marketing Committee. The Group Company Secretary functions asthe to 28of the Report. Annual Brief profiles of the members are 22 given onpages Director) (IND -Independent Director and NED-Non Executive Mrs Saumya Amarasekera DeMel Mr Deshal Miss Annika Senanayake SooriyaarachchiMr Deepal -Chairman Marketing Committee are: Non Executive Directors. The members of the Board The Board Marketing Committee comprises of four Composition of the Board Marketing Committee COMMITTEE REPORT BOARD MARKETING and their implications to the Bank. Oneof the main updates onvarious consumer trends behaviour asaconduitacts also to the mainBoard to receive practices.best The Board Marketing Committee towards the strategic focus of the Bank, following strongly the align activities of the marketing function a guidingbodyto inan the effort management to The Committee functions more asafacilitating and 4.
against set objectivesagainst progresses of same. Monito strategies inlinewith the customer charter Monito Re Re view Brand strategy and itsperformance view the customer strategy and performance r the CSRpolicy of the Bank and r customer service and customer service
(NED (IND (IN (N ED) D/NED) /NED) ) 18th February 2014 Colombo, SriLanka -Board MarketingChairman Committee SooriyaarachchiDeepal of theOn behalf Board Marketing Committee strengthening the Bank’s brand. accountability of the marketing spend and to focuses during the beenensuringgreater year had 159
Annual Report 2013 Sampath Bank PLC RISK MANAGEMENT REPORT
Effective and disciplined Risk Management Strong Capital & We are well capitalised and have a sufficient Strong Capital & Liquidity buffer over specified regulatory requirements Liquidity for the Statutory Liquid Assets ratio, Capital % Adequacy – Tier I and Total capital adequacy ratios. .62 27 A strong deposit to advances ratio and a deposit 22.4 base that is diversified by type and maturity 20 facilitates effective management of liquidity. 14.22 13.61 8 11.8 10 1 0.0 5 I Tier Ratio Ratio St/ Liq Ass .Rat . Tier I & II 2012 Regulatory 2013 Requirement
Diversified A diversified portfolio of loans and advances and income streams have enabled the Portfolio growth and stability of the bank. This year it provided a sufficient buffer for the adverse impacts of the decline in gold prices and the challenging economic conditions. Action has been instituted to further diversify the portfolio of advances during the year.
Robust Risk We have in place an effective risk governance structure which facilitates identification, Governance measurement and monitoring of risk in accordance with the defined risk appetite of the Structure Bank.
A culture of risk awareness is nurtured throughout the organisation in a planned and structured manner through regular training and knowledge sharing. This facilitates optimal resource allocation to ensure that activities in strategic business units are aligned to the overall strategic objectives, while operating within the defined risk appetite of the bank. Readiness for The Bank is currently compliant in; Basel II Standardise Approach – Credit & Market Risk
Basic Indicator Approach – Operational Risk
The following has been carried out in order to move towards Basel II advanced approaches; Calculation of Operational Risk Capital under Basel II Standardised Approach
Value at Risk (VAR) calculations on our Foreign Exchange portfolio, which forms a major part of moving on to Market Risk Capital calculation under Internal Models Approach.
Computed Probability of Default in order to move towards Internal Risk Based (Foundation) Approach in Credit Risk
Internal Capital Adequacy Assessment Process (ICAAP)
160 which defines how we dobusiness. combine to form the riskculture atSampath Bank operations, service levels, and riskmanagement and, robustness together with discipline among with the organisational vision,policies,goals maintaining stability. Strategic priorities aligned culturemanagement riskand to iskey managing We believe awareness that of riskand astrong risk and maintained within the defined riskappetite. be measured, monitored and continuously managed besufficientformust the risksassumed whichmust culture balances growth that and risk.The returns are pre-requisites to nurturingan appropriate risk policies and tools and riskmanagement techniques the organisation, effective governance structures, understood throughoutphilosophy isclearly that A proactive and forward lookingriskmanagement in both proactive and reactive manner. assessment, measurement and of management risk use various tools and techniques for identification, the development of our strategy and policies.We is approved by the Board and plays acentral in role awellSampath Bank has defined riskappetite which measurement, monitoring and of management risk. framework of facilitate policiesthat identification, appetite, an effective governance structure and a ofmanagement riskportfolios within adefined risk assuming appropriatelypriced riskand prudent in this vital area. The business of banking isabout with consequences of deficiencies and violations as the services financial deals industry globally continues toRisk Management remain centre stage Risk Management
Risk Governance Structure Risk Monitoring & Reporting Risk Minimising/ Mitigation Risk Culture Identification Risk by adedicated function operating RiskManagement Committees and Executive Committees supported governance structure comprises Board, Board Sub and understood throughout the organisation. The communicateda policy framework isclearly that defence model whichisset 162and out onpage governance structure basedonthe three linesof iseffectedRisk management through arisk report. supported with relevant metrics elsewhere in this reputation explained and riskwhichare clearly risk, strategic risk, regulatory risk,legal riskand as credit risk,market risk,liquidityoperational which are considered to besignificant to the Bank Accordingly, we risks have identified the major The Bank’s objectives riskmanagement are To strengthen governance, controls and To achieve competitive advantage through To ensure business growth that plans are To optimiserisk–return decisions To maintain the Bank’s capital strength and To define the Bank’s riskappetite and the align To identify, measure, evaluate, monitor and accountability across the organisation control efficient and affective and riskmanagement infrastructure supportedproperly by an effective risk strong liquidityposition line with the defined riskappetite Bank’s riskportfolios and business strategy in forward lookingbasis significant riskstomanage the Bank ona Pricing Risk Assessment Risk
Policy Framework 161
Annual Report 2013 Sampath Bank PLC RISK MANAGEMENT REPORT under the supervision of the Group Chief Risk out independently of one another. The Three Lines Officer. Risk is originated in the branches and the of Defence has earned high level of acceptance as a other strategic business units of the Bank including standard model in a modern approach to managing departments such as Credit, Treasury, IT and Trade uncertainty and minimising risk. This model could Services which are responsible for the initial risk be used as the primary means to demonstrate the assessments which are then reviewed by Risk structure, roles, responsibilities and accountabilities Management Department and where necessary by in decision making, risk and controlling functions to the relevant Committees. An experienced senior achieve effective risk management, governance and team of banking professionals nurture a culture of assurance objectives. risk awareness throughout the organisation which is supplemented through comprehensive training The Board of Directors has overall responsibility for programmes. defining the risk appetite of the Bank and for ensuring that the most significant risks to the Bank are Risk Governance competently managed. Accordingly, they determine The Bank`s overall risk governance model is the risk appetite, set the risk objectives and approve based on the concept of Three Lines of Defence the Integrated Risk Management Framework, policies model whereby business management, risk and ensure that relevant procedures are in place for management and assurance functions are carried effective risk management.
1st Line of Defence 2nd Line of Defence 3rd Line of Defence Decentralised Primary Centralised Oversight Assurance: Independent of All Responsibilities - Business Units - Risk Management others - Complianceé / Audit
Primary responsibility for Setting the Integrated Compliance identifying, managing Risk Management (IRM ) Regulatory Compliance and reporting risk Framework Regulatory Reporting Self assessment of risk Providing support to the Anti Money Laundering and controls business units, review Internal Audit Compliance with all and report key risks to Independent assurance policies and procedures Board Risk Management of the robustness Promoting strong risk Committee (BRMC) of the different risk culture and awareness of Challenge the self management processes risk elements in business assessments and inherent and methodologies activities risks identified by business Independent oversight Training as a way of units and review controls function with oversight mitigating risks in Independently identify and ability to communicate business operations assess all types of risks with external auditors and applicable to the Bank the Board Audit Committee Ensuring that appropriate Ensure that the Bank is mitigative plans are in compliant with the risk place management framework Monitor and ensure setting of Policies , Procedures Overseeing of the Insurance framework Overseeing the development of Risk Culture and Anti Fraud Framework
162 accordance with the terms of reference forming the Head of Internal Audit, and the external auditor in The Board Audit Committee reviews reports from the &ComplianceManagement functions, respectively. and the Group Compliance Officer whoheadRisk Board issupported by the Group ChiefRiskOfficer framework.Management This vital committee of the and the implementation of the Integrated Risk and Disaster Recovery plans, riskindicators key reviews BaselIIimplementation, Business Continuity through regular reviews and related controls. Italso theBank`s riskprofile agreed risk appetite against of the Bank’s second lineof defence. Itmonitors the as regulatory and compliance issues and forms part review the policiesaswell Bank`s riskmanagement Directive 11of 2007. This committee isempowered to BOD incompliance with the Central Bank of SriLanka assigned to Committee the RiskManagement of the Integrated of RiskManagement been the Bank has AND MANAGEMENT OFRISK. IDENTIFICATION, MEASUREMENT, MONITORING FRAMEWORK OFPOLICIESTHAT FACILITATE EFFECTIVE GOVERNANCE STRUCTURE AND A WITHIN ADEFINED RISKAPPETITE,AN PRUDENT MANAGEMENT OFRISKPORTFOLIOS ASSUMING APPROPRIATELY PRICEDRISKAND THE BUSINESS OFBANKING ISABOUT The Risk Management GovernanceThe RiskManagement structure isdepicted below. inthe chart Group Chief Risk Officer Board RiskManagement Committee Compliance Officer Group Board of Directors Head of Internal Board Audit Committee Audit across business areas. all is aformal and informal dissemination of knowledge committee members sitonother committees, there processesrisk management atthe Bank. As these by Director the Managing and these form partof the personnel management key of the Bank are chaired A number of executive key committees comprising non-executivehas oversight onTreasury activities. there isa separate Sub-Committee of the Board that as Interest Rates, Exchange Rates, Liquidity, etc., the Bank’s capital asaresult of Market such variables exposures could that create an adverse impacton As activitiesof the Treasury can give riseto large where necessary. Committee to ensure corrective that actionistaken are invited to attend the meetings of the Audit Chief RiskOfficer and the Group Compliance Officer third lineof defence. Director, The Managing Group Board Treasury DGM Treasury Committee Committees Managing Managing Executive Director 163
Annual Report 2013 Sampath Bank PLC RISK MANAGEMENT REPORT
Executive Committees Committee Assets & Liability & Liability Assets Credit Policy, Risk Policy, Credit & Portfolio Review Review & Portfolio ICAAP Committee ICAAP SLFRS Committee IT Steering Committee IT Steering Investment Committee Investment Outsourcing Committee Outsourcing Management Committee Management Committee Procurement Committee Procurement
Credit Policy, Risk & Portfolio Review Committee IT Steering Committee Credit Policy, Risk and Portfolio Review Committee is Chaired by Managing Director, the committee responsible for reviewing the overall credit policy and comprises of key decision makers in the areas portfolio, credit procedures, credit risk management of IT, Operations, Marketing, Risk, Systems Audit and also resolve significant credit policy issues. and Finance. The committee oversees the overall The Committee is chaired by the Managing Director responsibility for the feasibility, business case and the other members of the committee are the and the achievement of outcomes of operations, Heads of Credit Departments, Recoveries and Group infrastructure, automation, development, Chief Risk Officer. procurement and security aspects related to Information Technology infrastructure at Sampath Asset & Liability Management Committee Bank, in line with the strategic vision and long term (ALCO) goals. The Steering Committee will exercise oversight Asset & Liability Management Committee (ALCO) over the deliverables and rollout of IT strategies, comprising the Bank`s senior management, headed monitor and review the strategic alignment of the by the Managing Director, is the top executive Bank’s overall vision, mission, and goals with that of committee for managing the balance sheet of the the IT Department. All activities of the committee is Bank from a risk return perspective, including Market conducted as per the related IT policies. Risk within the risk appetite defined by the BOD. This Committee meets regularly and the committee ICAAP Committee reports are reviewed by the Board Treasury Chaired by the Group Chief Financial Officer, Committee. the committee comprises of key representatives from Finance, Risk, ALCO, Planning, IT, Internal Investment Committee Audit, and ensures that the Bank continuously The Investment Committee headed by the Managing meets requirements under ICAAP in a timely and Director comprises of decision makers representing comprehensive manner. The Bank has already all relevant areas of the Bank such as Treasury, submitted the ICAAP document to CBSL in February Finance and Risk. The committee shall be responsible 2013 for Regulator review. The next key target of the to take all decisions pertaining to Investment committee would be to submit the ICAAP document activities. The Bank invests surplus funds in Stocks, and the Bank’s approach to Capital Management debentures, Bonds or other special instruments as to the regulator within six months from end of 2013 decided by the committee, thereby contributing financial year in accordance with the Central Bank to the investment income of the Bank. All activities of Sri Lanka Directives on ICAAP. of the Investment Committee are governed by the Investment Policy of the Bank.
164 departments/units inSLFRSimplementation. Policy corporate members, and management Headsof key Officer,Financial Group ChiefRiskOfficer, and Director, and membership includes Group Chief The Committee ischaired by the Managing Reporting Standards) SLFRS Committee (SriLanka Financial onCapitalthan Expenditure. Assets (Capital Expenditure), other and onPayments set-out inthe procedures onprocurement of Fixed Activities of the committee and itsfunctions are area where the procured asset would beused. respective LineAGM/DGM of the business/functional comprises of Group Officer, ChiefFinancial and the Chaired by Director, the Managing the Committee Procurement Committee recommendations are implemented. duly the status of outsourced activitiesof the Bank and activities of the Bank. .BRMCisregularly updated on providers and various other decisions onoutsourcing areas for outsourcing, approves of service selection committee overseas, the criteria of for selection and industry practice. best Basedonthe policy, the to reflectinlinewith any changes CBSLguidelines ancillary functions isreviewed and updated annually thethat Bank’s policy onOutsourcing of Banking and Risk, Operations, ITand Systems Audit, and ensures comprises of decision key makers from Compliance, Chaired by Director, the Managing the Committee Outsourcing Committee
Pre-Credit risk Evaluation Credit Unit RiskManagement
Post- credit Risk Monitoring Integrated
Special Projects
Monitoring of Portfolio Risk Unit Risk Management committee. among the mainfunctions/responsibilities of the / execution, and reporting functions are included required by the SLFRS,and implementation planning formulation, ensuringprocedures are inplace as requirements under BaselIInorms. assessment of the capital adequacy basedonthe test results, for various carriesout risks.Italso an Exchange riskwithin the framework, including stress rate risk,LiquidityEquity Price Riskand Foreign Strategic Risk,Reputational Risk,Market Risk,Interest indicators covering Credit risk,Operational Risk, Accordingly the unit reviews and assesses risk key and benchmarkingwith international practice. best interdependent risks,measuringand monitoring risk, the policy framework addressing multiple and Chief RiskOfficer and isresponsible for formulating volume targets. The Unitisheaded by the Group Bank`s riskfunction and isindependent of profit and The Integrated the Unitmanages RiskManagement Integrated Unit(IRMU) RiskManagement of Reference of Committee. the Management and Scope of the Committee are set-out inthe Terms Bank are taken by the committee. Responsibilities a month, and decisions the of management key the The CommitteeManagement. once meets atleast comprises of members all of the Corporate Chaired by Director, the Managing the Committee CommitteeManagement Management Unit Management
1. Internal Loss Event Data Collection Operational Risk 2 Key Risk Indicators 3. Risk & Control Self Assessments
1 Risk Reviews/Recommendations and Periodic Reporting to Corporate Management & BRMC 2 Risk in IT Projects 3 Special Risk Review Projects on need basis
1 Limit Monitoring and Reporting Unit Management 2. Specific reviews and Assessments of RIsk in Market Risk areas coming under Market Risk
1 Stress Testing 2 VAR Calculations 3. BRMC/ALCO Reporting 165
Annual Report 2013 Sampath Bank PLC RISK MANAGEMENT REPORT BY MAKING RISK A PART OF DECISION MAKING PROCESS, THE BANK REFLECTS ITS KEENNESS TO DEVELOP A HEALTHY AND SUSTAINABLE RISK CULTURE WHICH SIGNIFICANTLY CONTRIBUTES TO IMPROVEMENT OF BUSINESS OUTCOMES.
Risk Performance Review Risk Reviews during Our Balance Sheet and liquidity position continue the year 2013 to remain strong although Tier 1 capital adequacy % reflects a marginal decrease over the previous year.
2 Our lending portfolio is diversified across a wide range of products, customer segments and industry 23 sectors which serves to mitigate risk concentration. 46 Impairment provisions increased significantly this year due to higher product exposure for pawning 29 which was adversely impacted due to a sharp decline in world markets prices for gold. We have taken adequate measures to manage the pawning Policies, Procedures & Directives portfolio which includes, Service Level Agreements/ MOU Sign-offs for Product / System / Concept Papers reducing the exposure to pawning Other Reviews reducing the loan to value ratio increasing the frequency of auctions stringent recovery process Risk Reviews and related recommendations Pawning remains a key product to achieve for improved operations provide a significant geographical diversity of our portfolio as it is a contribution and value addition from the Risk popular retail lending product that our customers Management function to all other business and outside the Western province know and understand, administrative activities of the Bank. By making risk a particularly those in farming communities subject part of the decision making process, the Bank reflects to seasonal variations in income and in areas where its keenness to develop a healthy and sustainable other forms of collateral remains an issue. risk culture which significantly contributes to improvement of business outcomes.
166 %from overall Cumulative Operational RiskAppetite Limit Risk Appetite OPERATIONAL RISK MARKET RISK CREDIT RISK Commitments to total Loans FundsPurchased to Total Assets Bulk Depositsto Total Deposits Liquid Assets to Short Term Liabilities Total Loans to customer Deposits Net Loans to Total Assets Liquid Assets Ratio Liquidity Risk Stop Loss Limit Net Open Position Foreign Exchange Risk Product wise Concentration (HHI Score) Sector wise Concentration (HHI Score) (OD+ M.Market Lns)/Total Advances (%) Below 40% Aggregate term loans over 3yrs(residual maturity)/Total Advances % Lending to Maldives(FCBU)/Total Advances % Top 20Adv. (direct basis)/Total -quarterly Adv.(%) Exposure Against Shares/Credit Portfolio (%) Lending to Agriculture (%)–mandatory requirement 10% 15% of the Capital)/Total exposure(funded +non funded) (%) Aggregate exposure(funded +nonfunded) to largeborrowers(i.e. over BorrowerSingle Limit(Group) -LKR/Mn BorrowerSingle Limit(Individual) -LKR/Mn Exposure above rating of C+to total advances Credit /Concentration Quality Criteria OVERALL CUMULATIVE OPERATIONAL RISKAPPETITELIMIT Execution, Delivery &Process Management Business disruptionand system failures Damage to Physical Assets Clients, Products & Business Practices PracticesEmployment and Workplace Safety External fraud Internal Fraud
Less 45% than Less 12% than Less 15% than 30% -35% 85% -95% Less 75% Than Minimum 21% USD 5000per deal USD 7Mn Below 0.16 Below 0.16 Below 20% Cap atexisting level Below 25% <= 7.5% 10% -15% as per CBSL as per CBSL as per CBSL Minimum 80% Policy Limit/Range Rs. 50.0 MN 60% * 10% * 10% * 10% * 10% * 50% * 20% * 167
Annual Report 2013 Sampath Bank PLC RISK MANAGEMENT REPORT
The above limits have been defined for respective ICAAP Implementation – Basel II Pillar II risk areas with the BRMC/Board approval. They are compliance. Capital allocation for Identified being monitored on a monthly basis and reported material Risks not covered in Pillar I of Basel II to management/BRMC. In case of deviations, as per CBSL Guideline, and submission of ICAAP such incidents are being closely monitored and document updated as at 2013 year end, to appropriate action taken to ensure compliance. regulator within the six month period stipulated by the regulator We continuously invest in improving the range of Submission of Sample calculation of Capital tools and techniques we use to measure, monitor and charge for Credit Risk Using- IRB-Foundation manage risk. During 2013 we completed the following method. key projects which have significantly enhanced our Applying to CBSL for migrating to Credit Risk ability to manage risks to which the Bank is exposed: IRB foundation approach on receipt of guidelines by Regulatory Directives Completed IT System implementation –Phase I. Applying to migrating to Operational Risk The Hosting of Risk rating models/scorecards Standardised Approach on receipt of Regulatory Parallel calculation of Credit Risk Capital Charge Directives. using the Credit Risk Management IT System, Operational Risk Stress Testing, Calculation through ‘Standardise Method’ of Operational Risk VAR, and validation of VAR Estimation of Probability of default to move Models once sufficient data is available towards IRB Advance methods. Groundwork for moving on to Operational Risk Sample calculation of Credit Risk Capital Advanced Measurement Approach under Basel II Charge in Credit Risk Management IT System, VAR Models used in Market Risk to be validated through Internal Risk based – Foundation Method Applying for migrating to Internal Models ICAAP Framework documentation submitted to Approach of Market Risk Management of Basel II CBSL. Bi- annual updates carried out once the necessary CBSL directives are issued. Completed customisations and system implementation of all Operational Risk Modules Credit Risk Management of the Risk Management IT System Credit risk is defined as the potential for loss due to Internal Loss Data Collection module has been in the failure of a customer or counterparty to meet its use by the entire network during the whole year obligations to pay in accordance with agreed terms 2013, and the Risk & Control Self Assessment and and conditions. Credit risk arises from bank’s lending Key Risk Indicator Modules commenced bank activities and other areas such as international trade, wide implementation during the last quarter of treasury and off balance sheet activities such as 2013. guarantees. Consequently, credit risk is the highest Implemented Board Approved Operational contributor to overall risk exposure of the Bank and and Market Risk Appetite Limits, and regular credit risk management is an activity that is critical monitoring and reporting of the actual against for the sustainable growth and profitability of the limits at monthly/quarterly intervals. Bank. Implemented VAR Calculations for Foreign Exchange Portfolio using the Treasury IT System, Credit risk is managed through a framework of and currently gathering data required for VAR policies and procedures covering the identification, model validation measurement and management of credit risk. There is clear segregation of duties between transaction We have commenced work on the following projects originators in the business units, risk management, which are expected to be completed in 2014, thereby compliance and internal audit in line with the 3 further enhancing the capabilities of the Risk lines of defence model. All credit exposure limits Management function of the Bank. are approved and managed within the Delegation Framework to be in place for Internal Risk of Authority, taking into account the Risk Appetite Based- Advance Approach, in Capital Calculation approved by the Board. Credit exposures are for Credit Risk. managed following the principle of diversification Completion of Credit and Operational Risk IT across products, geographies, industry/sector client Systems Implementation and Project Sign-off and customer segments.
168 the Board Committee, RiskManagement atleast by the Board of Directors onrecommendation of of the Bank. Itisreviewed, updated and approved international practice best and the riskappetite Guidelines issued by CBSL,BaselIIguidelines, is basedonthe Integrated RiskManagement The Credit policy of RiskManagement the Bank Credit Policy RiskManagement Credit riskenvironment control over credit risk Ensuring a Credit Risk Mitigation Management Concentration Risk monitoring process measurement and credit administration, Maintaining an appropriate Credit granting processes n adequate
Ma Credit Risk concentration positionsare reported to the Board Risk Ba the ConcentrationManaging riskonaportfolio basisto ensure the that on aquart Evaluation of top 20group exposure &reporting to Board Credit Committee o Credit Unitcarriesout acomprehensive RiskManagement interim review monit establishedThe procedures Bank has for PostCredit Riskidentification, t The Bank’s portfolio israted usinginternal riskratings inaccordance with a Authority isdelegated by the Board of Directors to Board subcommittees Independent pre-credit review by CRMUfor largeand higher riskexposures Facilitates and prudentduediligence clientselection inassessingSpecialists credit appraisal process Structured and standardised credit appraisal process c segregationClear of dutiesbetween transaction originators and approving c segregationClear of credit approval, administration, riskmanagement, monit Comprehensive training programme for riskinitiators, all reviewers, Effective riskgovernance structure Nurture acu which ist The requirement for collateral isnot asubstitute for the ability to repay c Procedures have beenimplemented to ensure the that value of the guarantors. enf Reliability of mitigants iscarefully assessed taking into account the legal Collateral netting agreements, credit insurance and other guarantees. inventories, bank guarantees and standby letters of credit. pr Collaterals usedfor riskmitigationinclude cash,residential and commercial sus Development Banking criteria include environmental criteria to integrate used t tools suchasthe Herfindahl-Hirschman Index,Analytical GiniCoefficient are monitoring. with the approval of the respective Credit Committees for more stringent Warning and Signals deteriorating credit would quality beWatch Listed Credit Committees. Facilities and clientsindicating largenumber of Early impactcredit (EWS)may andSignals quality that notifying their respective primary responsibility for identifying internal and external Warning Early Credit Policy, Riskand Portfolio Review Committee periodically. the review. Adetailed report onthis on-goingactivityissubmitted to the exposuresselected Warning onany and detected Early Signals alert during conditions, interim positionand financial utilisation/conduct of facilities for from the date of approval. The unit will evaluate adherence to approval he guidelines of BaselIIAdvance approaches ollateral isrecorded, reviewed and updated regularly. ommittees. ontrol and audit f selected largeexposuresf selected routed through the unit, within 3-4months nd Executive Committees operty, fixed assets suchasplant and machinery, marketable securities, nk’s iswell lending diversified nagement Committeenagement onaperiodic basis. orceability, market value correlation and the counterparty riskof tainability into the principles normal business activitiesof the Bank. oring and Branch management. and Relationship have Managers ors and policy makers. o quantify Concentration Risk. he primaryconsideration for anydecision. lending erly basis. erly lture of riskawareness the credit of riskmanagement the bank. Credit Committee meetings would further strengthen threshold and weak riskrating, presence inthe Board Risk Officer for facility proposals over aselected Unit.RiskSign-offManagement by the Group Chief policy ismonitoredmanagement by the Credit Risk on an basis.Implementation annual of credit risk 169
Annual Report 2013 Sampath Bank PLC RISK MANAGEMENT REPORT
Credit Risk Register
Risk Risk Factor Impact Risk Management/ Assessment Risk Mitigating Factors Rating CREDIT RISK Risk of borrower High 1. Key Committees : BRMC, 1. Board approved credit Medium default Credit Committees, Credit policies/procedures, & Policy Review Committees framework, annual review 2. Credit Risk Management 2. Delegated authority levels, Unit(CRMU) reviewed regulations Segregation of duties 3. Structured & standardised between loan originator, credit sanction process. Administration & risk. 4. Internal Risk Rating 3. Key input from the Risk 5. Pre-Credit Risk Evaluation Department for pre/post by specialised staff at credit risk Credit Departments & 4. Independent Pre-credit Risk Regional Offices. evaluation by CRMU for 6. Post-Credit monitoring and over Rs. 100 M. Loan Review Mechanism 5. Watch listing, Early Warning Signals (EWS) – Portfolio management Concentration High 1. Review the Bank’s 1. Board approved limits Low Risk: concentration in a number on maximum exposure Credit of areas, such as Top 20 guidelines exposure being exposure as a % of total 2. Setting of prudential limits, concentrated portfolio, Top 20 NPAs on maximum exposure, on one or product-wise /sector wise reviewed annually. few lending region-wise, collateral - wise sectors, groups, etc. 3. CBSL guidelines - single insufficient borrower/related party 2. Identify principal Risk diversification factors which affect the 4. Classification of borrower – portfolio and required to be sector/subsector stressed. 5. Monitoring of exposure 3. Concentration risk assessed against the limits and NPAs based on Herfindahl - on MOM & YOY basis. Hirshman Index (HHI) 6. Trends analysis reported to BRMC. 7. Stress testing/Sensitivity analysis results reported to Management / BRMC on quarterly basis for necessary action.
170 Risk Contd. Concentration ikFco matRs aaeet sesetRiskMitigatingFactors Assessment RiskManagement/ Impact Risk Factor Management Credit High Risk risk. monitor and manage we useto measure, of tools and techniques in improving the range We invest continuously } Name: score 100 Sector :score 531 0(low) to 10,000(high)} Hirschman Index (HHI){ Scale risk basedonHerfindahl- Quantification of concentration Risk Indicator this to improve further in2014. exposures for 2013. We expect sector whichisreflected inthe the Bank’s exposure to this been implemented to reduce of pawning and strategies have There isa higher concentration Sector-wise Sect 5% Manufacturing Services Financia Other Cust Other cust Ag Pawning Other Cust Tr 1% 4 ad % r iculture &Fishing 3% er or s l &Business -w 3% omers ome omers - 7% ise 10% rs -St 3%
aff 11% 2% Infras Tr Ne (Edu/Health/Media ,O Other Services Cr Other Cust Cons To 2% a 13% u e w Ec 18% nsport rism dit Card t tr ruction uctur onom 18% omers - e y th ) Low Rating Risk 171
Annual Report 2013 Sampath Bank PLC RISK MANAGEMENT REPORT
Risk Risk Factor Impact Risk Management/ Assessment Risk Mitigating Factors Rating Concentration High Low Risk Contd. Top 20
21%
79%
TOP 20 Customers Other Customers
Collateral - wise 1% 0% 2%
8% 0% 18% 4% 2% 28% 11% 4% 18% 0%
2% 2% Documentary bills Rfc,nrfc & rnnfc accounts Fds,cds & other deposits Shares,bonds,life policy Govt. Securities Stock in trade Hire purchase agreements Tractors & motor vehicles Immov. Property, pl&machin Trust receipts Clean Unsecured loans Other securities Gold Person.Guarant & pronotes
Geographical-wise
2% 2% 2% 3% 3%
4% 5% 5%
74%
Western Northern Southern Eastern Central Sabaragamuwa North Western Uva North Central
172 adequacy ratio impact oncapital to measure the been carriedout Stress testing has Stress Testing: action government up or frozen by being locked risk of capital risk, whichisthe risk and transfer risk, sovereign risk, economic exchange rate risk, political These risksinclude a foreign country. with investing in risks associated of A collection COUNTRY RISK ikFco matRs aaeet sesetRiskMitigatingFactors Assessment RiskManagement/ Impact Risk Factor urn A 10%increase Current CAR urn A 10%decrease 14.22% Current CAR 3) ‘Sector concentration’ basedon‘Herfindahl-Hirschman Index’. HHI score indicates the level of concentration riskonaccount of ‘Nameconcentration’ and 14.22% 2) 14.22% (CAR) Adequacy Ratio Current Capital 1) Low
Increase inHH Large Exposure d Impact of De 1. 3. 2.
Asses sanctions oncountries Monito Sov & economical situation terioration of goldprices by 10%,20%&30%onpawning I Score Scenario 1 13.93% Scenario 1 14.21% 13.68% default exposureLargest Scenario 1 ereign Riskrating sment of the political efault ring of specific Scenario 2 0%dces 30%decrease 13.63% 20 %decrease Scenario 2 14.20% 20 %Increase 13.29% Top 3 Exposure default Scenario 2 Departments. booked inHeadOffice Credit dueadvancesalso being activities inthis region and due to concentration of business in the Western region ispartly High geographical concentration 1. 2.
Monito Limitations onl exposure on lending. ring of country-wise ending/caps Scenario 3 13.29% Scenario 3 14.19% 30% Increase 12.97% default Top 5Exposure Scenario 3 Low Rating Risk 173
Annual Report 2013 Sampath Bank PLC RISK MANAGEMENT REPORT SPECIFIC AND FORWARD LOOKING SCENARIOS ARE GENERATED TO ANALYSE HOW THE BANK`S PROFITABILITY AND CAPITAL ADEQUACY WOULD BE IMPACTED IF BUSINESS CONDITIONS BECAME SIGNIFICANTLY MORE CHALLENGING
Market Risk Management by the committee. Commodity Risk (Gold Prices) is Market Risk is defined as the potential for change in also monitored by this committee as the Bank has the market value of on or off balance sheet positions. a significant exposure to Pawning. ALCO manages Market Risk arises from changes in interest rates, these risks through constant monitoring and credit spreads, foreign exchange rates, equity prices, implementing corrective action through various commodity prices and other relevant parameters. banking products and mechanisms such as the The main objective of Market Risk management management of advances, deposits and investment is to optimise the risk reward relationship without portfolios. The Committee’s key functions include exposing the Bank to unacceptable losses exceeding decisions on product pricing, determining the our risk appetite. optimum mix of assets and liabilities and stipulating the liquidity gap position and interest rate risk Market Risk Policies limits, formulating views on interest rates, setting The Bank has a well-established framework benchmark lending rates and determining the asset for managing Market Risk with the Market Risk and liability management strategy in light of the Management Policy, Asset and Liability Management current and expected operating environment. Policy and the Treasury Policy forming the basis for structure, procedure, processes and controls in line The Middle Office function, which is independent of with Basel II requirements, CBSL regulations and the Treasury, is an integral part of Integrated Risk international best practice. These policies reflect the Management Unit and monitors the comprehensive Bank’s risk appetite and provide guidance on: framework of Treasury operating limits approved Establishing and maintaining an appropriate by the Board, including open position limits, dealer structure for managing market risk limits, counterparty limits, gap limits, FCBU and Ensuring Treasury Operations are efficient and Domestic operations limits, stop loss limits, country effectively managed in line with regulatory limits etc., which are regularly reviewed and updated requirements and industry best practices. as per the prevailing business requirements, Establishing appropriate limits for all areas business opportunities, regulator guidelines, Basel of Treasury activities, including trading and II recommendations and industry best practices. investment positions Limit exceptions are escalated to respective Monitoring and managing impacts arising approving authorities, and also to the Board Treasury from the operating environment on relevant Committee / BRMC at regular meetings. parameters, including results of Stress Testing Evaluation of new business opportunities with respect to their creation of Market Risks Specific and forward looking scenarios are generated to analyse how the bank`s profitability and capital The Asset & Liability Committee (ALCO) chaired adequacy would be impacted if business conditions by the Managing Director, is the key management became significantly more challenging in line with committee that has responsibility for managing the the Bank`s Stress Testing Policy and Framework Bank’s Assets and Liabilities and its key components, which has been established by the Board. The Stress interest rate risk, exchange rate risk, liquidity risk Testing results for Exchange Rate Risk, Liquidity Risk and equity risk, which are constantly monitored and Equity Price Risk are given on next page.
174 Market RiskRegister controls poor treasury positions and exchange foreign (net open) unhedged from Risk arising RISK FOREIGN EXCHANGE ikFco Impact Risk Factor High Scenarios Ratio remains over 10%minimum value under Stress all Testing In the Foreign Exchange Risk Stress Testing Total Capital Adequacy 5. 4. 3. 2. 1. comparatively higher appreciationLKR. against appreciated GBPand USDhas EUR2013, while shows marginally a There was aslightincrease inexchange rates duringthe year Revised CAR % due to exchange rate movement) reduction in value of open position ofMagnitude Shock (percentage as at31December 2013 Stress Testing portfolios. Exchange Rate Sensitive calculation onForeign Value atRisk(VAR) Assessment Process (ICAAP) Capital Adequacy Calculation under Internal Economic Capital Exchange Riskduring Assessment of Foreign positions Regular revaluation of open Products setting Treasury Limitsand Exchange Riskconsidered in Assessment of Foreign Board Approved Policies Risk Management/ Risk Management/ Assessment Movement 2013 Ra Exchange % 168.44 206.48 127.65
Q4 2012 USD EUR GBP 191.81 162.18 126. Q1 2013 75 198. 130.40 170.34 6. 5. 4. 3. 2. 1.
Q2 2013 74 te 428 421 14.1932 14.2010 14.2088 Low %
132.05 213.30 178.23 limits for Foreign Exchange Riskand VAR Monitoring of RiskAppetite Limits & liabilities preparation of maturityof assets monitoring of forex exposures with Monitoring exposures including exposures tracking and monitoring of IT System inplace enables Office &BackOffice between Front Office, Middle Segregation of responsibilities appropriate decisions made. reportingvariables, to BRMC,and Regular stress testing for key capability.management on the capital requirements &risk CBSL requirements depending approved limitframework asper Continuous Monitoring of Board Q3 2013 Risk MitigatingFactors - 1 -15 -10 -5 130 180 216.29 .7
Q4 2013 .0 5 0 Medium % High % Medium Rating Risk 175
Annual Report 2013 Sampath Bank PLC RISK MANAGEMENT REPORT
Market Risk Register
Risk Management/ Risk Risk Factor Impact Assessment Risk Mitigating Factors Rating INTEREST RATE RISK Effect to Medium 1. Board approved Policies 1 Maturity gap analysis (various Low Economic 2. Prudential limits ie. maximum time bands) – residual term Value of Equity maturity, duration etc. maturity (Fixed Rate) / or next re- (EVE), and 3. Assessment of Interest Rate pricing (floating rate) Earnings at Risk during Economic Capital 2. Interest rate risk related reporting Risk (EAR) Calculation under Internal and analysis at ALCO and BRMC due to interest Capital Adequacy Assessment 3. Stress Testing and Scenario rate movement Process (ICAAP) Analysis, and the results on Net Interest are reported to BRMC, and Margin (NIM) appropriate decisions are made to mitigate risks. Stress Testing as at 31 December 2013 Combined effect on EVE and EAR due to Interest Rate movement Low Medium High from -1.5% to +1.5% are ranked, and three most severe impact scenarios are taken as High, Medium, Low in respective order. Increase in EVE 301,520 603,039 904,559 Impact on Earnings at Risk (Tax Adjusted P&L) (255,780) (511,560) (767,339) Net Impact on CAR (0.2971) (0.5866) (0.8686) Revised CAR 13.9195 13.6301 13.3480
In the Interest Rate Risk Stress Testing, total Capital Adequacy Ratio remains over 10% minimum value, under all Stress Testing Scenarios. EQUITY RISK Impact to the Medium 1. Board Approved Policies 1. Return of equity portfolio / Low value of the 2. Equity Portfolio Performance movements in stock market Bank’s Equity Review monitored by Investment Portfolio 3. Investment Committee Committee and risk mitigation (investments in 4. Mark to market of the decisions made. Share Market) investment portfolio 2. Stress Testing on a regular basis, due to adverse 5. Assessment of Equity Risk and reported/decisions made at movements in during Economic Capital BRMC stock market Calculation under Internal prices Capital Adequacy Assessment Process (ICAAP)
176 fall due and when they obligations as to meet Inability LIQUIDITY RISK requirements regulatory minimum relative to the capitalised Bank iswell to ensure the resources, capital insufficient Risk of CAPITAL RISK EQUITY RISK ikFco Impact Risk Factor High High 5. 4. 1. 3. 2. 2. 1. minimum value, under Stress all Testing Scenarios. In the EquityStress Testing, total Capital Adequacy Ratioremains over 10% 10% minimumvalue, under Stress all Testing Scenarios. In the LiquidityStress Testing, total Capital Adequacy Ratioremains over Revised CAR % within 3months. beyond 3months and loans due applied to deposits maturing Respective percentage of shock where loss of revenue islikely. Bank executes contingency plan, months maturitybucket, the gap isobserved inthe 3 first gap, and, ifanegative cumulative rollover impactthe asset/liability Potential deposit run and loan ofMagnitude Shock as at31December 2013 Stress Testing CAR after Shock% movement) Portfolio dueto stockmarket price reduction invalue of Equity ofMagnitude Shock(percentage as at31December 2013 Stress Testing
Asses currencies. major all Measurement o statement into timebands of Assets and liabilities Prepar Measurement t Board Appr Assessment Process (ICAAP) Internal Capital Adequacy Capital Calculation under Risk duringEconomic Short Term liabilities etc. deposits, liquidassets to Assets, loans to customer ratios suchasNet loans to St computed regularly. Capit adverse scenarios Risk Management/ Risk Management/ ress testing under various Assessment al adequacyal ratios sment of Liquidity ation of maturities oved Policies hrough key f liquidity in f liquidityin 4. 2. 3. 1. 3. 2. 1.
Low 413 389 13.4280 13.8898 14.1337 422 425 14.1934 14.2050 14.2120 Low Board appr decisions made. appropriate riskmitigation Risk are reported to BRMCand St Measurement o Liquidity RiskAppetite Limits Monito taken atALCO. ALCO, and decisions analysed currencies reportedmajor to Contingency plan. (Finance/ALCO) on the outcome of monitoring are putinplace depending (Finance) ratios are monitored regularly Guidelines Process (ICAAP) asper CBSL Capital Adequacy Assessment Calculation under Internal Regu Capit Fluctuation incapit Risk MitigatingFactors 1 5 20 15 10 ress Testing results onLiquidity -0 -5 -50 -25 -10 lar Economic Capital al augmentational measures ring of Board Approved eimHigh Medium eimHigh Medium oved Liquidity f liquidity in all f liquidityinall al Adequacyal Medium Medium Rating Risk 177
Annual Report 2013 Sampath Bank PLC
RISK MANAGEMENT REPORT Operational Risk Management } Operational Risk is the risk of losses as a Key Risk Indicators are consequence of failed or incomplete internal processes, people issues, systems issues, or from reviewed quarterly and external events. We manage Operational Risk appropriate risk mitigation through a comprehensive set of internal controls and management processes that drive risk identification, activities are initiated at assessment, control and monitoring as an on-going Corporate Management activity. The Operational Risk Management Policy approved by the Board of Directors provides a broad framework for identification and assessment of risk Systems Audit functions. Where specific expertise is and controls, new product and process approval required, professional services of external experts are framework, measurement through incidents and sought. exposure reporting, monitoring through Key Risk Indicators and risk mitigation through process Risk and Control Self Assessments are carried out at enhancement and insurance as a Risk Transferring least annually by all key business units of the Bank for mechanism. their business processes to identify and review the inherent risks and controls available to mitigate or The prime responsibility for achieving the manage the residual risks. IRMU conducts workshops organisational objectives and management of with the business units to assess the residual risks Operational Risk lies with the business/functional and to introduce additional mitigants or controls units where risks originate. A comprehensive Policy, depending upon the severity and probability of the Procedure and Directive Framework stemming from residual risk in line with the Basel II Standardised and the Bank’s Vision, Values and Corporate Strategy and Advanced Measurement Approaches. approved by the Board of Directors provides the links between achieving organisational objectives while The Bank has developed a Key Risk Indicator (KRI) managing risks in the process. Policies are reviewed Framework that outlines the risks faced by key annually or more frequently by the Operational Risk business units in a non-technical and meaningful Management Unit to ensure that appropriate risk manner that clearly communicates the nature of mitigation strategies are embedded and submitted risks and the related trends to the business units, for approval by the BRMC. The Operational Risk Corporate Management and the BRMC. These function within the Integrated Risk Management KRIs are reviewed quarterly and appropriate risk Unit reviews the need to introduce new policies mitigation activities are initiated at Corporate as a continuing activity in line with the regulatory Management level. environment, industry best practice and any gaps identified in consultation with the BRMC. Business units are required to report their operational risk losses on regular and event driven basis to Managing Risks in Innovation and Change IRMU and these are classified according to the Basel Management II business lines. The Operational Risk Function Risk Management, Compliance and Systems rates the loss events based on severity and impact. Audit units are represented in all New Product Events rated over and above an agreed threshold Committees and appropriate sign off is obtained are regularly reported to Corporate Management prior to implementing new or improved products. and the BRMC. Additionally, low risk events which Additionally, Legal, Finance and Internal Audit accumulate to substantial losses over a period of functions are appropriately involved and sign time are detected during the Trend Analysis and off obtained as required. Similarly, all systems similarly reported to Corporate Management and developments, new system acquisitions and BRMC. Analysis of events and trends have led to upgrades are reviewed by Operational Risk significant improvements notably in the areas of cash Management Unit and they are also represented in counter operations, ATM operations, Pawning, Foreign all project teams handling systems implementations Remittances and outsourced services. or changes. All contractual documents such as product applications and Service Level Agreements In addition, Anti-Fraud Policy of the Bank, approved with external parties are approved by the Chief by the Board provides an outline of the Anti-Fraud Legal Officer and reviewed by Risk, Compliance and culture, activities and policies adopted by the Bank in minimising the effect of frauds to the Bank.
178 Operational RiskRegister reputational risks. strategic and risk, butexcludes includes legal This definition external events. systems or from andpeople processes, internalfailed inadequate or resulting from The riskof loss OPERATIONAL RISK ikFco matRs aaeet sesetRiskMitigatingFactors Assessment RiskManagement/ Impact Risk Factor High 3. 2. 1. similar pattern. and Trading Therefore, &Sales. the spread of Loss Events shows a Banking, followed by Commercial &Settlements, Banking, Payments Basel Framework. The widest coverage and operations are inRetail The Bank operates infive out of eightbusiness linesdefined inthe Internal Loss Event Reporting 2013 by RiskIndicators. Key as shown below, provides acomprehensive overview of coverage from different areas of the organisation. Diversity of measurements, RiskIndicatorsKey provide aunique perspective onRisksarising RiskIndicatorsKey % Composition Fr Ke Key RiskIndicatorsKey respective business units, and Assessments provided by the Risk and Control Self control requirements. accordance with internal by business units in Operational Riskismanaged and atBRMCmeetings regularly assessed by IRMU Operational RiskPolicies are Adequacy &effectiveness of amewo Legal & Comp Legal St Credit Card Op Credit Op Technology y RiskIndicato affing &HR 17 18 12 er rk ations lian 6 er Audit Aspects ations ce 12 35 r 5. 4. 3. 2. 1. Ev Business Line Limits Limits Operational RiskAppetite outsourced service providers. processes, external suppliers/ Risk review onnew products, prevent future recurrence system and controls to action taken to improve by cause, and analysed Material losses regularly Line asper BaselII by Event Type and Business in the System to track losses loss database ismaintained Comprehensive operational Operational RiskITSystem. through newly installed monitoring Risk Management need. basedonthe frequently reviewed or more annually Operational RiskPolicies, ent Co Payment &Se Payment Corpo C Tr Re ommer ading &Sa ta il Banking ra 14 te cial Bankin cial u Financ nt Composition 5 le 1490 tt 0 s le wi 18 ment e se Loss g
Medium Rating Risk 179
Annual Report 2013 Sampath Bank PLC RISK MANAGEMENT REPORT
Operational Risk Register Contd.
Risk Risk Factor Impact Risk Management/ Assessment Risk Mitigating Factors Rating OPERATIONAL RISK
Risk Type Wise Actual & Potential Loss Event Reports 3 year Comparision 6 47 421 329 76 75 68 74 63 1 1 35 3 3 0 0 0 0 0 0 4 0 2011 2012 2013
Business disruption and system failure External Fraud Clients, Products & Business Practices Internal Fraud Damage to Physical Assets Employment Practices and Workplace Safety Execution, Delivery & Process Management
As common to any service sector organisation, most of our Risk generating events are reported from Execution, Delivery and Process Management.
Due to the conservative reporting practices adopted by the industry in order to cater to comprehensive analytical capabilities as required in Basel advanced approaches, any event which caused, or could cause operational risks are reported. Nevertheless, most of the events reported are recoverable through appropriate measures, and do not lead to actual financial losses impacting Profit & Loss Accounting. PEOPLE RISK Lack of High 1. Manpower planning in line 1. Robust HR policies, Medium appropriate with expansion & changes in governance structures, human resources, business requirements. programmes and processes failure to manage 2. Upgrading of minimum in place and policies are performance qualifications and skill levels applied in a consistent manner. and reward link, 3. Recognition of specialised 2. Recruitment, Pre unauthorised or skills employment screening, inappropriate 4. Quarterly reviews/ Employer feedback/ Exit employee assessment of performance interviews activity and 5 Performance management 3. Proactive HR programmes failure to comply systems in place to to engage and receive with employment recognise and reward feedback from staff related performance and identify throughout the bank requirements training needs 4. Strong staff development 6. Succession and programmes in place development plans combining e-learning, classroom training and on the job training. Programmes cover both general and specialised areas and soft skills.
180 PEOPLE RISK channels. and delivery technology the trends in in linewith not keeping disruptions, or downs and systems break of ITsystems, non -availability Risk arisingfrom TECHNOLOGY RISK applicable lawsapplicable as per the being conducted or business not documentation the Bank, faulty litigation against Risk arisingfrom LEGAL RISK ikFco matRs aaeet sesetRiskMitigatingFactors Assessment RiskManagement/ Impact Risk Factor High High 3. 2. 1. 5. 4. 3. 2. 1.
Legal Department. Legal of the controls reviewed by Adequacy &effectiveness consultants onaneedbasis. obtained from external advice legal Specialist Department Independent Legal IT Steering Committee delivery channels. new costefficient analyse reviewcontinuously and IT and Systems Audit assessing risk. Process of identifying and with riskmanagement. vulnerability assessment External/Internal production environment before into deploying for each&every system Performing systems audits strategicannual planning. conducted duringthe Technology planning is 3. 2. 1. 7. 6. 5. 1. 8. 7. 6. 5. 4.
Consis Recruitment, Pr Maintaining aL exit interviews disciplinary procedures and feedback screening, Employer turnover ratio assessing risk. Process of identifying and with riskmanagement. vulnerability assessment External/Internal environment intodeploying production every system before performed for eachand Systems auditsare covers a3year period planning process which a partof strategic annual Technology planning as applied in all legal mattersapplied legal inall Policy being Management Board Approved Risk Legal in place. (BCP) recovery, Planning &testing Back up&disaster advantage. ensure competitive technology, ITsystems, investment inlatest IT Policies/ procedures on the need. external consultants based assessment carriedout by External vulnerability implementation. implemented before live necessary controls are of the systems audit, Based onthe outcome efficient delivery channels. newand cost analyse reviewlines, continuously together with the business IT Steering Committee Bank’s ITDepartment/ tently applied applied tently ow staff e employment e employment Medium Low Rating Risk 181
Annual Report 2013 Sampath Bank PLC RISK MANAGEMENT REPORT
Operational Risk Register Contd.
Risk Risk Factor Impact Risk Management/ Assessment Risk Mitigating Factors Rating LEGAL RISK 2. Adequacy & effectiveness of the controls reviewed by Legal Dept. 3. Policies & procedures in place to ensure that business activities with legal impact are properly risk assessed and executed. 4 All legal documents/ Service Level Agreements are specifically approved by Chief Legal Officer & also signed off by Risk & Compliance departments. 5. Company Secretary function/compliance to ensure compliance with specific regulatory requirements
Strategic & Reputational Risk Management The Bank takes a holistic approach to strategic and Strategic Risks are those that arise from the strategic reputational risk management and relies on critical decisions that Directors and Corporate Management factors such as the combined skills of its Corporate take concerning an organisation’s objectives. Management Team, its risk management policy framework and a learning culture that rewards Essentially, strategic risks arise due to external causes, both qualitative and quantitative achievements. arising out of adopting wrong strategies and choices Additionally, reputation risk management and that can cause losses to the bank in the form of mitigation aspects are embedded in the Bank’s reduction of shareholder value, loss of earnings etc. policies and procedures, training programmes, the Business Continuity Plan and through the Audit and Strategic risk levels link-in with how the whole Board Risk Management Committees. organisation is positioned in relation to its environment and are not affected solely by what the We also have a Customer Grievance Handling Policy Directors decide. under which the customers have a range of options through which they can forward their grievances to The Strategic Risk Management Policy approved the Bank including a public help line that is manned by the Board outlines the strategic initiatives and on a 24 hour basis. A senior officer is tasked with intentions in place to manage strategic risks faced by coordinating such grievances and handling customer the Bank. relations. Significant public or customer grievances are submitted for appropriate action by Corporate Reputational risk is defined as the current or Management and review by BRMC. prospective risk to earnings and capital arising from an adverse perception of financial institutions Further, the Bank’s Whistle Blowing Policy approved on the part of existing and potential transactional by the Board provides a channel to raise issues, if any, stakeholders such as clients, trading counterparties, on breaches of any law, ethics, statutory or regulatory employees, suppliers, regulators/governmental concerns shared by them. bodies, and investors.
182 Strategic &Reputational RiskRegister b. a. capabilities: risk management provide evidence of the success of our reputational wonSampath the Bank has following accolades that need to holdany capital additional for this risk. it appears from the calibration, the Bank doesnot capital isassessed usingascorecard charge and as banking practices. best Theapplying Strategic Risk in customer confidence dueto continuous focus in years of crisis,with global improvement observed The Business Strategy beentested has inthe few last THE BANK TO FORWARD THEIRGRIEVANCES TO CUSTOMERS HAVE ARANGE OFOPTIONS HANDLING POLICY UNDER WHICH THE WE ALSOHAVE ACUSTOMER GRIEVANCE c. the business strategic of goals / longterm medium manage Failure to STRATEGIC RISK
ikFco matRs aaeet sesetRiskMitigatingFactors Assessment RiskManagement/ Impact Risk Factor 2013 outlook. and RAMRatingsLanka Ltd atAAwith astable Ratings Lanka Ltd., atAA- with outlook astable Best C Best Euromoney Aw Credit Ratings–Ratingw ard for Bank inSriLanka Best 2013 from orporate Citizen Sustainability Awards High as affirmedby Fitch 1.
Board. units approved by the plan covering business all Bank’s 2-3 year strategic
f. for Strategic and Reputational Risk. there isnorequirement for the Bank to holdcapital within the ICAAP framework and basedonthe result, customers. We have assessed the Reputational Risk a strong brand recall inthe minds of SriLankan deposit runs or regulatory created and penalties, has adverse notThe faced publicity, Bank has any major e. d.
Silver and Merit awards Development T Best HREx National Bes National Awards 2013 JointRunner Up Pr National
6. 5. 4. 3. 2. 1.
Top 10category recipient Category winner –Economic Contribution Sector winner –Economic Sustainability alent Management (HRM)and Management People alent r Accuracy of Financial Board approved SLFRS standards controls and adoption of environment changes. and any external, economic depending onthe outcome Review actions/plans Directors for review. submitted to the Board of of theachieved stages , reporting of assessment /quarterly Monthly Planning Division by business lineheads/ monitoringRegularly under Economic Capital in ICAAP and provisions Strategic RiskAssessment Risk Management Policy Risk Management eporting ensured by internal oject Management Excellence oject Management t Quality Softwaret Quality Award 2013 – cellence Awardscellence 2013 Strategic Low Rating Risk 183
Annual Report 2013 Sampath Bank PLC RISK MANAGEMENT REPORT
Strategic & Reputational Risk Register
Risk Risk Factor Impact Risk Management/ Assessment Risk Mitigating Factors Rating REPUTATIONAL RISK Negative effects High 1. Complaint handling policy/ 1. Timely & efficient Low of public opinion, procedure is in place in communications among all customer opinion terms of the customer stakeholders. and market charter as per CBSL 2. Corporate Governance reputation and guidelines. practices the damage 2. Procedure for receiving 3. Procedure for receiving caused due to customer complaints and customer complaints and brands by failure resolution mechanism is in resolution mechanism is in to manage public place. place. relations. 3. Complaints and process 4. Reputational Risk of resolution relating Assessment in ICAAP and to operational risk / provisions under Economic compliance if significant Capital is escalated to Corporate 5. Business Continuity Management / Risk Planning Committee. 6. Training and capacity building. 7. Code of conduct for Board and all staff members
Basel II Compliance In year 2014, the Bank’s ICAAP committee will ensure The Bank has complied with Regulatory requirements that updated ICAAP documentation as at end of of Basel II, and will continue to comply as per 2013 will be submitted to the regulator on timelines industry best practices and the regulatory stipulated by the regulator. instructions. Basel III Internal Capital Adequacy Assessment Process The latest updated version of Basel framework is (ICAAP) is a part of Pillar II of Basel II framework Basel III, which has already been published by the that bridges the gap between the Regulatory Committee on Banking Supervision of the Bank Capital and Economic Capital requirements of the for International Settlements. The new framework Banks by taking all material Risks such as Credit includes new standards for capital, leverage and Concentration, Reputational, Liquidity and Strategic liquidity to strengthen the regulations, supervision Risks etc. not covered in Pillar I of Basel II into and risk management of the banking sector. consideration. Implementation of Basel III is expected to begin In accordance with the Central Bank of Sri Lanka in the next few years, and the Banking industry is Guidelines, the Banks are required to submit the continuously engaged in gearing itself with the ICAAP document and the Bank’s approach to Capital necessary skills, tools, data, and infrastructure. Management to the regulator within six months from end of each financial year. In order to comply with We are fully committed to implement Basel III this requirement, during late 2012, and early 2013, we standards in line with the Regulations and Road Map secured the assistance of an internationally reputed for Banking Industry prepared by the Central Bank of consultant to complete the ICAAP implementation Sri Lanka. planning, and the initial ICAAP report was submitted to the regulator in February 2013.
184 and internal standards and requirements. The compliance riskasper CBSLand other regulatory established atSampath the Bank Bank’s manages standards of goodpractice. The Compliance function laws,applicable regulations, codes of conduct and suffermay asaresult of itsfailure with to comply sanctions loss, financial or loss to reputation abank Compliance or Riskisthe regulatory riskof legal Compliance RiskManagement basis. launderinganti-money procedures onagroup wide requirements imposedby the regulators including monitor compliance with regulatory and supervisory CommitteeRisk Management was created to Group Compliance Officer reporting to the Board Commercial Banks inSriLanka and the position of No 11of 2007 onCorporate Governance for Licensed governance advocated by the Banking Act Direction December practices 2012 adoptingbest and good of the BoardCommittee RiskManagement in Department was established under the purview An independently functioning Compliance Compliance Statutory Industry Practice Best Best Compliance Framework Regulatory Customer Know Your policies. its corporate responsibility whenformulating these business model and how the Bank should discharge regulatory developments present may for the Bank’s the strategic and opportunities that challenges into account, the regulatory requirements, /legal in itsoverseeing capacity. taken The Bank has and spreads over owned to itsfully subsidiaries business units within the itsbranches Bank, all AML compliance standards to all whichapply an AMLpolicy whichencapsulatesThe has Bank also of management Compliancetimely Risk. structure and processes to ensure effective and governingprinciples the compliance function, the encapsulates the Bank’s compliance philosophy, through eachcompany inthe Group. This policy group-wide compliance function implemented Policy of the Sampath Bank Group outlines the Bank’s Compliance Policy, the Group Compliance guidelines and directions inaccordance with the withunits comply statutory, regulatory and internal responsible for operating ensuringthat and business (AML) Compliance this department Unit.While is Compliance Unitand Laundering the AntiMoney Compliance Departmentcomprises the Regulatory Laundering Customer Diligence Money Money Due Anti 185
Annual Report 2013 Sampath Bank PLC RISK MANAGEMENT REPORT
The Compliance Department adopts a risk based The Compliance Department is responsible for approach and proactively identifies, documents monitoring and reporting of suspicious transactions and recommends measures to mitigate compliance which include large and structured transactions risk which is inherent in the business activities above a specified threshold as per regulatory and of the Bank. This Department is responsible for statutory provisions. Accounts are categorised to dissemination of regulatory requirements to business reflect the risk and Customer due diligence and units for necessary action and monitoring that they Know Your Customer processes are monitored operate within the boundaries set by the Bank and on a continuous basis. IT solutions have been the regulators. Other functions include facilitating implemented to identify unusual transaction incorporation of regulatory requirements into patterns, suspicious transactions as well as to screen operational procedures, recommending corrective transactions involving sanctioned parties, facilitating action to remedy instances of non-compliance and mandatory reporting to the Financial Intelligence to mitigate compliance risk exposure. A monthly Unit and compliance with the provisions of the Compliance Certificate is provided to BRMC covering Financial Transactions Reporting Act. The Compliance the following: Department’s activities contribute towards establishing a compliance culture that fosters compliance on statutory / regulatory reporting prudent risk management and strict compliance with requirements statutory and regulatory requirements. significant new regulations / directions issued by the regulators Central Bank has issued numerous Directions relevant significant non compliant events to Licensed Commercial Banks during 2013 and the training undertaken and identification of status of compliance with key directions is given training needs relating to compliance function below: compliance monitoring on Regulatory / Anti Money Laundering
Regulatory Requirement Status Preparation, Presentation and The new format introduced by CBSL for the Publication of annual audited preparation, presentation and publication of annual accounts of banks dated 11th audited accounts of licensed commercial banks, Compliant February 2013 effective from the financial reporting periods beginning on or after 1st January 2012 Public Disclosure by Publication The new format introduced by CBSL for the publication of Quarterly Financial Statements of quarterly financial statements of licensed of Banks in the press dated 11th commercial banks in the press effective from the 1st Compliant February 2013 quarter of 2013 Banking Act Direction No 3 of 2013 A person shall not hold office as a director of more amendments to directions on than 20 companies / entities /institutions inclusive of Corporate Governance issued to subsidiaries or associate companies of the bank. Compliant Licensed Commercial Banks dated 12th April 2013 Sale of Foreign Exchange to The procedure to open, maintain and close Migrant Emigrants dated 12th June 2013 Blocked Accounts (MBA) for migrants, who have Compliant obtained Permanent Residency (PR) of another country after 12th June 2013. Securities Investments Account (SIA) As a measure of facilitating inward remittances into Sri dated 12th June 2013. Lanka for investment purposes, investors have been granted more flexible avenues to receive and repatriate Compliant funds in and out of SIA.
186 institutions Policy inbanks and financial the Language Official Implementing 2013 Advertisement dated 8th November and UnethicalMisleading System dated 22nd November 2013 the web-based off-site Surveillance Introduction of New Returns under dated 17th September 2013 and other disclosures onthe websites ofPublication statements financial 2013 dated July 31st Banks and Licensed Banks Specialised of BASEL II)for Licensed Commercial Supervisory Review Process (Pillar 2 advances dated 2013 26th July by Licensed Banks onloans and interestCap onpenal charged June 2013 other Loans and Advances dated 7th Interest Rates onCredit Cards and dated 17th June 2013 Appointment of Compliance Officers 12th June 2013 Sri Lankans travelling abroad dated Issuance of Foreign Currency Notes to Regulatory Requirement official language policyofficial language Banks are requested to facilitate implementation of the times 02/17/800/0007/001 dated 6th November 2008atall manner with bya visible complying Circular No ensure important highlightingall information in and unethicalmisleading advertisements and to Banks are required to refrain from publishing and 2012 by 20th December 2013 based off-site surveillance system for the years 2011 Statement of Comprehensive Income through web- Submission of Statement of Position Financial and and statements asspecified inthe Direction and bi-annual Annual, disclosure quarterly of reports 2007 dated 26th December 2007 . requirements of Banking Act Directions No9and 10of , notwithstanding complied with ithas that the adequate capital to cover itsexposure to risks all Licensed Commercial Bank to maintain times, atall 2014 ,everyCommencing from January 1st 2013 August 1st in arrears duringthe overdue period, with effect from granted, to alevel not exceeding 2%p.a. for the amount loans and advances includingcredit facilities already Board to reduce the interest penal rates onall charged Licensed Banks have beeninstructed by the Monetary loans and advances Reduction of interest rates of Credit Cards and other all Exchange Control matters Appointment of aCompliance Officer to handle the bonafides of individual requests. currency after exercising duediligence and assessing inanyor other itsequivalent convertible foreign Issuance of foreign currency notes upto USD5,000/- be compliant initiated to been has Process Compliant Compliant Compliant comply the Bank shall As aPolicy, Compliant Compliant Compliant Compliant Status 187
Annual Report 2013 Sampath Bank PLC SUSTAINABILITY HIGHLIGHTS INNOVATION, CREATIVITY AND PIONEERING ‘OUT OF THE BOX’ THINKING ATTITUDE HAVE BEEN OUR PROMINENT INTANGIBLE ASSETS FOR SUSTAINING RELATIONSHIPS AMONG THE SRI LANKANS
Reduce Green-house gas CSR & by 59,624 Kg’s of the Sustainability carbon equivalent Projects for the year 244
1,013 fully grown trees p.a SAVINGS OWING TO RECYCLING OF
238,496Kwh PAPER WASTE Electricity p.a
1,894,850 litres of Water p.a
178Cubic meters of Landfill p.a
OIL
104,640 Sampath Bank Managing Director, Aravinda Perera and CEO of Think litres of Oil p.a Green (Pvt) Ltd Silvahar Muthuramalingan exchange the MOU of the E-waste programme
188 following both and global events local whichcould cautious inplanning our future actions, diligently economic growth isundeniable. However, we remain threespanning nearly decades, the potential for following the conclusion of atumultuous civil conflict experiencing adramatic economic resurgence towards creating progress. sustainable Asacountry commencement acourse of our incharting journey ofThe sustainability analysis trends marksthe Sustainability Overview SERVED OVER 1.9MN CUSTOMER BASE Our Sustainability Priorities the riskof the market. looking corporate strategies assessing ,while Sampath Bank PLC by forward implementing Wealth creation for stakeholders all of PerformanceFinancial and Risk Management ATM Network 1,842 Long End Access – Vision aspects of environmental, economic, social, human rightsand labour practices. StewardshipResponsible -Developing avoluntary reporting code integrates that all - Add value to stakeholders all by banking building platform. asustainable Moving to the Super Branch concept for sustainable lifestyles of our customers Strategy Reporting Focus the longterm sustainability of Sampath Bank PLC. couldrisks that pervade onour business and affect then proceed to envision potential opportunities and inherent of qualities the sustainability we mechanism, Having these studied trends, together with certain inSriLanka. banking institution as aleading trendsinferring only bearingonus, have aclear that temperpossibly our success inthe future. Thereby Category Men :Women (BasedonSalary) Gender ratio equality Accident &Minor Health &Safety- Major conducted (hours) Learning- Total Training advantages for our all stakeholders. strategic approach creates that competitive traditional philanthropic focus, towards amore strategicRe-align to goals move away from a ApproachManagement Quantity- Year 2013 167,409 1.07 :1 189 0
Annual Report 2013 Sampath Bank PLC SUSTAINABILITY HIGHLIGHTS WE CREATE A BETTER FUTURE FOR OUR STAKEHOLDERS BY LISTENING, COLLABORATING, HELPING AND RESPONDING TO THEIR NEEDS.
Focus governance framework underpins the importance The pursuit of a sustainable business model has of responsible business practices that embody our led us to factor in certain integral characteristics promise to create a sustainable future for all those associated with Sampath Bank’s 5E sustainability associated with our business. philosophy. Among them is our steadfast commitment to uphold the values of integrity and transparency at Reflecting our commitment to generate a sound all times. We will resolutely adhere to these principles business model, stakeholder management and and the dictates indoctrinated in our governance engagement forms the penultimate segment in code, when formulating business strategies and our overall sustainability strategy. Steered by a conducting our business in an ethical and sustainable strict management ethos, which clearly defines our manner. At Sampath Bank PLC, responsible custodial role in fostering meaningful relationships, stewardship is driven by an equal measure of our sustainability framework aims to bring about accountability and dedication. Accordingly, our enduring change that transmits meaningful future change for all stakeholder groups.
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190 SMART Banking Practices Shareholders Environment S the business. overall impactof up to reduce the procedures set operational practices and management response environmental Government Employees Customers Society pecific teamwork. accountability and by encouraging individual needs recognises culture that alongside a progression, for career opportunities M Defining Stakeholder Rights easurable easurable
the business operations. corporate culture services, aggressive expansion and nurturingapay-for-performance t Initiate responsible stewardship and strategies would that c Ensure compliance through statutory and voluntary consumption and practices eco-friendly en andManage control the organisational impactonthe a team whe Develop aculture iscommitted that to build an environment t Support shareholder wealth creation andgrowth sustainable technology and service acustomer-friendly platform. r Create and astable progressive banking environment, which ransmit through change the and social economic parameters of hrough prudent banking strategies, re-inventing products and enders banking solutions,backed highquality by superior ompliance codes vironment through the useof modern technology, lean re can make people adifference, both asindividuals and as be with customers to requirements. exceed customer ensure we processes to standards and reviewing our by continually needs changing to meet their redesign services needs and A t ter understand ttain R importance. causes of national addresses key support that and timely focused, relevant We provide future success. the foundation for thereby laying communities, issues ofsocial resolve current helping to hand eliable eliable industry. governance inthe of corporate standardshighest aim to set the investments that through development sustainable towards contributions T imely imely 191
Annual Report 2013 Sampath Bank PLC SUSTAINABILITY HIGHLIGHTS
Corporate Social Responsibility CSR model. While outlining the importance of social Being clearly ingrained into Sampath Bank PLC’s responsibility, the ensuing CSR value curve also cultural fabric, right from the inception, Corporate introduces a new dimension of social responsiveness Social Responsibility (CSR) has always had a to the equation. profound impact in all that we do. Evolving in tandem with emerging socio economic needs, our CSR philosophy is a reflection of the changing times and unchanging values. Sampath Bank PLC - CSR Proclamation: Centered on the aforementioned 5E platform, our We believe that Social CSR policy aims to accomplish corporate goals in Development is an ongoing sync with national priorities, while promoting global process that has a monumental best practices in cognizance with stakeholder needs. impact on individuals and the Shifting from a philanthropic focus to embrace a communities they live in. It is more strategic approach, we have endeavoured our priority to empower these to create competitive advantages for all our community cells in such a stakeholders. Overseeing this process, is a highly manner that will enable them focused strategic planning exercise that aims to to overcome both real and grow the Bank’s market share, while at the same perceived limitations and create time prudently managing associated business sustainable livelihoods for the risks. By initiating an attitudinal shift we have future. successfully moved away from the conventional charity driven approach in favour of a more strategic
CSR Value Curve - Charity Driven Approach vs Strategy Driven CSR Approach
Integrating CSR Philanthropic Community initiatives as part of Development corporate strategies Activities
Issue Issue Driven Driven Driven Initiatives Promoting employee Charity Strategy Strategy involvement
Strategic CSR Focus We believe that building strong communities is } the key to ensuring financial security and long term sustainability for all citizens of Sri Lanka. As a In its quest to providing responsible corporate citizen and a leading bank in the country, we are endowed with the capability of better focus in its CSR performing a leading role in enacting change at a initiatives, Sampath Bank community level. We understand our responsibility to nurture progressive communities and steer them place greater emphasis to achieve their own goals, while contributing to long on underprivileged areas term national development. Accordingly, our efforts encompass a broad range of community engagement in Sri Lanka. and social inclusion initiatives aimed at enabling these communities to pursue their future aspirations.
192 Sri Lanka. sessions. These projects were conducted throughout campaigns,6CSRprojectsleadership and 6training collaboration with AIESEC SriLanka whichincluded 6 A Youth Empowerment Project was conducted in Education for Development Highlights of Responsibility OurSocial
Sri Jayawardenepura committeeAIESEC local of University of Development - Entrepreneur 80 Projects Investments for Rs 57 Mn Environmental Protection and Conservation - 2013 over Community based Communities- Empowering 35 Projects 93 Projects above the average. conducted 75 successful operations whichisfar occured.has Within the 5month have past they to find the exact locationwhere the problem Through this system doctors have the capability compared to before and reduce the waiting list. have the capability to domore operations per day level issue.a national Asaresult neuro surgeons Hospital of SriLanka with the motive of resolving Neuro Navigator was contributed to the National Empowerment of Community
Sri Lanka Neuro Navigator to Hospital National of Community Capacity Building -36 projects
193
Annual Report 2013 Sampath Bank PLC SUSTAINABILITY HIGHLIGHTS
Environmental Protection and Conservation Entrepreneur Development Environmental Day Celebrations Islandwide SME programs
Sampath Bank celebrated Environment Day along Island wide SME development programs were with the bank’s Environmental Club, SNaPC. An conducted to motivate the small and medium scale awareness program was conducted on how to save entrepreneurs. energy among employees. The program included efforts to calculate the carbon footprint of Sampath Bank and contribution to FOGSL to initiate a research Strategy project on the endangered Blue Eared Kingfisher. The sustainability strategy and development framework bring together three fundamental elements, which dictate that sustainability at Sampath Bank is viewed as an on-going process. Ethics and Values This three pronged strategy, known as the strategy Mind Developing Programs development matrix, is aligned to our sustainability vision and echoes through the very fabric of our business. Culminating to promote the stakeholder rights framework, Sampath Bank PLC’s strategy development matrix also accentuates our overall approach towards sustainability as outlined below;
Innovate - Develop a timely and relevant value proposition that uniquely reflects the sustainability philosophy of Sampath Bank PLC Manage - Pursue an integrated business model that promotes sustainability at all levels of business Improve - Compliance, continuous monitoring,
review and initiating corrective action pertaining to every aspect of the business
Islandwide programmes were conducted to develop ethics and values among school children. Reporting Reaffirming our commitment to create cohesive } } development impacting all economic, environmental Through ethical business and social stakeholders of our business, in 2013, we moved towards the new Global Reporting Initiative practices we ensure our (GRI) G4 guidelines for sustainability reporting. The responsible behaviour in ubiquitous approach of the G4 guidelines not only favours our campaign for equitable wealth distribution the industry among stakeholders but culminates to spotlight greater transparency and reporting accuracy.
194 Strategy Development Matrix Fundamental Strategy Manage Innovate Improve Analysis of StakeholderAnalysis Aspirations Customers Shareholders Community Empowerment Regulatory Authorities Environment Employees
Monitoring of securityprocedures Complaint resolution cus market financial Enhancing awareness of the practicesEthical lending l Establishing abroader basednationwide SME cus Promoting bankability amongan island-wide Promoting island-wide customer inclusiveness ending across the country Ethical sourcing Health and Nutritional Development of society Education and literacy Community development and capacitybuilding r Compliance with mandatory and statutory Reduction of the Bank’s carbonfootprint Maintaining the bank’s reputation and credibility Transparency and responsible stewardship Ensuring sust Consistent bottom line shareStable price Resource Efficiency the impactontheManaging environment Human Rights inclusion Social w Occupational health and safety and employee Conflict resolution Retention strategy education Developing poolthrough the talent training and Fair and recruitment equitable egulations elfare tomer tomer network
ainable returnainable oninvestment 195
Annual Report 2013 Sampath Bank PLC SUSTAINABILITY HIGHLIGHTS
We seek guidance from our sustainability reporting element of the business according to the highest framework to fulfill the reporting requirements of G4 standards of integrity. We do not look to prevailing guidelines. As such, our reporting format demands, “market practices” as an indication of appropriate that we evaluate both internal and external drivers behaviour. We base our decisions on legal and to sustainability. Both internal and external drivers regulatory rules, our code, our business principles are subject to a materiality assessment to determine and our values, while safeguarding the constitutional material aspects relevant to each segment. and human rights of all stakeholders we remain committed to address any matters of conflict with all At Sampath Bank PLC, we believe the best way appropriate disclosure and transparency. to build and to maintain trust is to conduct every
Material Stakeholder Assessment Criteria Material Aspect Reason for Materiality Segment All rural and provincial Awareness of Delivering the promise of financial unbanked communities, Promoting issue inclusiveness to a broader across the country and Inclusive Banking Evidence of demographic not limited to Sampath impact Bank customers Industry and Product Developing an ethically responsible All Sampath Bank PLC competitor Responsibility product range bank customers response Environmental Following through on the national management and pledge to reduce the impact of the Society as a whole Resource Efficiency bank’s carbon footprint Promoting investment in carbon- National economy and “Green” lending neutral projects society as a whole Community Commitment to deliver meaningful National economy and Development and change to society in line with society as a whole Significance to society and other other and society to Significance stakeholders Capacity Building national development goals Shareholders, Developing Ethical Creating a sustainable framework Potential short- employees and Banking Practices to support future banking needs and long-term regulatory authorities business impact Shareholders, Ethical relevance Product Promoting best practices across the employees, suppliers and policy Responsibility value chain and customers considerations Introducing product differentiation Peer practices Reaching Diverse and service enhancements that Shareholders and and accepted Markets deliver consistent performance in customers social norms the longer term Stakeholder reactions and Development and Creating an empowered workforce Employees, reputational risk management of to act as a facilitator of long term shareholders, and Relevance to the the to Relevance organisation the talent pool sustainable progress of the bank customers
Ethical behaviour requires us to comply fully Conclusion with all laws and regulations, our Code of Ethics, Our aspirations to build a more sustainable business, supplemented to our employees’ principles and has led us to a deeper understanding of the internal compendium of internal policies, inform and guide and external drivers that influence our business. By our employee in their roles. obtaining insights on how our actions impact the stakeholders of the business, we remain committed Our success has been and will continue to be to convey in meaningful value to all stakeholders, dependent on the trust that our shareholders place through an equal measure responsibility and in us. Everything we do, every piece of advice we accountability. In short, by engaging our SMART give, every transaction we execute, every rupee we banking ethics, we will strive to deliver the level of manage, every interaction in which we take part, tangible value that truly personifies our image as the must serve to strengthen manner. “Bank that Presents the Future”.
196 I SPEAK FOR THE ENTIRE COMMUNITY IN AKKARAIPATTU WHEN I SAY THAT WE ARE VERY GRATEFUL FOR THE PART PLAYED BY SAMPATH BANK IN HELPING TO DEVELOP OUR LOCAL ECONOMY. THE BANK IS OUR PRIMARY FINANCIAL INSTITUTION AND WE APPRECIATE THEIR COMMITMENT TO US.
M A C M ISMAIL PROPRIETOR (BROADWAY MOTORS, AKKARAIPATTU) 17TH FEBRUARY 2014 Financial Calendar
Financial Calendar - 2013 2012 Annual Report and Audited Financial Statements signed on 22nd February 2013 2012 4th Quarter Interim Results released on 26th February 2013 27th Annual General Meeting held on 4th April 2013 Rs 6.00 per share Cash Dividend for 2012 paid on 9th April 2013 Rs 6.00 per share Scrip Dividend for 2012 paid on 16th April 2013 2013 Annual Report and Audited Financial Statements signed on 18th February 2014 28th Annual General Meeting to be held on 31st March 2014 Rs 8.00 per share Cash Dividend for 2013 payable in *April 2014
Interim Financial Statements published in terms of Rule 8.3 of the Colombo Stock Exchange and as per the requirements of the Central Bank of Sri Lanka: 1st Quarter Interim Results released on 15th May 2013 2nd Quarter Interim Results released on 14th August 2013 3rd Quarter Interim Results released on 7th November 2013 4th Quarter Interim Results to be released on or before 28th February 2014
Proposed Financial Calendar - 2014 2014 Annual Report and Audited Financial Statements to be signed in February 2015 29th Annual General Meeting to be held in March 2015 Dividend for 2014 to be payable in **April 2015
Interim Financial Statements published in terms of Rule 8.3 of the Colombo Stock Exchange and as per the requirements of the Central Bank of Sri Lanka: 1st Quarter Interim Results to be released on or before 13th May 2014 2nd Quarter Interim Results to be released on or before 15th August 2014 3rd Quarter Interim Results to be released on or before 14th November 2014 4th Quarter Interim Results to be released on or before 27th February 2015
* Subject to confirmation by Shareholders
** Subject to confirmation by Directors and Shareholders
198 Financial Contents
Annual Report of the Board of Directors on the Affairs of the Company 200 Directors’ Statement on Internal Control Over Financial Reporting 211 Independent Assurance Report to the Board of Directors of Sampath Bank PLC 213 Managing Director’s and Group Chief Financial Officer’s Responsibility Statement 214 Statement of Directors’ Responsibility for Financial Reporting 215 Independent Auditors’ Report to the Shareholders of Sampath Bank PLC 217 Income Statement 218 Statement of Comprehensive Income 219 Statement of Financial Position 220 Cash Flow Statement 221 Statement of Changes In Equity 223 Notes to the Financial Statements 224 Income Statement In US$ 322 Statement of Comprehensive Income in US$ 323 Statement of Financial Position in US$ 324 Ten Years at a Glance 325 Value Addition 326 Sources & Distribution of Income 327 Annual Report 2013 Sampath Bank PLC PLC Bank Sampath 2013 Annual Report
199 ANNUAL REPORT OF THE BOARD OF DIRECTORS ON THE AFFAIRS OF THE COMPANY
1. General ‘A+(lka)’. RAM Rating Lanka has reaffirmed Bank’s long term and The Board of Directors of Sampath Bank PLC has pleasure in short term financial institution ratings at AA and P1 respectively; the presenting their Annual Report on the State of Affairs of the long term rating carries a stable outlook. Company to the members of Sampath Bank for the financial year ended 31st December 2013, together with the audited Financial The registered office as well as the Head Office of the Bank is Statements of the Bank, Consolidated Financial Statements of located at No 110, Sir James Pieris Mawatha, Colombo 02, Sri the Group for the year and the Auditors’ Report on those Financial Lanka. Statements, conforming to the requirements of the Companies Act No 7 of 2007 and the Banking Act No 30 of 1988. The 2. Vision, Values and Corporate Conduct Financial Statements were reviewed and approved by the Board The Bank’s Vision and Values are given in page 3 of the Annual of Directors on 18th February 2014. This report includes the Report. The business activities of the Bank are conducted at a high information required by the Companies Act No 7 of 2007, Banking level of ethical standard in achieving its Vision. Act Direction No 11 of 2007 on Corporate Governance for licensed commercial banks and subsequent amendments thereto, Listing 3 Principal Business Activities Rules of the Colombo Stock Exchange and is also guided by the As required by the Section 168 (1) (a) of the Companies Act, the recommended best practices on Corporate Governance. principal business activities of the Bank and the Group during the year are given below. Sampath Bank PLC (Bank) is a licensed commercial bank registered under the Banking Act No 30 of 1988 (Banking Act) and 3.1 Bank was incorporated as a public limited liability company in Sri Lanka The principal activities of the Bank include accepting deposits, on 10th March 1986 under the Companies Act No 17 of 1982. corporate and retail banking, project financing, trade financing, The Company was re-registered as per the requirements of the treasury and investment services, issuing of local and international Companies Act No 7 of 2007 (Companies Act) on 28th April 2008 credit and debit cards, off-shore banking, resident and non-resident under the name Sampath Bank PLC with The Registrar General of foreign currency operations, electronic banking services: such as Companies. The Re-registration number of the Company is PQ 144. telephone banking, internet banking, mobile banking, payment gateway money remittance facilities etc, pawning, leasing, travel The ordinary shares of the Bank are listed on the main board of related services and dealing in Government Securities. the Colombo Stock Exchange in Sri Lanka. The Bank’s unsecured subordinated redeemable debentures are also listed on the 3.2 Subsidiaries Colombo Stock Exchange. Sampath Bank PLC had four Subsidiaries as at 31st December 2013. Names of the Subsidiaries and their principal business Fitch Rating Lanka has affirmed Bank’s National Long Term rating activities are as tabulated below at ‘AA-(lka)’ with a Stable Outlook and subordinated debentures at
Entity Principal business activities
Sampath Centre Ltd Renting of Commercial Property S C Securities (Pvt) Ltd Stock Broking Siyapatha Finance Ltd (formerly Sampath Leasing and Factoring Ltd)* Leasing, Factoring and Accepting Fixed & Savings Deposits Sampath Information Technology Solutions Ltd Developing Software Solutions and Maintenance of Hardware * Please refer 4 below.
4. Changes to the Group Structure during the year 2013 as required by the Section 168 (1) (a) of the Sampath Leasing and Factoring Ltd, 100% owned Subsidiary, Companies Act are contained in the Chairman’s Statement (pages was converted into a finance company during the year. As a 8 to 11), the Managing Director’s Review (pages 12 to 21) and result the company was renamed as “Siyapatha Finance Ltd” on the Management Discussion & Analysis (pages 40 to 101). These 2nd September 2013. The CBSL licence was received on 25th reports form an integral part of the Annual Report of the Board of September 2013. This company can now accept term deposits and Directors. savings deposits from the public. 6. Future Developments [Section 168 (1) (a)] Three new branches were opened during the year. The Bank 5. Review of Operations intends to focus on a business expansion drive through the already A review of the Financial and Operational performance of the Bank expanded Branch Network, concentrating mainly on its core banking and the Group together with important events that took place operations to increase its market share and profitability. This will
200 be further supplemented by a more vigorous drive on innovative 9. Auditors’ Report product development, process improvements and staff development, The Auditors of the Bank are Messrs Ernst & Young, Chartered aimed at fulfilling the rapidly changing customer needs in the Accountants. Messrs Ernst & Young carried out the audit on the challenging market conditions and maximizing the value that we Financial Statements of the Group and the Bank for the year create for all the stakeholders. Further as required under Section ended 31st December 2013 and their report on those Financial 168 (1) (a) of the Companies Act, an overview of the future Statements, as required by the Section 168 (1) (c) of the development of the Bank and the Group is given in the Chairman’s Companies Act is given on page 217. Statement (pages 8 to 11), the Managing Director’s Review (pages 12 to 21) and the Management Discussion & Analysis (pages 40 to 10. Significant Accounting Policies 101). These reports form an integral part of the Annual Report of The significant accounting policies adopted in the preparation of the the Board of Directors. Financial Statements are given on pages 224 to 242 and comply with Section 168 (1) (d) of the Companies Act. 7. Financial Statements The Financial Statements of the Group and the Bank have been The Bank and the Group applied, for the first time, Sri Lanka prepared in accordance with the Sri Lanka Accounting Standards Accounting Standard - LKAS 19 (Employee Benefits) which require (SLFRSs) laid down by the Institute of Chartered Accountants of Sri restatement of previous Financial Statements. A detailed analysis on Lanka, and comply with the requirements of the Companies Act and this is given in Note No 6.4 to the Financial Statements. the Banking Act. The aforementioned Financial Statements for the year ended 31st December 2013 duly signed by the Group Chief 11. Financial Results and Appropriations Financial Officer, three of the Directors of the Bank and the Group 11.1 Income Company Secretary are given on pages 218 to 321 which form an The Income of the Group for 2013 was Rs 48,066,173,000/- integral part of this Annual Report of the Board of Directors. (As per (2012: Rs 39,727,737,000/-) while the Bank’s income was Rs the Section 168 (1) (b) of the Companies Act). 46,525,520,000/- (2012: Rs 38,796,181,000/-). An analysis of the income is given in Note 7 to the Financial Statements. 8. Directors’ Responsibility for Financial Reporting The Directors are responsible for the preparation of Financial 11.2 Profit and Appropriations Statements of the Group and the Bank to reflect a true and fair The Group has recorded a decline in profit before tax and profit view of its state of affairs. The Directors are of the view that these after tax of 37.4% and 33.1% respectively in 2013. The Bank’s Financial Statements appearing on pages 218 to 321 have been profit before tax and profit after tax for the year too recorded a prepared in conformity with the requirements of the Sri Lanka decline of 39.3% and 34.4% respectively over 2012. Group’s Accounting Standards, Companies Act, Sri Lanka Accounting Total Comprehensive Income (net of tax) for the year is Rs and Auditing Standards Act No 15 of 1995, the Banking Act and 4,991,242,000/- (2012: Rs 5,113,457,000/-) while the Bank amendments thereto, the Listing Rules of the Colombo Stock has recorded a Total Comprehensive Income (net of tax) of Rs Exchange and the Corporate Governance Code for Licensed 3,822,000,000/- (2012: Rs 4,903,916,000/-). A detailed breakup of Commercial Banks issued by the Central Bank of Sri Lanka (CBSL). the profits & appropriations of the Bank is given below: The Statement of Directors’ Responsibility for Financial Reporting is given on pages 215 & 216 and forms an integral part of the Annual Report of the Board of Directors.
2013 2012 * Restated Rs 000 Rs 000
Profit for the year after payment of all operating expenses and provision for depreciation and contingencies 4,491,427 7,400,640 Less: Taxation (1,060,960) (2,170,157) Net profit after taxation 3,430,467 5,230,483 Other comprehensive income net of income tax Actuarial gains & losses on defined benefit plans (460,571) 12,264 Deferred tax effect on above 128,960 (3,434) 3,098,856 5,239,313 Unappropriated balance brought forward from previous year (net of prior year adjustment) 2,559,909 2,173,999 Balance available before appropriation / adjustments 5,658,765 7,413,312 Transfer from the risk reserve fund of PDU (correcting entry) - 3,659 5,658,765 7,416,971 Annual Report 2013 Sampath Bank PLC PLC Bank Sampath 2013 Annual Report
201 ANNUAL REPORT OF THE BOARD OF DIRECTORS ON THE AFFAIRS OF THE COMPANY
2013 2012 * Restated Rs 000 Rs 000
Appropriations Transfer to Statutory Reserve Fund (171,523) (256,821) Transfer to Risk Reserve Fund of Primary Dealer Unit - (73,302) Transfer to Investment Fund Account (908,727) (939,955) Transfer to General Reserve (124,008) (2,160,000)
Dividend Final cash dividend paid - 2011 (Rs 4.50 per share) - (713,505) Final scrip dividend paid - 2011 (Rs 4.50 per share) - (713,479) Final cash dividend paid - 2012 (Rs 6.00 per share) (977,046) - Final scrip dividend paid - 2012 (Rs 6.00 per share) (977,050) - Unappropriated balance carried forward 2,500,411 2,559,909
Proposed dividend Final cash dividend proposed - 2013 (Rs 8.00 per share) 1,342,301 - Final scrip and cash dividend proposed - 2012 (Rs 12.00 per share) - 1,952,840
* Certain amounts shown here do not correspond to the Financial Statements - 2012 and reflect adjustment made based on the newly adopted Sri Lanka Accounting Standards: refer Notes to the Financial Statements No 6.4.
12. Taxation Further details are given in Note 17 to the Financial Statements. Income tax rate applicable on the Bank’s domestic operations and on-shore and off-shore operations of the off-shore Banking Centre 14. Reserves is 28% (2012: 28%). A summary of the Group’s Reserves is given below:
The Bank is also liable for Financial Services VAT at 12% (2012: 2013 2012 12%) * Restated Rs 000 Rs 000 The Group has also provided deferred taxation on all known temporary differences under the liability method, as permitted by the Statutory Reserve Fund 1,271,913 1,089,349 Sri Lanka Accounting Standard - LKAS 12 (Income Taxes). Risk Reserve Fund - 109,481 Investment Fund Account 2,497,983 1,560,771 13. Dividend Revaluation Reserve 4,202,261 2,876,185 The Directors recommend that a final cash dividend of Rs 8.00 per Available for Sale Reserve 1,966,240 1,465,022 share (2012 : Rs 6.00 per share - cash and Rs 6.00 per share - Hedge Reserve (168,014) - scrip) be paid for the financial year ended 31st December 2013. General Reserve 14,138,985 13,895,840 Retained Earnings 3,300,881 3,197,040 The cash dividend is subject to Shareholder approval at the Annual Total 27,210,249 24,193,688 General Meeting. * Certain amounts shown here do not correspond to the Financial The Board of Directors was satisfied that the Bank would meet the Statements - 2012 and reflect adjustment made based on the solvency test immediately after the final dividend proposed which newly adopted Sri Lanka Accounting Standards: refer Notes to the will be paid in April 2014 in terms of the Section 31 (3) of the Financial Statements No 6.4 Companies Act. The Board provided the Statements of Solvency to the Auditors and obtained Certificates of Solvency from the Auditors in respect of the dividend payment conforming to the statutory provision. With this dividend payment, the Bank is also fulfilling the deemed dividend requirement according to the provisions of Inland Revenue Act.
202 15. Capital Expenditure The details of the debentures issued during the year and those The total capital expenditure on acquisition of property, plant outstanding as at 31st December 2013 are given in Note 37 to the and equipment and intangible assets of the Group and the Bank Financial Statements. These debentures are eligible for the Tier II amounted to Rs 989,498,000 and Rs 845,168,000 respectively Capital of the Bank. (2012 Group: Rs 1,016,108,000/- and Bank: Rs 918,935,000/-). Details are given in Notes 31 and 32 to the Financial Statements. Sampath Bank PLC had issued a deep discounted zero coupon bond with a maturity value of Rs. 3,458,108,968/- for 20 years. 16. Capital Commitments The present paid up value of this bond is Rs 1,494,001,000/- The capital expenditure approved and contracted for, after the year (2012: Rs 1,368,723,000/-) and this forms part of the Tier II end is given in Note 42.3 to the Financial Statements. Capital. The above Bond was issued in August 2003 and will mature in August 2023. The details are given in Note 37 to the 17. Property, Plant and Equipment (PPE) Financial Statements. Details of property, plant and equipment are given on Note 31 to the Financial Statements. 20. Share Information Information relating to earnings, dividend, net assets and market 18. Market Value of Freehold Properties value per share is given in the Financial Highlights on page 4. All freehold land and buildings of the Group and the Bank were Information on the trading of the shares and movement in the revalued as at 30th October 2013 by professionally qualified number of shares of the Bank is given in the Investor Relation independent valuers, and brought into the Financial Statements. section on pages 328 to 335. The Directors are of the opinion that the revalued amounts are not in excess of the current market values of such properties. The 21. Shareholding details of freehold properties owned by the Bank are given in Note There were 17,900 registered ordinary shareholders as at 31st 31 to the Financial Statements. December 2013 (2012: 17,518). Information on the distribution of shareholding and the respective percentages are given on page 19. Stated Capital, Debentures and Bonds 329 of the Annual Report. Details of top twenty shareholders, 19.1 Stated Capital percentages of their holdings and percentage holding of the public The Stated Capital of the Bank as at 31st December 2013 are given in the Investor Relations section on page 332. amounted to Rs 4,460,339,000/- consisting of 167,787,605 ordinary shares (2012: Rs 3,564,172,000/- consisting of 22. Equitable Treatment to Shareholders 162,736,665 ordinary shares). The Bank has at all times ensured that all shareholders are treated equitably. The number of shares in issue of the Bank increased from 162,736,665 ordinary shares to 167,787,605 ordinary shares as a 23 The Board of Directors result of the payment of final Scrip Dividend for 2012 (4,916,007 The Board of Directors of the Bank consists of twelve (2012: ordinary shares) and the exercise of options by employees under twelve) Directors with wide financial and commercial knowledge the ESOP 2010 (134,933 ordinary shares). and experience. The names of the Directors of the Bank during the period 1st January 2013 to 31st December 2013 are given The details of the proportionate increments of the issued shares below as per Section 168 (1) (h) of the Companies Act. Their are given in Note 16 to the Financial Statements. brief profiles are given on pages 22 to 28 of the Annual Report. The classification of Directors into Executive (ED), Non-Executive 19.2 Debt Capital (NED) and Independent (IND) Directors is given against the names The Bank had issued 15,000,000 Unsecured, Subordinated, as per Listing Rules and Corporate Governance Rules of Colombo Redeemable 5 year Debentures to the value of Rs Stock Exchange and Banking Act Direction No 11 of 2007 issued 1,500,000,000/- as at 31st December 2013 (2012: Rs by the Central Bank of Sri Lanka. 1,500,000,000/-), which are listed in the Colombo Stock Exchange. The par value of a debenture is Rs 100/- and these debentures will be redeemed in October 2017. The Bank also issued 50,000,000 Unsecured, Subordinated, Redeemable Debentures to the value of Rs 5,000,000,000/- during the year. These debentures too are listed in the Colombo Stock Exchange. The par value of a debenture amounts to Rs 100/- and these debentures will be redeemed in December 2018. Annual Report 2013 Sampath Bank PLC PLC Bank Sampath 2013 Annual Report
203 ANNUAL REPORT OF THE BOARD OF DIRECTORS ON THE AFFAIRS OF THE COMPANY
Name of Director Classification Remarks Mr Dhammika Perera NED Director since 01.08.2007; Chairman since 01.01.2012 Mr Channa Palansuriya NED Director since 01.01.2012; Deputy Chairman since 26.01.2012 Mr Sanjiva Senanayake NED / IND Director since 01.01.2012; Senior Director since 26.01.2012 Mr Deepal Sooriyaarachchi NED / IND Director since 05.08.2010 Prof Malik Ranasinghe NED / IND Director since 30.08.2011 Mrs Dhara Wijayatilake NED / IND Director since 30.08.2011 Miss Annika Senanayake NED / IND Director since 01.01.2012 Mr Deshal De Mel NED Director since 01.01.2012 Mr Ranil Pathirana NED Director since 01.01.2012 Mrs Saumya Amarasekera NED Director since 01.06.2012 Mr Aravinda Perera ED Executive Director since 25.11.2008; Managing Director since 01.01.2012 Mr Ranjith Samaranayake ED Director since 01.01.2009 Alternate Directors Prof Malik Ranasinghe Alternate Director to Mr Deepal Sooriyaarachchi since 15.01.2012 Mr Deepal Sooriyaarachchi Alternate Director to Prof Malik Ranasinghe since 31.01.2012 Mr Sanjiva Senanayake Alternate Director to Mr Deshal De Mel since 26.04.2012 Mrs Saumya Amarasekera Alternate Director to Mr Channa Palansuriya since 28.03.2013
24. New Appointments and Resignation of Directors 26.3 Siyapatha Finance Ltd (formerly Sampath Leasing and The Bank has to disclose the new appointments to and resignations Factoring Ltd) from the Board of Directors in the Annual Report of the Board of Mr I W Senanayake (Chairman) Directors in terms of Section 168 (1) (h) of the Companies Act. Mr S G Wijesinha Mr P M A Sirimane There were no new appointments to the Board of Directors during Dr H S D Soysa the year. None of the Directors resigned from the Board during the Mrs M A Karunaratne year. Mr W M P L De Alwis Mr M A Abeynaike 25. Retirement and re-election / re-appointment of Mr Aravinda Perera Directors Mr Ranjith Samaranayake In terms of Article No 86 and 87 of the Articles of Association of the Company, Mr Channa Palansuriya, Mr Deshal De Mel, Miss Annika 26.4 Sampath Information Technology Solutions Ltd Senanayake and Mr Ranil Pathirana retire by rotation and being Mr L J K Hettiaratchi (Chairman) eligible, offer for re-election on the unanimous recommendation of Mr D J Gunaratne the Board Nomination Committee and the Board of Directors. Mr M V Indrasoma Mr K M S P Herath No existing Director has reached the age of 70 and therefore re- election under Sections 210 and 211 of the Companies Act does 27. Register of Directors and Secretaries not apply this year. As required under Section 223 (1) of the Companies Act, the Bank maintains a Register of Directors and Secretaries which contain the 26. List of Directors of the Subsidiaries of the Bank name, surname, former name (if any), residential address, business, Names of the Directors of Subsidiary companies are as follows: occupation, dates of appointment and dates of resignation (if applicable) of each Director and the Secretary. 26.1 Sampath Centre Ltd Mr I W Senanayake (Chairman) Mr S G Wijesinha 28. Board Sub Committees Mr S P Kannangara The Board while assuming the overall responsibility and Mr L R Jayakody accountability for the management oversight of the Bank has also appointed Board Sub Committees to ensure that the activities of the 26.2 S C Securities (Pvt) Ltd Bank at all times are conducted with the highest ethical standards Mr D J Gunaratne (Chairman) and the best interests of all its stakeholders. The Board formed Mr N H K Fernando (Executive Director/CEO) many Sub Committees including the following four mandatory Board Dr S Kelegama Sub Committees as required by the Banking Act Direction No 11 of Mr M N R Fernando 2007. The compositions of these four Sub Committees as at 31st December 2013 were as follows:
204 28.1 Board Audit Committee The Report of the Board Credit Committee is given on pages 153 & Mr Ranil Pathirana (Chairman) 154 and forms an integral part of the Annual Report of the Board of Mr Sanjiva Senanayake Directors. Mr Deepal Sooriyaarachchi Prof Malik Ranasinghe 28.6 Board Strategic Planning Committee Mrs Dhara Wijayatilake Mr Dhammika Perera (Chairman) Mr Channa Palansuriya The Report of the Board Audit Committee is given on pages 142 to Mr Sanjiva Senanayake 145 and forms an integral part of the Annual Report of the Board of Prof Malik Ranasinghe Directors. Mr Deshal De Mel Mr Ranil Pathirana 28.2 Board Human Resources and Remuneration Committee Mr Aravinda Perera Mr Deepal Sooriyaarachchi (Chairman) Mr Ranjith Samaranayake Mr Channa Palansuriya Miss Annika Senanayake The Report of the Board Strategic Planning Committee is given on Mr Deshal De Mel page 155 and forms an integral part of the Annual Report of the Mr Aravinda Perera Board of Directors.
The Report of the Board Human Resources and Remuneration 28.7 Board Shareholder Relations Committee Committee is given on pages 146 & 147 and forms an integral part Mr Channa Palansuriya (Chairman) of the Annual Report of the Board of Directors. Mr Deshal De Mel
28.3 Board Nomination Committee The Report of the Board Shareholder Relations Committee is given Miss Annika Senanayake (Chairperson) on pages 156 & 157 and forms an integral part of the Annual Mr Dhammika Perera Report of the Board of Directors. Mr Channa Palansuriya Mrs Saumya Amarasekera 28.8 Board Treasury Committee Mr Sanjiva Senanayake (Chairman) The Report of the Board Nominations Committee is given on pages Prof Malik Ranasinghe 148 & 149 and forms an integral part of the Annual Report of the Mr Deshal De Mel Board of Directors. Mr Aravinda Perera Mr Ranjith Samaranayake 28.4 Board Risk Management Committee Mrs Dhara Wijayatilake (Chairperson) The Report of the Board Treasury Committee is given on page 158 Mr Channa Palansuriya and forms an integral part of the Annual Report of the Board of Mr Sanjiva Senanayake Directors. Mr Aravinda Perera Mr Ranjith Samaranayake 28.9 Board Marketing Committee Mr Deepal Sooriyaarachchi (Chairman) The Report of the Board Risk Management Committee is given on Miss Annika Senanayake pages 150 to 152 and forms an integral part of the Annual Report Mr Deshal De Mel of the Board of Directors. Mrs Saumya Amarasekera
Apart from the above four mandatory Board Sub Committees, the The Report of the Board Marketing Committee is given on page Board has also appointed the following five non-mandatory Board 159 and forms an integral part of the Annual Report of the Board Sub Committees: of Directors.
28.5 Board Credit Committee The duties, responsibilities and performance of the above board Sub Prof Malik Ranasinghe (Chairman) Committees are discussed in the respective Board Sub Committee Mr Channa Palansuriya reports. Mr Sanjiva Senanayake Miss Annika Senanayake 29. Directors’ Meetings Mr Deshal De Mel The details of Directors meetings which comprise Board meetings Mr Aravinda Perera and the Board Sub Committee meetings and the attendance of Mr Ranjith Samaranayake Directors at these meetings are given in Corporate Governance Report on page 110 of the Annual Report. Annual Report 2013 Sampath Bank PLC PLC Bank Sampath 2013 Annual Report
205 ANNUAL REPORT OF THE BOARD OF DIRECTORS ON THE AFFAIRS OF THE COMPANY
30. Directors’ Interest Register and Directors’ Interest in 33. Directors’ Interest in Shares and Debentures of Contracts or Proposed Contracts Subsidiaries The Bank maintains the Directors’ Interest Register as required under Mr Aravinda Perera and Mr Ranjith Samaranayake hold one the provisions of Section 168 (1) (e) of the Companies Act. Directors share each in Sampath Information Technology Solutions Ltd, as of the Bank have made necessary declarations of their interest in subscribers. These shares are held in trust for Sampath Bank. Mr contracts or proposed contracts, in terms of the Sections 192 (1) and Aravinda Perera also holds one share each in S C Securities (Pvt) Ltd 192 (2) of the Companies Act. These interests have been recorded in and Sampath Centre Ltd for and on behalf of Sampath Bank PLC. the Interest Register which is available for inspection in terms of the Act. The particulars of the Directors’ Interest in Contracts are given on None of the Directors directly hold any debentures in any Subsidiary. pages 209 & 210 of the Annual Report and form an integral part of the Annual Report of the Board of Directors. 34. Directors’ Remuneration As required under the Section 168 (1) (f), details of Directors’ As a practice, Directors have refrained from voting on matters in emoluments and other benefits paid in respect of the Group and the which they were materially interested. The Directors have no direct Bank during the financial year under review are given in Note 14 to or indirect interest in a contract or a proposed contract with the the Financial Statements. Company other than those disclosed. 35. Our Team Members 31. Related Party Transactions The Bank believes that its real potential rests on the strength and Directors have also disclosed transactions if any, that could be capabilities of its team members in a rapidly changing environment. classified as related party transactions in terms of Sri Lanka All efforts are directed at having a motivated and competent team in Accounting Standard - LKAS 24 (Related Party Disclosure) which order to grow and achieve results as projected in the Strategic Plan is adopted in preparation of the Financial Statements. Those and the Budget. transactions disclosed by the Directors are given in Note 43 to the Financial Statements which form an integral part of the Annual As at 31st December 2013, the number of employees on the Report of the Board of Directors. payroll of the Bank was 3,688 (2012: 3,455).
32. Directors’ Interest in Ordinary Shares and Debentures 36. ESOPs The shareholdings of Directors were as follows: 36.1 Employee Share Option Plan (ESOP) 2010 The shareholders approved an Employee Share Option Plan (ESOP No of Shares No of Shares 2010) at the Extraordinary General Meeting held on 21st August as at 31st as at 31st 2010. ESOP 2010 was introduced in the year 2011, having December December achieved the targets set for 2010. 2013 2012 Mr Dhammika Perera* - - The option exercisable period would be 3 years, from the Mr Channa Palansuriya - - entitlement date of 30th June 2011. In the event of options Mr Sanjiva Senanayake - - being fully exercised by the eligible staff, the Stated Capital of Mr Deepal Sooriyaarachchi - - the Bank would increase by Rs 244,492,720/-, as a result of the Prof Malik Ranasinghe - - consideration to be paid by the staff under the ESOP. Mrs Dhara Wijayatilake - - Ms Annika Senanayake - - No financial assistance will be provided by the Bank to the staff to Mr Deshal De Mel - - purchase the share options. The remaining contractual life of share Mr Ranil Pathirana 9,422 6,363 options is 6 months. Mrs Saumya Amarasekera - - Mr Aravinda Perera 68,832 18,597 36.2 Employee Share Ownership Plan (ESOP) 2000 Mr Ranjith Samaranayake 21,314 20,690 In 2000 when a hostile takeover attempt was made on the Bank * Following Company is staff created trusts with trustees and shares were bought to the controlled by Mr Dhammika trusts. The loans with regard to these shares have now been settled Perera by the eligible employees. Based on eligibility these shares are now Vallibel One PLC 25,107,454 24,371,697 being transferred to the employees.
None of the Directors directly hold any debentures issued by the Bank.
206 The details of the options offered to the employees as at 31st December 2013 are as follows:
31st Dec 2013 31st Dec 2012 31st Dec 2011
Number of options in issue 3,056,159 3,056,159 3,056,159 Number of options exercised in previous years (2,725,360) (524,924) - Number of options brought forward 330,799 2,531,235 3,056,159 Number of options exercised during the year (134,933) (2,200,436) (524,924) Number of options remaining 195,866 330,799 2,531,235 Option price (Rs) 80.00 80.00 80.00 Weighted average market price (Rs) 199.83 200.89 221.00
37. Environmental Protection 42. Donations To the best of knowledge of the Board, the Bank has not engaged As required by the Section 168 (1) (g) of the Companies Act, in any activity that is harmful or hazardous to the environment. The information pertaining to donations made by the Bank during the Directors also confirm that to the best of their knowledge and belief year is given below. During the year the Bank made donations to the Bank has complied with the relevant environmental laws and the value of Rs 54,009,000/- (2012: Rs 3,922,000/-) in terms regulations. of the resolution passed at the last Annual General Meeting. Donations made by the Group during the year amounted to Rs 38. Statutory Payments 54,011,000/- (2012: 3,924,000/-). Out of the aforementioned The Directors, to the best of their knowledge and belief, are sum, the donations made by the Bank to Government approved satisfied that all statutory payments due to the Government, other charities amounted to Rs 49,862,000/- (2012: nil). The Bank does regulatory bodies and related to the employees have been paid on not make donations for political purposes. a timely basis. 43. Significant Shareholdings in Other 39. Outstanding Litigation Organisations In the opinion of the Directors and in consultation with the Bank’s Sampath Bank PLC has a 7.54% shareholding in Union Bank of lawyers, litigations currently pending against the Bank will not Colombo PLC and 9.47% shareholding in LankaBangla Finance have a material impact on the reported financial results of future Limited in Bangladesh. Details are given in Note 23 and 28 to the operations of the Bank. Details of litigations pending against the Financial Statements. Bank are given in Note 42 to the Financial Statements. 44. Risk Management and Internal Control 40. Events after the Reporting Period 44.1 Risk Management No circumstances have arisen since the Statement of Financial The Bank has an ongoing process in place to identify, evaluate Position date which would require adjustments to, or disclosure in, and manage the risks that are faced by the Bank. This process is the accounts, except those disclosed in Note 45 to the Financial detailed in the Risk Management Report on pages 160 to 187. The Statements. Directors on a regular basis review the above mentioned process through the Board Risk Management Committee. 41. Going Concern The Directors after making necessary inquiries and reviews 44.2 Internal Controls including reviews of the budget for the ensuing year, capital The Directors have taken reasonable steps open to them to expenditure requirements, future prospects and risks, cash flows safeguard the assets of the Bank and the Group and to prevent and such other matters required to be addressed in the Code and detect frauds and any other irregularities. For this purpose the of Best Practice on Corporate Governance issued jointly by the Directors have instituted effective and comprehensive systems of Institute of Chartered Accountants of Sri Lanka and the Securities internal controls for identifying, recording evaluating and managing and Exchange Commission of Sri Lanka and the Direction on the significant risks faced by the Bank throughout the year and Corporate Governance issued by the Central Bank of Sri Lanka it is being under regular review of the Board of Directors. This are satisfied that the Bank has adequate resources to continue comprises internal reviews, internal audit and the whole system operations into the foreseeable future. Accordingly, they continue of financial and other controls required to carry on the operations to adopt the going concern basis in preparing the Financial in an orderly manner, safeguard the assets, prevent and detect Statements. frauds and other irregularities and secure as far as practicable the accuracy and reliability of the records. Annual Report 2013 Sampath Bank PLC PLC Bank Sampath 2013 Annual Report
207 ANNUAL REPORT OF THE BOARD OF DIRECTORS ON THE AFFAIRS OF THE COMPANY
45. Corporate Governance Further the Group and the Bank paid Rs 6,283,000/- (2012: The Board of Directors is committed towards maintaining an Rs 5,618,000/-) and Rs 6,283,000/- (2012: Rs 5,618,000/-) effective Corporate Governance Framework and implementing respectively to Messrs Ernst & Young as Audit related fee expenses. processes required to ensure that the Bank is compliant with In addition, they were paid Rs 4,929,000/- (2012: Rs 5,419,000/-) the Code of Best Practice on Corporate Governance issued and Rs 4,664,000/- (2012: Rs 4,030,000/-) by the Group and the jointly by the Institute of Chartered Accountants of Sri Lanka and Bank respectively for permitted non-audit related services including the Securities and Exchange Commission of Sri Lanka and the tax consultancy services. Direction on Corporate Governance issued by the Central Bank of Sri Lanka. Details are given on Corporate Governance Report on Based on the declaration provided by Messrs Ernst & Young, and pages 102 to 140 of this Annual Report. as far as the Directors are aware, the Auditors do not have any relationship with or interest with the Bank that in our judgement, As required by Section 3(8)(ii)(g) of the Direction No 11 of may reasonably be thought to have a bearing on their independence 2007 of the Banking Act on Corporate Governance for Licensed within the meaning of the Code of Professional Conduct and Ethics Commercial Banks, issued by the Central Bank of Sri Lanka, the issued by the Institute of Chartered Accountants of Sri Lanka, Board of Directors confirms that all the findings of the “Factual applicable on the date of this report. Findings Reports” of auditors issued under “Sri Lanka Related Services Practice Statement 4750” have been incorporated in the The retiring Auditors, Messrs Ernst & Young, have expressed their annual Corporate Governance Report on pages 102 to 140 of this willingness to continue in office. Hence they come up for re-election Annual Report.. at the Annual General Meeting, with the recommendation of the Board Audit Committee and the Board of Directors. In accordance 46. Auditors with the Companies Act, a resolution proposing the re-appointment The Auditors of the Bank during the year were Messrs Ernst & of Messrs Ernst & Young, Chartered Accountants, as Auditors is Young, Chartered Accountants. They also function as the Auditors being proposed at the Annual General Meeting. for the Bank’s Subsidiary companies namely, Sampath Centre Ltd, SC Securities (Pvt) Ltd, Siyapatha Finance Ltd (formerly Sampath 47. Notice of Meeting Leasing and Factoring Ltd) and Sampath Information Technology The 28th Annual General Meeting will be held at the Kingsbury Solutions Ltd. Audit fees and reimbursement of expenses paid to Hotel, Colombo 1 on 31st March 2014. The Notice of Meeting is Messrs Ernst & Young for the year ended 31st December 2013 given on page 350 of the Annual Report. by the Group and the Bank amounted to Rs 12,516,000/- (2012: Rs. 10,759,000/-) and Rs 8,871,000/- (2012: Rs. 8,544,000/-) As required by Section 168 (1) (k) of the Companies Act the Board respectively. of Directors hereby acknowledge the contents of this report.
For and on behalf of the Board of Directors.
Dhammika Perera Channa Palansuriya Aravinda Perera S Sudarshan Chairman Deputy Chairman Managing Director Group Company Secretary
Colombo, Sri Lanka 18th February 2014
208 Directors’ Interest in Contracts with the Company Related party disclosures as required by the Sri Lanka Accounting Standard - LKAS 24 (Related Party Disclosures) are detailed in Note 43 to Financial Statements. In Addition, the Bank carries out transactions in the ordinary course of business in an arm’s length basis with entities where the Chairman or Director of the Bank is the Chairman or a Director of such entities as detailed below.
Also these companies with the requirements of such section 168 of the Companies act No. 7 of 2007 and Directions issued under Section 47 ( 3), (4) ,(5) & (6) of the Banking Act No 30 of 1988.
Company Relationship Nature of the Current Balance Balance facility Limit outstanding Outstanding as at as at 31.12.2013 31.12.2012 Rs 000 Rs 000 Rs 000 Mr Dhammika Perera Dipped Products Ltd Director Overdraft - 25 Cr - Overdraft - 2 Cr 2 Cr Haycarb PLC Director Saving Deposits - 4,513 - Loans & receivables 222,266 212,492 65,897 Foreign Bills 10,000 - - Hayleys MGT Knitting Mills PLC* Director Margin Deposits - 954 - Overdraft 75,000 74,937 74,744 Deputy Horana Plantations PLC Overdraft - 16 - Chairman Overdraft 80,000 70,270 - Lanka Floor Tiles PLC Director Loans & receivables 326,028 126,028 - Deputy Royal Ceramic Lanka PLC Overdraft - 1129 Cr - Chairman The Fortress Resorts Ltd Chairman Overdraft - 19 Cr - Vallibel Finance PLC Chairman Overdraft - 14,977 Cr - Overdraft - 52 Cr - Vallibel One PLC Chairman Saving Deposits - 246 - Mr M Y A Perera Overdraft 50,000 30,707 Cr 22,580 Cr Siyapatha Finance Ltd** Director Loans & receivables 9,740,000 1,221,112 970,653 Institute of Bankers of Sri Lanka Director Overdraft - 102 Cr - Mr Channa Palansuriya Overdraft - 146 Cr - Orit Trading Lanka ( Pvt) Ltd Chairman Loans & receivables 153 18,671 - Mr Deepal Sooriyaarachchi Young Entrepreneurs Sri Lanka Director Overdraft - 47 Cr - (Guarantee) Ltd Prof Malik Kumar Ranasinghe Independent Overdraft - 32,817 Cr - Access Engineering PLC Non Ex Deposits - 9,955 - Director Margin Deposits - 46,010 - Annual Report 2013 Sampath Bank PLC PLC Bank Sampath 2013 Annual Report
209 ANNUAL REPORT OF THE BOARD OF DIRECTORS ON THE AFFAIRS OF THE COMPANY
Directors’ Interest in Contracts with the Company Contd.
Company Relationship Nature of the Current Balance Balance facility Limit outstanding Outstanding as at as at 31.12.2013 31.12.2012 Rs 000 Rs 000 Rs 000 Mr Ranil Pathirana Director Overdraft 100,000 126 Cr 13 Cr Star Packaging ( Pvt) Ltd Deposits - 6 - Star Pack Investments ( Pvt) Ltd Director 75,000 13 106 Cr Windforce ( Pvt) Ltd Director Overdraft - 321 Cr - Loans & receivables 200,000 - CKT Apparel ( Pvt) Ltd Director Overdraft - 7 Cr -
* Mr Dhammika Perera & Mr Ranil Pathirana are Directors of Hayleys Mgt Knitting Mills PLC ** Mr M Y A Perera & Mr Samaranayake are Directors of Siyapatha Finance Ltd
210 DIRECTORS’ STATEMENT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
Responsibility The Internal Audit Division of the Bank checks for compliance In line with the Banking Act Direction No 11 of 2007, section 3 (8) with policies and procedures and the effectiveness of the (ii)(b), the Board of Directors present this report on Internal Control internal control systems on an ongoing basis using samples over Financial Reporting. and rotational procedures and highlight significant findings in respect of any non-compliance. Audits are carried out on The Board of Directors (“Board”) is responsible for the adequacy all units and branches, the frequency of which is determined and effectiveness of the internal control mechanism in place at by the level of risk assessed, to provide an independent Sampath Bank PLC, (“the Bank”). In considering such adequacy and and objective report. The annual audit plan is reviewed and effectiveness, the Board recognises that the business of banking approved by the Board Audit Committee. Findings of the requires reward to be balanced with risk on a managed basis and Internal Audit Department are submitted to the Board Audit as such the internal control systems are primarily designed with a Committee for review at their periodic meetings. view to highlight any deviations from the limits and indicators which comprise the risk appetite of the Bank. In this light, the system The Board Audit Committee of the Bank reviews internal of internal controls can only provide reasonable, but not absolute control issues identified by the Internal Audit Department, the assurance, against material misstatement of financial information External Auditors, regulatory authorities and the Management: and records or against financial losses or fraud. and evaluates the adequacy and effectiveness of the risk management and internal control systems. They also review The Board has established an ongoing process for identifying, the internal audit functions with particular emphasis on the evaluating and managing the significant risks faced by the Bank scope of audits and quality of the same. The minutes of the and this process includes enhancing the system of internal control Board Audit Committee meetings are forwarded to the Board over financial reporting as and when there are changes to business on a periodic basis. Further details of the activities undertaken environment or regulatory guidelines. The process is regularly by the Board Audit Committee of the Bank are set out in the reviewed by the Board and accords with the Guidance for Directors Board Audit Committee Report on pages 142 to 145. of Banks on the Directors’ Statement on Internal Control issued by the Institute of Chartered Accountants of Sri Lanka. The Board has In assessing the internal control system over financial assessed the internal control over financial reporting taking into reporting, identified officers of the Bank collated all account principles for the assessment of internal control system as procedures and controls that are connected with significant given in that guidance. accounts and disclosures of the financial statements of the Bank. These in turn were observed and checked by The Board is of the view that the system of internal controls over the internal audit department for suitability of design and financial reporting in place is sound and adequate to provide effectiveness on an ongoing basis. The Bank adopted the reasonable assurance regarding the reliability of financial reporting, new Sri Lanka Accounting Standards comprising LKAS and that the preparation of financial statements for external and SLFRS in 2012. The processes and procedures initially purposes is in accordance with relevant accounting principles and applied to adopt the aforementioned Accounting Standards regulatory requirements. were further strengthened during the year 2013 based on the feedback received from the external auditors, internal The Management assists the Board in the implementation of the audit department, regulators and the Board Audit Committee. Board’s policies and procedures on risk and control by identifying The Bank is in the process of updating relevant procedure and assessing the risks faced, and in the design, operation and manuals pertaining to these new requirements. The Bank has monitoring of suitable internal controls to mitigate and control these also recognised the need to introduce an automated financial risks. reporting process in order to comply with the requirements of recognition, measurement, classification and disclosure Key Features of the Process Adopted in Applying in Reviewing of the financial instruments more effectively and efficiently. the Design and Effectiveness of the Internal Control System The assessment did not include subsidiary companies of the Over Financial Reporting Bank. The key processes that have been established in reviewing the adequacy and integrity of the system of internal controls with • The comments made by the External Auditors in connection respect to financial reporting include the following: with internal control system over financial reporting in previous years were reviewed during the year and appropriate Various Committees are established by the Board to assist steps have been taken to rectify them. The recommendations the Board in ensuring the effectiveness of Bank’s daily made by the External Auditors in 2013 in connection with the operations and that the Bank’s operations are in accordance internal control system over financial reporting will be dealt with the corporate objectives, strategies and the annual with in the future. budget as well as the policies and business directions that have been approved. Annual Report 2013 Sampath Bank PLC PLC Bank Sampath 2013 Annual Report
211 DIRECTORS’ STATEMENT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
Confirmation Based on the above processes, the Board confirms that the financial reporting system of the Bank has been designed to provide a reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes and has been done in accordance with Sri Lanka Accounting Standards and regulatory requirements of the Central Bank of Sri Lanka.
Review of the Statement by External Auditors The External Auditors, Messrs Ernst & Young, have reviewed the above Directors Statement on Internal Control over Financial Reporting included in the Annual Report of the Bank for the year ended 31st December 2013 and reported to the Board that nothing has come to their attention that causes them to believe that the statement is inconsistent with their understanding of the process adopted by the Board in the review of the design and effectiveness of the internal control over financial reporting of the Bank. Their Report on the Statement of Internal Control over Financial Reporting is given on page 213 of this Annual Report.
By order of the Board
Ranil Pathirana Chairman - Board Audit Committee
Dhammika Perera Channa Palansuriya Chairman Deputy Chairman
Aravinda Perera S Sudarshan Managing Director Group Company Secretary
Colombo, Sri Lanka 18th February 2014
212 INDEPENDENT ASSURANCE REPORT TO THE BOARD OF DIRECTORS OF SAMPATH BANK PLC
Introduction SLSAE 3050 does not require us to consider whether the We were engaged by the Board of Directors of Sampath Bank Statement covers all risks and controls or to form an opinion on the PLC (“Bank”) to provide assurance on the Directors’ Statement on effectiveness of the Bank’s risk and control procedures. SLSAE Internal Control over Financial Reporting (“Statement”) included in 3050 also does not require us to consider whether the processes the annual report for the year ended 31 December 2013. described to deal with material internal control aspects of any significant problems disclosed in the annual report will, in fact, Management’s responsibility remedy the problems. Management is responsible for the preparation and presentation of the Statement in accordance with the “Guidance for Directors Our conclusion of Banks on the Directors’ Statement on Internal Control” issued in Based on the procedures performed, nothing has come to our compliance with section 3(8)(ii)(b) of the Banking Act Direction No attention that causes us to believe that the Statement included 11 of 2007, by the Institute of Chartered Accountants of Sri Lanka. in the annual report is inconsistent with our understanding of the process the Board of Directors has adopted in the review of the Our responsibilities and compliance with SLSAE 3050 design and effectiveness of internal control over financial reporting Our responsibility is to issue a report to the Board on the Statement of the Bank. based on the work performed. We conducted our engagement in accordance with Sri Lanka Standard on Assurance Engagements (SLSAE) 3050 – Assurance Report for Banks on Directors’ Statement on Internal Control issued by the Institute of Chartered Accountants of Sri Lanka. Ernst & Young Summary of work performed Chartered Accountants We conducted our engagement to assess whether the Statement is supported by the documentation prepared by or for Directors; and 18th February 2014 appropriately reflected the process the Directors have adopted in Colombo reviewing the system of internal control over financial reporting of the Bank.
The procedures performed were limited primarily to inquiries of Bank personnel and the existence of documentation on a sample basis that supported the process adopted by the Board of Directors. Annual Report 2013 Sampath Bank PLC PLC Bank Sampath 2013 Annual Report
213 MANAGING DIRECTOR’S AND GROUP CHIEF FINANCIAL OFFICER’S RESPONSIBILITY STATEMENT
The Financial Statement of Sampath Bank PLC (Bank) and the We confirm, compliance with section 3(8)(ii)(b) of the Banking Act Consolidated Financial Statements of the Bank and its Subsidiaries Direction No 11 of 2007 on Corporate Governance (Internal Control (Group) as at 31st December 2013 are prepared in compliance with Over Financial Reporting - ICOFR) issued by the Central Bank of the requirements of the following: Sri Lanka as of 31 December 2013 and that the Bank’s Internal Sri Lanka Accounting Standards issued by The Institute of Controls over Financial Reporting is adequate and effective. The Chartered Accountants of Sri Lanka; Annual Report of the Directors on pages 200 to 210 has briefly Companies Act No 7 of 2007 (Companies Act); covered the Group’s Internal Control over Financial Reporting. In Sri Lanka Accounting and Auditing Standards Act No 15 of addition, Directors’ Statement on Internal Control Over Financial 1995; Reporting is provided on pages 211 & 212. The Bank’s External Banking Act No 30 of 1988 and amendments thereto; Auditors, Messrs Ernst & Young, have audited the effectiveness the Listing Rules of the Colombo Stock Exchange; of the Bank’s Internal Controls Over Financial Reporting and have the Code of Best Practice on Corporate Governance issued given an unqualified opinion on page 213 of this Annual Report. jointly by the Institute of Chartered Accountants of Sri Lanka, the Securities and Exchange Commission of Sri Lanka; and The Financial Statements of the Group were audited by Messrs section 3(8)(ii)(g) of the Banking Act Direction No 11 of Ernst & Young, Chartered Accountants, the independent External 2007 on Corporate Governance issued by the Central Bank Auditors. Their report is given on page 217 of this Annual Report. of Sri Lanka. The Audit Committee of the Bank meets periodically with the The formats used in the preparation of the Financial Statements and Internal Auditors and the independent External Auditors to disclosures made comply with the formats prescribed by the Central review the manner in which these auditors are performing their Bank of Sri Lanka, which is also in compliance with the disclosure responsibilities and to discuss issues relating to auditing, internal requirements of the Sri Lanka Accounting Standard (LKAS 1) controls and financial reporting issues. To ensure complete “Presentation of Financial Statements”. independence, the External Auditors and the Internal Auditors have full and free access to the members of the Audit Committee to The Accounting Policies used in the preparation of the Financial discuss any matter of substance. The Audit Committee report is Statements are appropriate and are consistently applied by the given on pages 142 to 145. Group. The significant accounting policies and estimates that involve a high degree of judgment and complexity were discussed with the The Audit Committee approves the audit and non-audit services Audit Committee and External Auditors. Comparative information provided by Messrs Ernst & Young, in order to ensure that the has been restated wherever necessary to comply with the current provision of such services does not impair Messrs Ernst & Young’s presentation and material departures, if any, have been disclosed independence. and explained in the notes to the Financial Statements. We confirm that to the best of our knowledge, the Financial Statements give We confirm that to the best of our knowledge: a true and fair view of the assets, liabilities, financial position, the Group has complied with all applicable laws, regulations results of the operations and the cash flows of the Group. We have and prudential requirements; reasonable grounds to believe that the Bank and its Subsidiaries there are no material non compliances; and have adequate resources to continue in operational existence for there are no material litigations that are pending against the foreseeable future. Accordingly, we continue to adopt the going the Group other than those disclosed in Note No 42 to the concern basis in preparing the Financial Statements. Financial Statements in the Annual Report.
The estimates and judgments relating to the Financial Statements were made on a prudent and reasonable basis; in order that the Financial Statements reflect in a true and fair manner, the form and substance of transactions and that the Bank’s state of affairs is reasonably presented. To ensure this, the Bank and all of its Aravinda Perera Ranjith Samaranayake Subsidiaries have taken proper and sufficient care in installing a Managing Director Director (Executive)/ system of internal controls and procedures for safeguarding assets, Group Chief Financial Officer preventing and detecting frauds and / or errors as well as other irregularities which are reviewed, evaluated and updated on an Colombo, Sri Lanka. ongoing basis. Our Internal Auditors have conducted periodic audits 18th February 2014 to provide reasonable assurance that the established policies and procedures were consistently followed. However, there are inherent limitations that should be recognised in weighing the assurances provided by any system of internal controls and accounting.
214 STATEMENT OF DIRECTORS’ RESPONSIBILITY FOR FINANCIAL REPORTING
The responsibilities of the Directors in relation to the Financial The Directors are also required to ensure that the Bank and the Statements of Sampath Bank PLC (Bank) and the Consolidated Group have adequate resources to continue in operation and Financial Statements of the Bank and its Subsidiaries (Group) to justify applying the going concern basis in preparing these are set out in the following Statement. The responsibility of the Financial Statements. Auditors in relation to the Financial Statements is set out in the Report of the Auditors given on page 217. Financial Statements for the year 2013, prepared and presented in this Annual Report are consistent with the underlying books As per the provisions of the Companies Act No 7 of 2007 of account and are in conformity with the requirements of (Companies Act), the Directors of the Bank are responsible for Sri Lanka Accounting Standards, Companies Act, Sri Lanka ensuring that the Bank and the Group keep proper books of Accounting and Auditing Standards Act No 15 of 1995, Banking account of all the transactions and they are required to prepare Act and amendments thereto, the continuing Listing Rules of Financial Statements that give a true and fair view of the financial the Colombo Stock Exchange (CSE) and the Code of Best position of the Bank and the Group as at end of each financial Practice on Corporate Governance issued jointly by The Institute year and place them before a general meeting. The Financial of Chartered Accountants of Sri Lanka (ICASL) & the Securities Statements comprise of the Statement of Financial Position as and Exchange Commission of Sri Lanka (SEC). Further these at end of the financial year, the Income Statement, Statement Financial Statements comply with the prescribed format issued by of Comprehensive Income, Statement of Changes in Equity, the Central Bank of Sri Lanka (CBSL) for the preparation of annual Statement of Cash Flow for the financial year and notes thereto. financial statements of licensed commercial banks. The Directors accept responsibility for the integrity and objectivity of the Financial The Financial Statements are prepared under the supervision of the Statements published in this Annual Report. The Directors confirm Group Chief Financial Officer who is an Executive Director of the that in preparing the Financial Statements given on pages 218 Bank. The Directors confirm that the Financial Statements of the to 321, appropriate accounting policies have been selected and Bank and the Group give a true and fair view of: applied based on the new financial reporting framework on a 1. the state of affairs of the Bank and the Group as at 31st consistent basis, while reasonable and prudent judgments have December 2013: and been made so that the form and substance of transactions are 2. the financial performances of the Bank and the Group for properly reflected. the financial year ended 31st December 2013. The Directors have taken appropriate steps to ensure that the Bank The Financial Statements of the Bank and the Group have and the Group maintain proper books of account and review the been certified by the Group Chief Financial Officer, the officer financial reporting system directly by them at their regular meetings responsible for their preparation, as required by the Companies and also through the Board Audit Committee. The Report of the Act. The accounts have been circulated and reviewed by the Board Board Audit Committee is given on pages 142 to 145. The Board Audit Committee and Board of Directors. Further, the Financial of Directors also approves the Interim Financial Statements prior to Statements of the Bank and the Group have been signed by three their release, following a review and recommendation by the Board Directors and the Group Company Secretary in conformity with the Audit Committee. requirements of the Companies Act. The Directors have taken all reasonable steps open to them to In preparing these Financial Statements, the Directors are required safeguard the assets of the Bank and the Group and to prevent to ensure that: and detect frauds and any other irregularities. For this purpose the 1. the appropriate accounting policies have been selected and Directors have instituted effective and comprehensive systems of applied in a consistent manner and material departures, if internal controls for identifying, recording, evaluating and managing any, have been disclosed and explained; the significant risks faced by the Bank throughout the year and 2. the Financial Statements are presented in accordance with it is being under regular review of the Board of Directors. This Sri Lanka Accounting Standards (SLFRS/LKAS); comprises internal reviews, internal audit and the whole system 3. reasonable and prudent judgments and estimates have been of financial and other controls required to carry on the operations made so that the form and substance of transactions are in an orderly manner, safeguard the assets, prevent and detect properly reflected; frauds and other irregularities and secure as far as practicable the 4. the Financial Statements provide the information required by accuracy and reliability of the records. and otherwise comply with the Companies Act, Banking Act No 30 of 1988 (Banking Act) and the Listing Rules of the Based on their assessment of Internal Control Over Financial Colombo Stock Exchange. Reporting (ICOFR), in compliance with section 3(8)(ii)(b) of the 5. the companies within the Group maintain sufficient Banking Act Direction No 11 of 2007 on Corporate Governance, accounting records to disclose, the financial position of the the Directors have concluded that, as of 31st December 2013, the Bank and the Group with reasonable accuracy. Group’s internal controls over financial reporting are effective. The Directors’ Statement on Internal Control Over Financial Reporting Annual Report 2013 Sampath Bank PLC PLC Bank Sampath 2013 Annual Report
215 DIRECTORS’ RESPONSIBILITY FOR FINANCIAL REPORTING
and Annual Report of the Board of Directors are provided on pages 211 & 212 and pages 200 to 210 respectively of this Annual Report. The External Auditors’ Independent Assurance Report on the “Directors’ Statement on Internal Control Over Financial Reporting” is given on page 213 of this Annual Report.
As required by section 56(2) of the Companies Act, the Directors have made an assessment of the Solvency of the Bank, immediately after the proposed Dividend and confirm that the Bank satisfies the Solvency Test required by the Section 57 of Companies Act. The Directors have also obtained the Certificate of Solvency from the External Auditors of the Bank, Messrs Ernst & Young.
Messrs Ernst & Young, Chartered Accountants, the External Auditors of the Bank were provided with every opportunity to undertake the inspections they considered appropriate. They have examined the Financial Statements made available to them by the Directors together with all financial records, related data, minutes of the Shareholders’ meetings, Directors’ meetings, Board Audit Committee meetings and other Board Sub Committee meetings and expressed their opinion as reported by them in the Annual Report on page 217.
Compliance Report The Directors confirm that to the best of their knowledge, all taxes, duties and levies payable by the Bank and its Subsidiaries, all contributions, levies and taxes payable on behalf of and in respect of the employees of the Bank and its Subsidiaries and all other known statutory dues as were due and payable by the Bank and its Subsidiaries as at reporting date have been paid or, where relevant, provided for, except as specified in Note No 42 to the Financial Statements covering contingent liabilities. The Directors confirm that based on their assessment the accounting controls are adequate and nothing has come to their attention to indicate that any breakdown in the functioning of these controls, resulting in material loss to the Bank. The Directors also confirm that the Bank will have adequate resources to continue in operational existence and as a going concern for the foreseeable future.
The Directors are of the view that they have discharged their responsibilities as set out in the above statement.
By order of the Board,
S Sudarshan Group Company Secretary
Colombo, Sri Lanka 18th February 2014
216 INDEPENDENT AUDITORS’ REPORT TO THE SHAREHOLDERS OF SAMPATH BANK PLC
Report on the Financial Statements We have obtained all the information and explanations which We have audited the accompanying financial statements of to the best of our knowledge and belief were necessary for the Sampath Bank PLC (“Bank”), the consolidated financial statements purposes of our audit. We therefore believe that our audit provides a of the Bank and its Subsidiaries (Group), which comprise the reasonable basis for our opinion. statements of financial position as at 31 December 2013, and the income statements and statements of comprehensive income, Opinion statements of changes in equity and cash flow statements for the In our opinion, so far as appears from our examination, the Bank year then ended, and a summary of significant accounting policies maintained proper accounting records for the year ended 31 and other explanatory notes set out on pages 218 to 321 of the December 2013 and the financial statements give a true and fair Annual Report. view of the Bank’s financial position as at 31 December 2013 and its financial performance and cash flows for the year then ended in Management’s Responsibility for the Financial Statements accordance with Sri Lanka Accounting Standards. Management is responsible for the preparation and fair presentation of these financial statements in accordance with Sri Lanka In our opinion, the consolidated financial statements give a true Accounting Standards. This responsibility includes: designing, and fair view of the financial position as at 31 December 2013 implementing and maintaining internal control relevant to the and the financial performance and cash flows for the year then preparation and fair presentation of financial statements that are ended, in accordance with Sri Lanka Accounting Standards, of the free from material misstatement, whether due to fraud or error; Bank and its subsidiaries dealt with thereby, so far as concerns the selecting and applying appropriate accounting policies; and making shareholders of the Bank. accounting estimates that are reasonable in the circumstances. Report on Other Legal and Regulatory Requirements Scope of Audit and Basis of Opinion These financial statements also comply with the requirements of Our responsibility is to express an opinion on these financial Sections 151(2) and 153(2) to 153(7) of the Companies Act No 07 statements based on our audit. We conducted our audit in of 2007. accordance with Sri Lanka Auditing Standards. Those standards require that we plan and perform the audit to obtain reasonable assurance whether the financial statements are free from material misstatement. Ernst & Young An audit includes examining, on a test basis, evidence supporting Chartered Accountants the amounts and disclosures in the financial statements. An audit also includes assessing the accounting policies used and significant 18th February 2014 estimates made by management, as well as evaluating the overall Colombo. financial statement presentation. Annual Report 2013 Sampath Bank PLC PLC Bank Sampath 2013 Annual Report
217 INCOME STATEMENT
Bank Group For the year ended 31st December 2013 2012 2013 2012 Restated* Restated* Note Rs 000 Rs 000 Rs 000 Rs 000
Gross Income 7 46,525,520 38,796,181 48,066,173 39,727,737
Interest income 40,921,433 31,881,948 42,320,239 32,712,018 Less: Interest expense 26,555,565 20,269,375 27,225,504 20,672,970 Net interest income 8 14,365,868 11,612,573 15,094,735 12,039,048
Fee & commission income 3,002,660 2,803,755 3,099,195 2,876,724 Less: Fee & commission expense 459,315 654,757 480,449 675,136 Net fee & commission income 9 2,543,345 2,148,998 2,618,746 2,201,588
Net trading income 10 (69,735) 6,227 (69,735) 6,227 Other operating income 11 2,671,162 4,104,251 2,716,474 4,132,768 Total operating income 19,510,640 17,872,049 20,360,220 18,379,631
Impairment charge / (reversal) for loans & other losses 12 3,490,129 64,883 3,574,075 80,145 Net operating income 16,020,511 17,807,166 16,786,145 18,299,486
Less: Operating expenses Personnel expenses 13 4,417,103 4,009,306 4,672,240 4,180,916 Other operating expenses 14 6,216,586 5,239,094 6,393,806 5,289,261 Total operating expenses 10,633,689 9,248,400 11,066,046 9,470,177
Operating profit before Value Added Tax (VAT) 5,386,822 8,558,766 5,720,099 8,829,309
Less: Value Added Tax on Financial Services 895,395 1,158,126 931,134 1,176,225 Operating profit after Value Added Tax (VAT) 4,491,427 7,400,640 4,788,965 7,653,084
Less: Income tax expense 15 1,060,960 2,170,157 1,151,300 2,213,060 Profit for the year 3,430,467 5,230,483 3,637,665 5,440,024
Attributable to: Equity holders of the Bank 3,430,467 5,230,483 3,634,957 5,436,682 Non controlling interest - - 2,708 3,342 3,430,467 5,230,483 3,637,665 5,440,024
Earnings per share (Rs) 16 Earnings per share: Basic (Rs) 21.67 32.57 Earnings per share: Diluted (Rs) 21.66 32.54
Dividend per share (Rs)** 17 Dividend per share: Gross (Rs) 8.00 12.00 Dividend per share: Net (Rs) 7.28 10.87
The Notes to the Financial Statements from pages 224 to 321 form an integral part of these Financial Statements
* Certain amounts shown here do not correspond to the Financial Statements - 2012 and reflect adjustments made based on the newly adopted Sri Lanka Accounting Standards: refer Note 6.4 ** Calculated based on proposed dividend, which is to be approved at the Annual General Meeting
218 STATEMENT OF COMPREHENSIVE INCOME
Bank Group For the year ended 31st December 2013 2012 2013 2012 Restated* Restated* Rs 000 Rs 000 Rs 000 Rs 000
Profit for the year 3,430,467 5,230,483 3,637,665 5,440,024
Other comprehensive income / (expenses) net of tax Gains & Losses arising on re-measuring available for sale financial assets 494,561 (348,818) 494,561 (348,818) Exchange difference in translation 6,657 16,061 6,657 16,061 501,218 (332,757) 501,218 (332,757)
Actuarial gains & losses on defined benefit plans (460,571) 12,264 (462,196) 12,264 Deferred tax effect on above 128,960 (3,434) 128,960 (3,434) (331,611) 8,830 (333,236) 8,830
Surplus from revaluation of Property, plant & equipment 415,446 (2,640) 1,379,115 (2,640) Deferred tax effect on above (25,506) - (25,506) - 389,940 (2,640) 1,353,609 (2,640)
Gains & losses arising from cash flow hedge (168,014) - (168,014) -
Other comprehensive income net of tax 391,533 (326,567) 1,353,577 (326,567) Total comprehensive income for the year net of tax 3,822,000 4,903,916 4,991,242 5,113,457
Attributable to: Equity holders of the Bank 3,822,000 4,903,916 4,961,001 5,110,115 Non controlling interest - - 30,241 3,342 3,822,000 4,903,916 4,991,242 5,113,457
The Notes to the Financial Statements from pages 224 to 321 form an integral part of these Financial Statements
* Certain amounts shown here do not correspond to the Financial Statements - 2012 and reflect adjustments made based on the newly adopted Sri Lanka Accounting Standards: refer Note 6.4 Annual Report 2013 Sampath Bank PLC PLC Bank Sampath 2013 Annual Report
219 STATEMENT OF FINANCIAL POSITION
Bank Group As at 31st December 31st December 1st January 31st December 31st December 1st January 2013 2012 2012 2013 2012 2012 Restated* Restated* Restated* Restated* Note Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000
ASSETS 18 Cash & cash equivalents 19 8,302,576 10,432,135 10,736,413 8,340,838 10,442,259 10,746,713 Balances with Central Bank of Sri Lanka 20 15,766,967 17,200,792 13,232,130 15,766,967 17,200,792 13,232,130 Placements with banks 21 1,791,329 8,788,127 5,337,084 1,791,329 8,788,127 5,337,084 Reverse repurchase agreements 18,043,918 3,300,817 4,601,965 18,043,918 3,300,373 4,606,010 Derivative financial instruments 22 230,517 279,022 203,732 230,517 279,022 203,732 Financial assets held for trading 23 46,974,516 35,181,084 23,052,987 46,974,516 35,181,084 23,052,987 Financial assets held for trading pledged as collaterals 24 3,496,141 2,856,321 4,002,777 3,496,141 2,856,321 4,002,777 Loans & receivables to banks 25 638,244 816,119 441,938 638,244 816,119 441,938 Loans & receivables to other customers 26 259,401,578 208,184,369 169,681,372 265,909,593 212,480,041 171,976,938 Other loans & receivables 27 12,150,588 10,515,756 5,736,278 12,150,588 10,224,474 5,736,278 Financial investments available for sale 28 2,393,118 1,923,624 2,025,241 2,393,174 1,923,680 2,025,297 Financial investments held to maturity 29 1,845,903 - 10,289 1,845,903 9,765 19,411 Investment in Subsidiaries 30 1,059,921 1,059,921 1,054,921 - - - Property, plant & equipment 31 5,134,731 4,559,806 4,527,784 8,327,019 6,764,372 6,691,153 Intangible assets 32 297,359 311,758 67,294 313,305 316,412 73,372 Deferred tax assets 33 308,816 - - 332,949 12,328 2,359 Other assets 34 4,205,442 4,000,674 2,945,661 4,748,913 4,459,859 3,419,102 Total Assets 382,041,664 309,410,325 247,657,866 391,303,914 315,055,028 251,567,281
LIABILITIES 18 Due to banks 35 2,211,281 624,784 1,175,672 2,250,372 668,198 1,175,672 Derivative financial instruments 22 638,724 381,838 310,966 638,724 381,838 310,966 Securities sold under re-purchase agreements 3,389,684 2,757,117 4,100,864 3,055,257 2,751,332 4,100,864 Due to other customers 36 300,549,350 243,330,990 195,195,074 300,381,786 243,088,236 195,094,359 Debt issued & other borrowed funds 37 38,862,331 28,825,029 19,754,221 44,748,530 32,218,014 21,490,478 Unclaimed dividend 54,981 49,185 37,173 54,981 49,185 37,173 Current tax liabilities 38 2,691,865 3,041,259 1,851,834 2,753,338 3,073,243 1,881,142 Deferred tax liabilities 33 - 357,474 330,142 59,034 388,201 345,896 Other provisions 39 441,209 342,636 303,824 457,100 355,358 316,863 Other liabilities 40 4,783,987 4,055,488 3,254,554 5,145,219 4,262,319 3,503,286 Total Liabilities 353,623,412 283,765,800 226,314,324 359,544,341 287,235,924 228,256,699
EQUITY Stated capital 41 4,460,339 3,564,172 2,743,780 4,460,339 3,564,172 2,743,780 Reserves Statutory reserves 3,673,643 2,702,874 1,432,323 3,769,896 2,759,601 1,461,890 Other reserves 17,783,859 16,817,570 14,993,440 20,139,472 18,237,047 16,412,917 Retained profit 2,500,411 2,559,909 2,173,999 3,300,881 3,197,040 2,632,091 Total equity attributable to equity holders of the Bank 28,418,252 25,644,525 21,343,542 31,670,588 27,757,860 23,250,678 Non controlling interest 88,985 61,244 59,904 Total Equity 28,418,252 25,644,525 21,343,542 31,759,573 27,819,104 23,310,582 Total Liabilities & Equity 382,041,664 309,410,325 247,657,866 391,303,914 315,055,028 251,567,281
Net asset value per share (Rs) 169.37 152.96 129.00 188.75 165.57 140.53 Commitments & contingencies 42 145,566,776 115,925,743 120,946,802 145,685,243 116,129,397 120,946,802
* Certain amounts shown here do not correspond to the Financial Statements - 2012 and reflect adjustments made based on the newly adopted Sri Lanka Accounting Standards: refer Note 6.4 The Notes to the Financial Statements from pages 224 to 321form an integral part of these Financial Statements I certify that these Financial Statements are presented in compliance with the requirements of the Companies Act No 7 of 2007
Ranjith Samaranayake Executive Director / Group Chief Financial Officer The Board of Directors is responsible for the preparation & presentation of these Financial Statements
Dhammika Perera Channa Palansuriya Aravinda Perera S Sudarshan Chairman Deputy Chairman Managing Director Group Company Secretary
18th February 2014 Colombo, Sri Lanka
220 CASH FLOW STATEMENT
Bank Group For the year ended 31st December 2013 2012 2013 2012 Rs 000 Rs 000 Rs 000 Rs 000
Cash flows from operating activities Interest receipts 38,619,572 29,472,438 40,018,378 30,302,509 Commission receipts 2,531,474 2,136,723 2,606,877 2,189,313 Interest payments (25,358,452) (18,434,186) (26,028,391) (18,837,781) Receipts from other operating activities 2,377,258 3,974,818 2,518,443 4,082,176 Cash payments to employees and suppliers (6,510,608) (6,358,275) (6,966,632) (6,388,782) Value Added Tax on Financial Services (962,148) (1,137,042) (997,888) (1,155,142) Cash payments to other operating activities (3,241,195) (2,339,412) (3,168,746) (2,474,880) Operating profit before changes in operating assets & liabilities 7,455,901 7,315,064 7,982,041 7,717,413
(Increase) / decrease in operating assets Balance with Central Bank of Sri Lanka 1,433,825 (3,968,662) 1,433,825 (3,968,662) Loans & receivables from customers (52,672,536) (38,782,036) (54,968,826) (40,789,709) Loans & receivables from banks 177,874 (378,000) 177,875 (378,000) Other loans & receivables (1,634,832) (2,381,364) (1,926,115) (2,090,082) Other assets (613,380) (849,266) (699,291) (850,010) (53,309,049) (46,359,328) (55,982,532) (48,076,463)
Increase / (decrease) in operating liabilities Due to customers 56,146,525 46,424,935 56,221,715 46,282,896 Due to banks 1,635,494 (460,783) 1,635,494 (460,783) Other liabilities 750,850 833,801 905,857 798,887 58,532,869 46,797,953 58,763,066 46,621,000
Net cash generated from/(used in) operating activities before income tax 12,679,721 7,753,689 10,762,575 6,261,950 Income tax paid (1,973,189) (956,835) (2,017,539) (992,057) Net cash generated from/(used in) operating activities 10,706,532 6,796,854 8,745,036 5,269,893
Cash flows from investing activities Cash collateral on securities borrowed & reverse repurchase agreements (14,743,102) 1,301,148 (14,743,545) 1,305,637 Securities sold under re-purchase agreements 632,571 (1,343,743) 303,927 (1,349,528) Financial investments held for trading (11,517,689) (12,056,074) (11,517,689) (12,056,074) Financial assets held for trading pledged as collaterals (639,819) 1,146,121 (639,819) 1,146,121 Net proceeds from sale, maturity and purchase of financial investments (1,845,903) 10,289 (1,836,139) 9,646 Net proceeds from sale, maturity and purchase of available for sale investments 56,823 (211,766) 56,823 (211,766) Income from investments 71,467 10,949 71,467 10,949 Dividend received from Subsidiaries 95,872 79,155 - - Investment in Subsidiary - (5,000) - - Purchase of property, plant and equipment (709,064) (576,167) (808,599) (671,141) Purchase of intangible assets (41,385) (288,032) (58,311) (290,204) Proceeds from disposal of property, plant and equipment 2,243 23,692 37,141 25,579 Net cash flows used in investing activities (28,637,986) (11,909,428) (29,134,744) (12,080,781)
Cash flows from financing activities Non controlling interest - - (2,500) (2,002) Increase / (Decrease) in Debentures 5,000,000 (261,618) 4,915,623 75,519 Increase / (Decrease) in Commercial papers - - (217,750) 722,369 Increase in borrowed funds 4,912,022 9,217,653 7,707,364 9,814,875 Shares issued 10,794 176,035 10,794 176,035 Dividend paid (1,068,723) (782,627) (1,068,723) (782,627) Net cash generated from financing activities 8,854,093 8,349,443 11,344,808 10,004,169 Net cash generated / (used in) during the year (9,077,361) 3,236,869 (9,044,900) 3,193,281 Cash and cash equivalents at the beginning of the year 18,839,516 15,602,647 18,806,226 15,612,945 Cash and cash equivalents at the end of the year 9,762,155 18,839,516 9,761,326 18,806,226
The Notes to the Financial Statements from pages 224 to 321 form an integral part of these Financial Statements Annual Report 2013 Sampath Bank PLC PLC Bank Sampath 2013 Annual Report
221 CASH FLOW STATEMENT
RECONCILIATION STATEMENT
Bank Group For the year ended 31st December 2013 2012 2013 2012 Restated* Restated* Rs 000 Rs 000 Rs 000 Rs 000
Note (a) Reconciliation of operating profit before changes in operating assets and liabilities
Profit before income tax 4,491,427 7,400,640 4,788,965 7,653,084 Profit on disposal of property plant and equipment (1,093) (22,098) (1,093) (22,412) Income from investments (36,536) (42,021) (36,536) (42,021) Diminution / (Appreciation) in value of investments (275,744) (72,023) (275,744) (72,023) Dividend received from Subsidiaries (95,872) (79,155) - - Capital loss / (gain) from sale of shares (34,931) 31,072 (34,931) 31,072 Accruals on personnel expenses 299,329 (44,895) 301,895 (44,895) Income from available for sale financial investments (31,755) (35,100) (31,755) (35,100) Depreciation of property, plant & equipment 522,759 535,656 563,343 587,859 Amortization of intangible assets 47,270 43,566 52,904 47,163 Loss / (gain) on Forward contract revaluation 137,377 (4,419) 137,377 (4,419) Exchange revaluation 6,657 16,061 6,657 16,061 Other non-cash expenses 12,528 36,817 12,528 36,820 Other non-cash income (66,754) - (66,754) - Impairment provision 3,757,188 136,906 3,841,134 152,168 Interest income accrued on impaired financial assets (75,777) (11,395) (75,777) (11,395) Interest expenses due to other customers 9,489 73,308 9,489 73,308 Guarantee Income (11,871) (12,275) (11,871) (12,275) Accrual for interest receivable (2,226,084) (2,398,114) (2,226,084) (2,398,114) Accrual for interest payable 1,187,624 1,762,533 1,187,624 1,762,533 Impairment loss on property, plant & equipment 8,685 - 8,685 - Gain on cash flow hedge (168,014) - (168,014) - Operating profit before changes in operating assets/liabilities 7,455,901 7,315,064 7,982,041 7,717,413
Note (b) Reconciliation of cash & cash equivalents
Local currency in hand 4,731,387 4,483,580 4,740,751 4,483,791 Foreign currency in hand 2,257,858 1,089,882 2,257,858 1,089,882 Balances with local banks 112,777 71,025 141,675 80,937 Balances with foreign banks 1,200,554 1,774,914 1,200,554 1,774,915 Money at call and short notice - 3,012,734 - 3,012,734 Cash & cash equivalents at the end of the year (Note No 19) 8,302,576 10,432,135 8,340,838 10,442,259 Placements with banks (Note No 21) 1,791,329 8,788,127 1,791,329 8,788,127 Unfavourable Balances with local & foreign Banks (Note No 35) (331,750) (380,746) (370,841) (424,160) Cash & cash equivalents at the end of the year 9,762,155 18,839,516 9,761,326 18,806,226
The Notes to the Financial Statements from pages 224 to 321 form an integral part of these Financial Statements
* Certain amounts shown here do not correspond to the Financial Statements - 2012 and reflect adjustments made based on the newly adopted Sri Lanka Accounting Standards: refer Note 6.4
222 STATEMENT OF CHANGES IN EQUITY
BANK Stated Statutory Reserves Other Reserves Retained Shareholders’ Capital Statutory Risk Investment Revaluation Available Hedge General Profit Fund Reserve Reserve Fund Reserve for Sale Reserve Reserve Fund Fund Account Reserve Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000
For the year ended 31st December 2012 (Restated*) Balance as at 1st January 2012 2,743,780 805,805 35,706 590,812 1,459,349 1,797,779 - 11,736,312 1,730,572 20,900,115 Changes in Accounting policies ------443,427 443,427 Restated balance as at 1st January 2012 2,743,780 805,805 35,706 590,812 1,459,349 1,797,779 - 11,736,312 2,173,999 21,343,542 Profit for the year ------5,230,483 5,230,483 Other Comprehensive income - - - - (2,640) (332,757) - - 8,830 (326,567) Adjustments - - 473 - - - - (473) 3,659 3,659 ESOP-2010 176,035 ------176,035 Final Cash Dividend Paid 2011 ------(713,505) (713,505) Final Scrip Dividend Paid 2011 644,357 ------(713,479) (69,122) Transfer to reserves during the year - 256,821 73,302 939,955 - - - 2,160,000 (3,430,078) - Balance as at 31st December 2012 3,564,172 1,062,626 109,481 1,530,767 1,456,709 1,465,022 - 13,895,839 2,559,909 25,644,525
For the year ended 31st December 2013 Balance as at 1st January 2013 3,564,172 1,062,626 109,481 1,530,767 1,456,709 1,465,022 - 13,895,839 2,559,909 25,644,525 Profit for the year ------3,430,467 3,430,467 Other Comprehensive income - - - - 389,940 501,218 (168,014) - (331,611) 391,533 ESOP-2010 10,794 ------10,794 Final Cash Dividend Paid 2012 ------(977,046) (977,046) Final Scrip Dividend Paid 2012 885,373 ------(977,050) (91,677) Cancellation of Risk reserve - - (109,481) - - - - 109,481 - - Unclaimed Dividend-write back ------9,656 - 9,656 Transfer to reserves during the year - 171,523 - 908,727 - - - 124,008 (1,204,258) - Balance as at 31st December 2013 4,460,339 1,234,149 - 2,439,494 1,846,649 1,966,240 (168,014) 14,138,984 2,500,411 28,418,252
GROUP Stated Statutory Reserve Other Reserves Retained Shareholders’ Non Total Capital Statutory Risk Investment Revaluation Available Hedge General Profit Fund controlling equity Reserves Reserve Fund Reserve for Sale Reserve Reserve interest Fund Fund Account Reserve Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000
For the year ended 31st December 2012 (Restated*) Balance as at 1st January 2012 2,743,780 822,531 35,706 603,653 2,878,825 1,797,779 - 11,736,313 2,188,664 22,807,251 59,904 22,867,155 Changes in Accounting policies ------443,427 443,427 - 443,427 Restated balance as at 1st January 2012 2,743,780 822,531 35,706 603,653 2,878,825 1,797,779 - 11,736,313 2,632,091 23,250,678 59,904 23,310,582 Profit for the year ------5,436,682 5,436,682 3,342 5,440,024 Other Comprehensive income - - - - (2,640) (332,757) - - 8,830 (326,567) - (326,567) Adjustments - - 473 - - - - (473) 3,659 3,659 - 3,659 ESOP-2010 176,035 ------176,035 - 176,035 Final Cash Dividend Paid 2011 ------(713,505) (713,505) (2,002) (715,507) Final Scrip Dividend Paid 2011 644,357 ------(713,479) (69,122) - (69,122) Transfer to reserves during the year - 266,818 73,302 957,118 - - - 2,160,000 (3,457,238) - - - Balance as at 31st December 2012 3,564,172 1,089,349 109,481 1,560,771 2,876,185 1,465,022 - 13,895,840 3,197,040 27,757,860 61,244 27,819,104
For the year ended 31st December 2013 Balance as at 1st January 2013 3,564,172 1,089,349 109,481 1,560,771 2,876,185 1,465,022 - 13,895,840 3,197,040 27,757,860 61,244 27,819,104 Profit for the year ------3,634,957 3,634,957 2,708 3,637,665 Other Comprehensive income - - - - 1,326,076 501,218 (168,014) - (333,236) 1,326,044 27,533 1,353,577 Adjustments - 15 - (15) ------ESOP-2010 10,794 ------10,794 - 10,794 Final Cash Dividend Paid 2012 ------(977,046) (977,046) (2,500) (979,546) Final Scrip Dividend Paid 2012 885,373 ------(977,050) (91,677) - (91,677) Cancellation of Risk reserve - - (109,481) - - - - 109,481 - - - - Unclaimed Dividend-write back ------9,656 - 9,656 - 9,656 Transfer to reserves during the year - 182,549 - 937,227 - - - 124,008 (1,243,784) - - - Balance as at 31st December 2013 4,460,339 1,271,913 - 2,497,983 4,202,261 1,966,240 (168,014) 14,138,985 3,300,881 31,670,588 88,985 31,759,573
The Notes to the Financial Statements from pages 224 to 321 form an integral part of these Financial Statements
* Certain amounts shown here do not correspond to the Financial Statements - 2012 and reflect adjustments made based on the newly adopted Sri Lanka Accounting Standards: refer Note 6.4 Annual Report 2013 Sampath Bank PLC PLC Bank Sampath 2013 Annual Report
223 NOTES TO THE FINANCIAL STATEMENTS
1. REPORTING ENTITY 2. BASIS OF PREPARATION 1.1 General 2.1 Statement of Compliance Sampath Bank PLC (‘The Bank’), is a domiciled, public limited The Consolidated Financial Statement of the Group and the separated liability company incorporated in Sri Lanka on 10th March Financial Statement of the Bank, which comprise the Statement 1986 under the Companies Act No 17 of 1982. It is a Licensed of Financial Position, Income Statement, Statement of Other Commercial Bank registered under the Banking Act No 30 of Comprehensive Income, Statement of Changes in Equity, Statement 1988 (Banking Act) and amendments thereto. The Company was of Cash Flow, Notes to the Financial Statements have been prepared re-registered with the Registrar General of Companies as per the and presented in accordance with Sri Lanka Accounting Standards requirements of the Companies Act No 7 of 2007 (Companies Act) (SLFRSs and LKASs) laid down by the Institute of Chartered on 28th April 2008 under the name of Sampath Bank PLC. The Accountants of Sri Lanka and in compliance with the requirements of registered office of the Bank is located at No 110, Sir James Peiris the Companies Act No 7 of 2007. The presentation of the Financial Mawatha, Colombo 02. The shares of the Bank have a primary Statements is also in compliance with the requirements of the Banking listing on the Colombo Stock Exchange. The staff strength of the Act No 30 of 1988 and amendments thereto. These Financial Bank as at 31st December 2013 was 3,688 (2012: 3,455). Statements also provide appropriate disclosures as required by the Listing Rules of the Colombo Stock Exchange. The Bank does not have an identifiable parent on its own. Sampath Bank is the ultimate parent of the Group. 2.2 Approval of Financial Statements by Directors The Financial Statements of the Group and the Bank for the year 1.2 Consolidated Financial Statements ended 31st December 2013 were authorized for issue by the Board The Consolidated Financial Statements of the Bank as at and for of Directors in accordance with the resolution of the Directors on the year ended 31st December 2013 comprise the Bank (Parent 18th February 2014. Company) and its Subsidiaries (together referred to as the “Group” and individually as “Group entities”). The Subsidiaries of the Bank as 2.3 Basis of Measurement at 31st December 2013 were Sampath Centre Ltd, S C Securities The Financial Statements of the Group and the Bank have been (Pvt) Ltd, Siyapatha Finance Ltd (formerly known as Sampath prepared on the historical cost basis, except for the following Leasing & Factoring Ltd) and Sampath Information Technology material items in the Statement of Financial Position: Solutions Ltd. Derivative financial instruments are measured at fair value Available for sale investments are measured at fair value 1.3 Principal Activities and Nature of Operations Other financial assets and liabilities held for trading are 1.3.1 Bank measured at fair value The Bank provides a comprehensive range of financial services Financial instruments designated at fair value through profit encompassing accepting deposits, corporate and retail banking, or loss are measured at fair value project financing, trade finance, treasury and investment services, Land and Buildings which are measured at cost at the time of issuing of credit cards and debit cards, off shore banking, resident acquisition and subsequently at revalued amounts, which are and non-resident foreign currency operations, electronic banking the fair values at the date of revaluation services such as: telephone banking, internet banking and money Liabilities for defined benefit obligations are recognised as remittance facilities, pawning, leasing, travel related services and the present value of the defined benefit obligation less the dealing in Government securities etc. net totals of plan assets and unrecognised past service cost.
1.3.2 Subsidiaries Ownership of Subsidiaries as of 31st December 2013 and 31st December 2012 is as follows.
Subsidiary Principal activities 31st December 2013 31st December 2012
Sampath Centre Ltd Renting of Commercial Property 97.14% 97.14% S C Securities (Pvt) Ltd Share Broking 100.00% 100.00% Siyapatha Finance Ltd Leasing, Factoring and Accepting Fixed 100.00% 100.00% (formerly known as Sampath & Savings Deposits Leasing & Factoring Ltd) Sampath Information Developing Software Solutions and Technology Solutions Ltd Maintenance of Hardware 100.00% 100.00%
224 2.4 Functional and Presentation Currency 2.8.1 Going Concern The Financial Statements of the Group and the Bank are presented The Directors have made an assessment of the Bank’s ability in Sri Lanka Rupees, which is the currency of the primary economic to continue as a going concern and are satisfied that it has the environment in which Sampath Bank PLC operates. Financial resources to continue in business for the foreseeable future. information presented in Sri Lankan Rupees has been rounded to Furthermore, Board is not aware of any material uncertainties that the nearest thousand unless indicated otherwise. may cast significant doubt upon the Bank’s ability to continue as a going concern and they do not intend either to liquidate or to 2.5 Presentation of Financial Statements cease operations of the Bank. Therefore, the Financial Statements The items of the Group and the Bank presented in their Statements continue to be prepared on the going concern basis. of Financial Position are grouped by nature and listed in an order that reflects their relative liquidity and maturity pattern. No 2.8.2 Impairment Losses on Loans and Advances adjustments have been made for inflationary factors affecting the The Group and the Bank review their individually significant Financial Statements. An analysis on recovery or settlement within loans and advances at each reporting date to assess whether an 12 months after the reporting date (current) and more than 12 impairment loss should be recorded in the Income Statement. In months after the reporting date (non-current) is presented in the particular, Management’s judgment is required in the estimation of Note No 48. the amount and timing of future cash flows when determining the impairment loss. These estimates are based on assumptions about 2.6 Materiality and Aggregation a number of factors and actual results may differ, resulting in future In compliance with Sri Lanka Accounting Standard - LKAS 01, changes to the impairment allowance made. (Presentation of Financial Statements), each material class of similar items is presented separately in the Financial Statements. Loans and advances that have been assessed individually and Items of dissimilar nature or functions too are presented separately found to be not impaired and all individually insignificant loans and unless they are immaterial. advances are then assessed collectively, by categorising them into groups of assets with similar risk characteristics, to determine Financial assets and financial liabilities are offset and the net whether a provision should be made due to incurred loss events amount reported in the Statement of Financial Position only when for which there is objective evidence, but the effects of which are there is a legally enforceable right to offset the recognized amounts not yet evident. The collective assessment takes account of data and there is an intention to settle on a net basis, or to realize the from the loan portfolio (such as levels of arrears, credit utilisation, assets and settle the liability simultaneously. Income and expenses loan-to-collateral ratios etc.) and judgement on the effect of are not offset in the Income Statement unless required or permitted concentrations of risks and economic data (including levels of by an Accounting Standard. unemployment, inflation, interest rates, exchange rates, sovereign rating etc.). 2.7 Comparative Information The comparative information is re-classified wherever necessary to 2.8.3 Impairment of Available for Sale Investments conform to the current year’s presentation. The Group and the Bank review their debt securities classified as available for sale investments at each reporting date to assess 2.8 Significant Accounting Judgments, Estimates and whether they are impaired. This requires similar judgments as Assumptions applied on the individual assessment of loans and advances. The preparation of Financial Statements of the Group and the Bank in conformity with Sri Lanka Accounting Standards requires The Group and the Bank also record impairment charges on the management to make judgments, estimates and assumptions available for sale equity investments when there has been a that affect the application of accounting policies and the reported significant or prolonged decline in the fair value below their cost. amounts of assets, liabilities, income and expenses. Actual results The determination of what is ‘significant’ or ‘prolonged’ requires may differ from these estimates. judgment. The Bank generally treats ‘significant’ as 20% or more and ‘prolonged’ as greater than six months. In addition the Group Estimates and underlying assumptions are reviewed on an ongoing and the Bank evaluates, among other factors, historical share price basis. Revisions to accounting estimates are recognised in the movements, duration and extent up to which the fair value of an period in which the estimate is revised and in any future periods investment is less than its cost. affected. 2.8.4 Deferred Tax Assets The most significant areas of estimation, uncertainty and critical Deferred tax assets are recognised in respect of tax losses to judgments in applying accounting policies that have most the extent that it is probable that future taxable profits will be significant effect on the amounts recognised in the Financial available against which such tax losses can be utilised. Judgement Statements of the Group and the Bank are as follows: is required to determine the amount of deferred tax assets that can be recognised, based upon the likely timing and level of future taxable profits, together with the future tax-planning strategies. Annual Report 2013 Sampath Bank PLC PLC Bank Sampath 2013 Annual Report
225 NOTES TO THE FINANCIAL STATEMENTS
2.8.5 Defined Benefit Plans of its properties taking into consideration the current use of such The cost of the defined benefit plans and the present value of their properties. Currently the Bank does not have any Investment obligations are determined using actuarial valuations. The actuarial Property. valuation involves making assumptions about discount rates, expected rates of return on assets, future salary increases, mortality 3 SIGNIFICANT ACCOUNTING POLICIES - STATEMENT rates and future pension increases. Due to the long term nature of OF FINANCIAL POSITION these plans, such estimates are subject to significant uncertainty. All The significant accounting policies applied by the Group and the assumptions are reviewed at each reporting date. Bank in preparation of the Financial Statements are included below. The accounting policies set out below have been applied In determining the appropriate discount rate, management considers consistently to all periods presented in these Financial Statements the interest rates of Sri Lanka Government bonds with extrapolated of the Group and the Bank, unless otherwise indicated. maturities corresponding to the expected duration of the defined benefit obligation. 3.1 Basis of Consolidation The Bank’s Financial Statements comprise the amalgamation of the The mortality rate is based on publicly available mortality tables. Financial Statements of the Domestic Banking Unit and the Foreign Future salary increases and pension increases are based on Currency Banking Unit, as well as the consolidation of the Financial expected future inflation rates and expected future salary increase Statements of the Bank and its Subsidiaries in terms of the Sri rate of the Bank. Lanka Accounting Standard - LKAS 27 (Consolidated and Separate Financial Statements). 2.8.6 Fair Value of Property, Plant and Equipment The Land and Buildings of the Group and the Bank are reflected 3.1.1 Business Combinations and Goodwill at fair value. The Group engaged independent valuation specialist Business combinations are accounted for using the Acquisition to determine fair value of land and building. When current market method as per the requirements of Sri Lanka Accounting Standard - prices of similar assets are available, such evidence is considered in SLFRS 03 (Business Combinations). estimating fair values of these assets. The Group and the Bank measure goodwill as the fair value of the 2.8.7 Useful Life-time of the Property, Plant and Equipment consideration transferred including the recognised amount of any The Group and the Bank review the residual values, useful lives non-controlling interest in the acquiree, less the net recognised and methods of depreciation of Property, Plant and Equipment at amount (generally fair value) of the identifiable assets acquired and each reporting date. Judgment of the management is exercised in liabilities assumed, all measured as of the acquisition date. When the estimation of these values, rates, methods and hence they are the excess is negative, a bargain purchase gain is recognised subject to uncertainty. immediately in profit or loss.
2.8.8 Commitments and Contingencies The Group and the Bank elect on a transaction-by-transaction basis All discernible risks are accounted for in determining the amount of whether to measure non-controlling interest at its fair value, or at its all known liabilities. proportionate share of the recognised amount of the identifiable net assets, at the acquisition date. Contingent liabilities are possible obligations whose existence will be confirmed only by uncertain future events or present obligations The consideration transferred does not include amounts related where the transfer of economic benefit is not probable or cannot be to the settlement of pre-existing relationships. Such amounts are reliably measured. Contingent liabilities are not recognised in the generally recognised in profit or loss. Statement of Financial Position but are disclosed unless they are remote. Transaction costs, other than those associated with the issue of debt or equity securities, that the Group incurs in connection with a 2.8.9 Classification of Investment Properties business combination are expensed as incurred. Management requires using its judgment to determine whether a property qualifies as an investment property. The Bank has 3.1.2 Subsidiaries developed criteria so it can exercise its judgment consistently. A Subsidiaries are entities that are controlled by the Bank. The control property that is held to earn rentals or for capital appreciation or is presumed to exist when the Bank owns, directly or indirectly both and which generates cash flows largely independently of the through other subsidiaries, more than half of the voting power of an other assets held by the Bank are accounted for as investment entity. Control is achieved where the Bank has the power to govern properties. On the other hand, a property that is used for operations the financial and operating policies of an entity so as to obtain or in the process of providing services or for administrative purposes benefits from its activities. and which do not directly generate cash flows as a standalone asset are accounted for as property, plant and equipment. The The Financial Statements of Subsidiaries are fully consolidated from Bank assesses on an annual basis the accounting classification the date on which control is transferred to the Bank and continue
226 to be consolidated until the date when such control ceases. The 3.2 Foreign Currency Transactions and Balances Financial Statements of the Bank’s Subsidiaries are prepared All foreign currency transactions are translated into the Functional for the same reporting year as per the Bank, using consistent Currency, which is Sri Lankan Rupees, using the exchange rates accounting policies. prevailing at the dates of the transactions were affected.
The cost of an acquisition is measured at fair value of the Monetary assets and liabilities denominated in foreign currencies consideration, including contingent consideration, given on the date at the reporting date are translated to Sri Lanka Rupees using the of transfer of title. The acquired identifiable assets, liabilities and spot foreign exchange rate ruling at that date and all differences contingent liabilities are measured at their fair values at the date arising on non-trading activities are taken to ‘Other operating of acquisition. Subsequent to the initial measurement the Bank income’ in the Income Statement. continues to recognise the investments in Subsidiaries at cost. Non monetary items in a foreign currency that are measured in The total assets and liabilities of the Subsidiaries as at the reporting terms of historical cost are translated using the exchange rates date are included in the Consolidated Statement of Financial as at the dates of the initial transactions. Non monetary items in Position. The total profit or loss for the year of the Subsidiaries is foreign currency measured at fair value are translated using the included in the Consolidated Statement of Comprehensive Income. exchange rates at the date when the fair value was determined.
The Non Controlling Interest is presented in the Consolidated Foreign exchange differences arising on the settlement or Statement of Financial Position within equity, separately from reporting of monetary items at rates different from those which the equity attributable to the Equity Holders of the Bank. Non were initially recorded are dealt with in the Income Statement. Controlling Interest in the profit or loss of the Group is disclosed in the Consolidated Statement of Comprehensive Income. Forward exchange contracts are valued at the forward market rates ruling on the reporting date. Resulting net unrealised gains or Where Subsidiaries have been acquired or sold during the year, losses are dealt with the Income Statement. their operating results have been included from the date of acquisition or to the date of disposal. 3.3 Financial Instruments - Initial Recognition, Classification and Subsequent Measurement Upon the loss of control, the Group derecognises the assets and 3.3.1 Date of Recognition liabilities of the Subsidiary, any Non Controlling interests and All financial assets and liabilities are initially recognized on the the other components of equity related to the Subsidiary. Any trade date, i.e., the date that the Group becomes a party to the surplus or deficit arising on the loss of control is recognised in the contractual provisions of the instrument. This includes ’regular Statement of Changes in Equity. If the Group retains any interest in way trades’. Regular way trades means purchases or sales of the previous Subsidiary, then such Interest is measured at fair value financial assets that require delivery of assets within the time frame at the date that control is lost. Subsequently it is accounted for as generally established by regulation or convention in the market an equity-accounted investee or in accordance with the Group’s place. accounting policy for financial instruments depending on the level of influence retained. 3.3.2 Classification and Initial Measurement of Financial Instruments All Subsidiaries of the Bank have been incorporated in Sri Lanka. The classification of financial instruments at the initial recognition depends on their purpose and characteristics and 3.1.3 Transactions Eliminated on Consolidation the Management’s intention in acquiring them. Further details on Intra-group balances and transactions and any unrealised income classification of financial assets and financial liabilities are given and expenses arising from Intra-group transactions are eliminated under 3.3.3 and 3.3.4 respectively. in preparing the Consolidated Financial Statements. Unrealised gains arising from transactions with equity accounted investees All financial instruments are measured initially at their fair value plus are eliminated to the extent of the Group’s interest in the investee transaction costs that are directly attributable to acquisition or issue against the investment in the investee. Unrealized losses are of such financial instruments except in the case of financial assets eliminated in the same way as unrealized gains, except that they and financial liabilities at fair value through profit or loss as per the are eliminated to the extent that there is no evidence of impairment. Sri Lanka Accounting Standard - LKAS 39 (Financial Instruments: Recognition and Measurement). Transaction cost in relation to financial assets and financial liabilities at fair value through profit 3.1.4 Material Gains or Losses, Provisional Values or Error and loss are dealt with through Income Statement. Corrections There were no material gains or losses, provisional values or error 3.3.2.1 ‘Day 1’ Profit or Loss corrections recognised during the year in respect of business When the transaction price differs from the fair value of other combinations that took place in previous periods. observable current market transactions in the same instrument, or Annual Report 2013 Sampath Bank PLC PLC Bank Sampath 2013 Annual Report
227 NOTES TO THE FINANCIAL STATEMENTS
based on a valuation technique whose variables include only data 3.3.3.1.2 Financial Assets Designated at Fair Value through Profit from observable markets, the Group immediately recognises the or Loss (FVtPL) difference between the transaction price and fair value (a ‘Day 1’ The Group designates financial assets at fair value through profit or profit or loss) in ‘net trading income’. loss in the following circumstances: Such designation eliminates or significantly reduces 3.3.3 Classification and Subsequent Measurement of Financial measurement or recognition inconsistency that would Assets otherwise arise from measuring the assets At the inception a financial asset is classified into one of the The assets are part of a group of financial assets, financial following: liabilities or both, which are managed and their performance a. Financial assets at fair value through profit or loss evaluated on a fair value basis, in accordance with a i. Financial assets held for trading documented risk management or investment strategy. ii. Financial assets designated at fair value through profit or loss The asset contains one or more embedded derivatives that iii. Financial assets available-for-sale significantly modify the cash flows that would otherwise have b. Held-to-maturity financial investments been required under the contract. c. Loans and receivables to banks and other customers, Financial assets at fair value through profit or loss are recorded The subsequent measurement of financial assets depends on their in the Statement of Financial Position at fair value. Changes in classification. fair value are recorded in ‘net gain or loss on financial instrument designated at fair value through profit or loss’. Interest earned is 3.3.3.1Financial Assets at Fair Value through Profit or Loss accrued in ‘interest income’, using the effective interest rate (EIR) A financial asset is classified as fair value through profit or loss if it method, while dividend income is recorded in ‘other operating is held for trading or is designated at fair value through profit or loss. income’ when the right to the payment has been established. Included in this classification are loans and receivables to customers 3.3.3.1.1 Financial Assets Held for Trading which are economically hedged by credit derivatives and do not Financial assets are classified as held for trading if they are qualify for hedge accounting, as well as notes issued which are acquired principally for the purpose of selling or repurchasing in the managed on a fair value basis. near term or holds as a part of a portfolio that is managed together for short-term profit or position taking. This category also includes The Group has not designated any financial assets upon initial derivative financial instruments entered into by the Group that are recognition as designated at fair value through profit or loss. not designated as hedging instruments in hedge relationships as defined by Sri Lanka Accounting Standard - LKAS 39 (Financial 3.3.3.1.3 Available for Sale Financial Investments Instruments: Recognition and Measurement). Available for sale investments include equity and debt securities. Equity investments classified as ‘available for sale’ are those which Financial assets held for trading are recorded in the Statement of are neither classified as ‘held for trading’ nor ‘designated at fair Financial Position at fair value. Changes in fair value are recognized value through profit or loss’. Debt securities in this category are in ‘Net trading income’. Interest and dividend income is recorded in intended to be held for an indefinite period of time and may be ‘Net trading income’ according to the terms of the contract, or when sold in response to needs for liquidity or in response to changes in the right to receive the payment has been established. the market conditions. The Group has not designated any loans or receivables as available for sale. The Group evaluates its held for trading asset portfolio, other than derivatives, to determine whether the intention to sell them in the After initial measurement, available for sale financial investments are near future is still appropriate. When the Group is unable to trade subsequently measured at fair value. Unrealised gains and losses these financial assets due to inactive markets and management’s are recognised directly in Equity through ‘other comprehensive intention to sell them in the foreseeable future significantly changes, income / expense’ in the ‘available for sale reserve’. When the the Group may select to reclassify these financial assets. investment is disposed of, the cumulative gain or loss previously recognised in Equity is recognised in the Income Statement in Financial assets held for trading include instruments such as ‘other operating income’. Where the Group holds more than one Government securities and equity instruments that have been investment in the same security, they are deemed to be disposed of acquired principally for the purpose of selling or repurchasing in the on a first–in first–out basis. Interest earned whilst holding ‘available near term and derivatives, including separated embedded derivatives for sale financial investments’ is reported as ‘interest income’ using explained in 3.3.11 unless they are designated as effective hedging the effective interest rate (EIR). Dividend earned whilst holding instruments. ‘available for sale financial investments’ are recognised in the Income Statement as ‘other operating income’ when the right of Details of ‘financial assets held for trading’ are given in Note 23 to payment has been established. The losses arising from impairment the Financial Statements. of such investments are recognised in the Income Statement in
228 ‘Impairment losses on financial investments’ and removed from the The Group may enter into certain lending commitments where the ‘available for sale reserve’. loan, on drawdown, is expected to be classified as ‘held for trading’ because the intent is to sell the loans in the short term. These Details of ‘financial investments - available for sale’ are given in commitments to lend are recorded as derivatives and measured Note 28 to the Financial Statements. at fair value through profit or loss. Where the loan, on drawdown, is expected to be retained by the Group, and not sold in the short 3.3.3.1.4 Held to Maturity Financial Investments term, the commitment is recorded only when it is an onerous Held to maturity financial investments are non derivative financial contract that is likely to give rise to a loss. assets with fixed or determinable payments and fixed maturities, which the Group has the intention and ability to hold to maturity. Details of ‘loans and receivables to banks and other customers’ are After the initial recognition, held to maturity financial investments given in Note 25 and Note 26 to the Financial Statements. are subsequently measured at amortised cost using the effective interest rate (EIR), less impairment. Amortised cost is calculated 3.3.3.1.6 Cash and Cash Equivalents by taking into account any discount or premium on acquisition Cash and cash equivalents comprise cash in hand, balances with and fees that are an integral part of the EIR. The amortisation is banks, and money at call and short notice that are subject to an included in ‘interest income’ in the Income Statement. The losses insignificant risk of changes in their value. arising from impairment of such investments are recognised in ‘impairment gain / loss on loans and receivables’ in the Income Cash and cash equivalents are carried at amortised cost in the Statement. Statement of Financial Position.
If the Group were to sell or reclassify more than an insignificant Details of cash and cash equivalents are given in Note 19 to amount of held to maturity investments before maturity [other Financial Statements. than in certain specific circumstances permitted in the Sri Lanka Accounting Standard - LKAS 39 (Financial Instruments: For the purpose of the Statement of Cash Flow, cash and cash Recognition and Measurement)], the entire category would be equivalents consist of cash and short term deposits as defined tainted and would have to be reclassified as ‘available for sale’. above, net of unfavorable Nostro balances. Furthermore, the Group would be prohibited from classifying any financial asset as ‘held to maturity’ during the following two years. 3.3.3.1.7 Statutory Deposit with Central Bank of Sri Lanka The Monetary Law Act requires that all commercial banks Details of ‘financial investments - held to maturity’ are given in Note operating in Sri Lanka to maintain a statutory reserve equal to 6% 29 to the Financial Statements. (2012: 8%) against all deposit liabilities denominated in Sri Lankan Rupees. 3.3.3.1.5 Loans and Receivables to Banks and Other Customers Loans and receivables to banks and other customers include non The details of statutory deposit with Central Bank are given in Note derivative financial assets with fixed or determinable payments that 20 to the Financial Statements. are not quoted in an active market, other than: Those that the Group intends to sell immediately or in the 3.3.4 Classification and Subsequent Measurement of near term and those that the Group, upon initial recognition, Financial Liabilities designates as fair value through profit or loss At the inception the Group determines the classification of its Those that the Group, upon initial recognition, designates as financial liabilities. Accordingly financial liabilities are classified as: available for sale a. Financial liabilities at fair value through profit or loss (FVtPL) Those for which the Group may not recover substantially i. Financial liabilities held for trading all of its initial investment, other than because of credit ii. Financial liabilities designated at fair value through profit deterioration or loss b. Financial liabilities at amortised cost. After initial measurement, loans and receivables to banks and other customers are subsequently measured at amortised cost using 3.3.4.1 Financial Liabilities at Fair Value through Profit or Loss the effective interest rate (EIR), less allowance for impairment. Financial liabilities at FVtPL include financial liabilities held for Amortised cost is calculated by taking into account any discount trading and financial liabilities designated upon initial recognition as or premium on acquisition and fees and costs that are an integral at fair value through profit or loss. Subsequent to initial recognition, part of the EIR. The amortisation is included in ‘interest income’ financial liabilities at FVtPL are measured at fair value, and changes in the Income Statement. The losses arising from impairment are there in recognized in profit or loss. recognised in ‘impairment gain / loss on loans and receivables’ in the Income Statement. Financial liabilities are classified as held for trading if they are acquired principally for the purpose of selling or repurchasing in the near term or holds as a part of a portfolio that is managed together Annual Report 2013 Sampath Bank PLC PLC Bank Sampath 2013 Annual Report
229 NOTES TO THE FINANCIAL STATEMENTS
for short-term profit or position taking. This category includes Reclassifications are recorded at fair value at the date of derivatives financial instruments entered into by the Group that are reclassification, which becomes the new amortised cost. not designated as hedging instruments in hedge relationships as defined by the Sri Lanka Accounting Standard - LKAS 39 (Financial For a financial asset reclassified out of the ’available for sale’ Instruments: Recognition and Measurement). category, any previous gain or loss on that asset that has been recognised in Equity is amortised to profit or loss over the remaining Separated embedded derivatives are also classified as held for life of the investment using the effective interest rate (EIR). Any trading unless they are designated as effective hedging instruments. difference between the new amortised cost and the expected cash flows is also amortised over the remaining life of the asset using the Gains or losses on liabilities held for trading are recognised in the EIR. If the asset is subsequently determined to be impaired, then the Income Statement. amount recorded in Equity is recycled to the Income Statement.
The Group has not designated any financial liabilities upon initial The Group may reclassify a non derivative trading asset out of recognition as at fair value through profit or loss. the ‘held for trading’ category and into the ‘loans and receivables’ category if it meets the definition of loans and receivables and the 3.3.4.2 Financial Liabilities at Amortised Cost Group has the intention and ability to hold the financial asset for the Financial Instruments issued by the Group that are not designated foreseeable future or until maturity. If a financial asset is reclassified, at fair value through profit or loss, are classified as liabilities under and if the Group subsequently increases its estimates of future ‘due to banks’, ‘due to other customers’ and ‘debt issued and cash receipts as a result of increased recoverability of those cash other borrowed funds’ as appropriate, where the substance of the receipts, the effect of that increase is recognised as an adjustment contractual arrangement results in the Group having an obligation to the EIR from the date of the change in estimate. either to deliver cash or another financial asset to the holder, or to satisfy the obligation other than by the exchange of a fixed amount Reclassification is at the election of management, and is determined of cash or another financial asset for a fixed number of own equity on an instrument by instrument basis. shares at amortised cost using the EIR method. The Group has not reclassified any financial assets during the year. After initial recognition, such financial liabilities are substantially measured at amortised cost using the EIR method. Amortised 3.3.6 Derecognition of Financial Instruments cost is calculated by taking into account any discount or premium 3.3.6.1 Derecognition of Financial Assets on the issue and costs that are an integral part of the EIR. The The Group derecognises a financial asset (or, where applicable a EIR amortisation is included in ‘interest expenses’ in the Income part of a financial asset or part of a group of similar financial assets) Statement. Gains and losses are recognised in the Income when: Statement when the liabilities are derecognised as well as through the rights to receive cash flows from the asset have expired; the EIR amortisation process. or the Group has transferred its rights to receive cash flows The details of the Group’s financial liabilities at amortised cost are from the asset or has assumed an obligation to pay the shown in Note 35, Note 36, Note 37 and Note 40 to the Financial received cash flows in full without material delay to a third Statements. party under a ‘pass–through’ arrangement and either the Group has transferred substantially all the risks and rewards 3.3.5 Reclassification of Financial Instruments of the asset or the Group has neither transferred nor retained The Group does not reclassify any financial instrument into the ‘fair substantially all the risks and rewards of the asset, but has value through profit or loss’ category after initial recognition. Also transferred control of the asset. the Group does not reclassify any financial instrument out of the ‘fair value through profit or loss’ category if upon initial recognition it was When the Group has transferred its rights to receive cash flows designated as at fair value through profit or loss. from an asset or has entered into a pass–through arrangement, and has neither transferred nor retained substantially all of the risks and The Group reclassifies non derivative financial assets out of the rewards of the asset nor transferred control of the asset, the asset ‘held for trading’ category and into the ‘available for sale’, ‘loans is recognised to the extent of the Group’s continuing involvement and receivables’, or ’held to maturity’ categories as permitted by the in the asset. In that case, the Group also recognises an associated Sri Lanka Accounting Standard - LKAS 39 (Financial Instruments: liability. The transferred asset and the associated liability are Recognition and Measurement). In certain circumstances the Group measured on a basis that reflects the rights and obligations that the is also permitted to reclassify financial assets out of the ‘available Group has retained. for sale’ category and into the ’loans and receivables’, ‘held for trading’ or ‘held- to-maturity’ category. Continuing involvement that takes the form of a guarantee over the transferred asset is measured at the lower of the original carrying
230 amount of the asset and the maximum amount of consideration which case the obligation to return the securities is recorded as a that the Group could be required to repay. trading liability and measured at fair value with any gains or losses included in ‘net trading income’. 3.3.6.2 Derecognition of Financial Liabilities A financial liability is derecognised when the obligation under the 3.3.9 Offsetting of Financial Instruments liability is discharged or cancelled or expired. Financial assets and financial liabilities are offset and the net amount presented in the Statement of Financial Position when, and Where an existing financial liability is replaced by another from only when, the Group has a legal right to set off the recognised the same lender on substantially different terms, or the terms of amounts and it intends either to settle on a net basis or to realise an existing liability are substantially modified, such an exchange the asset and settle the liability simultaneously. or modification is treated as a derecognition of the original liability and the recognition of a new liability. The difference between the Income and expenses are presented on a net basis only when carrying value of the original financial liability and the consideration permitted under LKASs / SLFRSs, or for gains and losses arising paid is recognised in profit or loss. from a group of similar transactions such as in the Group’s trading activity. 3.3.7 Repurchase and Reverse Repurchase Agreement Securities sold under agreements to repurchase at a specified 3.3.10 Impairment of Financial Assets future date are not derecognised from the Statement of Financial The Group assesses at each reporting date, whether there is any Position as the Group retains substantially all of the risks and objective evidence that a financial asset or a group of financial rewards of ownership. The corresponding cash received is assets not carried at fair value through profit or loss is impaired. recognised in the Statement of Financial Position as an asset with A financial asset or a group of financial assets is deemed to be a corresponding obligation to return it, including accrued interest impaired if, and only if, there is objective evidence of impairment as as a liability within ‘cash collateral on securities lent and repurchase a result of one or more events that have occurred after the initial agreements’, reflecting the transaction’s economic substance as a recognition of the asset (an ‘incurred loss event’) and that loss loan to the Group. The difference between the sale and repurchase event (or events) has an impact on the estimated future cash flows prices is treated as interest expense and is accrued over the life of the financial asset or the group of financial assets that can be of agreement using the EIR. When the counterparty has the right reliably estimated. to sell or repledge the securities, the Group reclassifies those securities in its Statement of Financial Position to ‘financial assets 3.3.10.1 Impairment of Financial Assets carried at Amortised Cost held for trading pledged as collateral’ or to ‘financial investments For financial assets carried at amortised cost, such as amounts available for sale pledged as collateral’, as appropriate. due from banks, loans and advances taken by customers, held to maturity investments etc., the Group first assesses individually Conversely, securities purchased under agreements to resell whether objective evidence of impairment exists for financial at a specified future date are not recognised in the Statement assets that are individually significant, or collectively for financial of Financial Position. The consideration paid, including accrued assets that are not individually significant. In the event the Group interest, is recorded in the Statement of Financial Position, within determines that no objective evidence of impairment exists for ‘cash collateral on securities borrowed and reverse repurchase an individually assessed financial asset, it includes the asset in agreements’, reflecting the transaction’s economic substance as a a group of financial assets with similar credit risk characteristics loan by the Group. The difference between the purchase and resale and collectively assesses them for impairment. However assets prices is recorded in ‘net interest income’ and is accrued over the that are individually assessed for impairment and for which an life of the agreement using the EIR. impairment loss is, or continues to be, recognised are not included in a collective assessment of impairment If securities purchased under agreement to resell are subsequently sold to third parties, the obligation to return the securities is 3.3.10.1.1 Individually Assessed Financial Assets recorded as a short sale within ‘financial liabilities held for trading’ The criteria used to determine whether there is objective evidence and measured at fair value with any gains or losses included in ‘net of impairment include: trading income’. Known cash flow difficulties experienced by the borrower; Past due contractual payments of either principal or interest; 3.3.8 Securities Lending and Borrowing Breach of loan covenants or conditions; Securities lending and borrowing transactions are usually The probability that the borrower will enter bankruptcy or collateralised by securities or cash. The transfer of the Securities other financial realisation; and to counterparties is only reflected on the Statement of Financial A significant downgrading in credit rating by an external Position if the risks and rewards of ownership are also transferred. credit rating agency. Cash advanced or received as collateral is recorded as an asset or liability. Securities borrowed are not recognised in the Statement If there is objective evidence that an impairment loss has been of Financial Position, unless they are then sold to third parties, in incurred, the amount of the loss is measured by discounting Annual Report 2013 Sampath Bank PLC PLC Bank Sampath 2013 Annual Report
231 NOTES TO THE FINANCIAL STATEMENTS
the expected future cash flows of a financial asset at its original The collective impairment allowance is determined after taking into effective interest rate and comparing the resultant present value account: with the financial asset’s current carrying amount. The impairment Historical loss experience in portfolios of similar credit risk; allowances on individually significant accounts are reviewed more and regularly when circumstances require. This normally encompasses Management’s experienced judgment as to whether current re-assessment of the enforceability of any collateral held and the economic and credit conditions are such that the actual level timing and amount of actual and anticipated receipts. Individually of inherent losses at the reporting date is likely to be greater assessed impairment allowances are only released when there is or less than that suggested by historical experience. reasonable and objective evidence of a reduction in the established loss estimate. Homogeneous groups of financial assets Statistical methods are used to determine impairment losses on a When impairment losses are determined for those financial assets collective basis for homogeneous groups of financial assets. Losses where objective evidence of impairment exists, the following factors in these groups of financial assets are recorded on an individual are considered: basis when individual financial assets are written off, at which point Bank’s aggregate exposure to the customer; they are removed from the group. The viability of the customer’s business model and their capacity to trade successfully out of financial difficulties and Two alternative methods are used to calculate historical loss generate sufficient cash flow to service debt obligations; experience on a collective basis: The amount and timing of expected receipts and recoveries; When the group of financial assets by nature long term, The extent of other creditors’ commitments ranking ahead the Group uses Probability of Default method. Under this of, or pari-passu with, the Bank and the likelihood of other methodology the movements in number of customers into bad creditors continuing to support the company; categories over the periods are used to estimate the amount The complexity of determining the aggregate amount and of financial assets that will eventually be written off as a result ranking of all creditor claims and the extent to which legal of the events occurring before the reporting date which the and insurance uncertainties are evident; Group is not able to identify on an individual financial asset The realisable value of security (or other credit mitigants) and basis, and that can be reliably estimated. likelihood of successful repossession; When the group of loan by nature short term, the Group The likely deduction of any costs involved in recovery of uses Net Flow Rate method. Under this methodology the amounts outstanding; movement in the outstanding balance of customers into bad The ability of the borrower to obtain, and make payments in, categories over the periods are used to estimate the amount the currency of the loan if not denominated in local currency; of financial assets that will eventually be written off as a result and of the events occurring before the reporting date which the The likely dividend available on liquidation or bankruptcy; Group is not able to identify on an individual loan basis, and that can be reliably estimated. 3.3.10.1.2 Collectively Assessed Financial Assets Impairment is assessed on a collective basis in two circumstances: Under both methodologies, loans are grouped into ranges according To cover losses which have been incurred but have not yet to the number of days in arrears and statistical analysis is used been identified on loans subject to individual assessment; and to estimate the likelihood that loans in each range will progress For homogeneous groups of loans that are not considered through the various stages of delinquency, and ultimately prove individually significant. irrecoverable.
Incurred but not yet identified impairment Current economic conditions and portfolio risk factors are also Individually assessed financial assets for which no evidence of loss evaluated when calculating the appropriate level of allowance has been specifically identified on an individual basis are grouped required to cover inherent loss. These additional macro and portfolio together according to their credit risk characteristics for the purpose risk factors may include: of calculating an estimated collective loss. This reflects impairment Recent loan portfolio growth and product mix, losses that the Group has incurred as a result of events occurring Unemployment rates, before the reporting date, which the Group is not able to identify on Gross Domestic Production (GDP) growth, an individual loan basis, and that can be reliably estimated. These Inflation, losses will only be individually identified in the future. As soon as Exchange rates, information becomes available which identifies losses on individual Interest rates financial assets within the group, those financial assets are removed Changes in Government laws and regulations from the group and assessed on an individual basis for impairment. 3.3.10.1.3 Reversals of Impairment If the amount of an impairment loss decreases in a subsequent period, and the decrease can be related objectively to an event
232 occurring after the impairment was recognised, the excess is at amortised cost. However, the amount recorded for impairment written back by reducing the financial asset impairment allowance is the cumulative loss measured as the difference between the account accordingly. The write-back is recognised in the Income amortised cost and the current fair value, less any impairment loss Statement. on that investment previously recognised in the Income Statement. Future interest income is based on the reduced carrying amount 3.3.10.1.4 Write-off of Financial Assets carried at Amortised Cost and is accrued using the rate of interest used to discount the future Financial assets (and the related impairment allowance accounts) cash flows for the purpose of measuring the impairment loss. The are normally written off, either partially or in full, when there is no interest income is recorded as part of ‘Interest income’. If, in a realistic prospect of recovery. Where financial assets are secured, subsequent period, the fair value of a debt instrument increases this is generally after receipt of any proceeds from the realisation and the increase can be objectively related to a credit event of security. occurring after the impairment loss was recognised in the Income Statement, the impairment loss is reversed through the Income 3.3.10.1.5 Impairment of Rescheduled Loans and Advances Statement. Where possible, the Group seeks to restructure loans rather than to take possession of collateral. This may involve extending In the case of equity investments classified as available for sale, the payment arrangements and the agreement of new loan objective evidence would also include a ‘significant’ or ‘prolonged’ conditions. Once the terms have been renegotiated, any impairment decline in the fair value of the investment below its cost. Where is measured using the original EIR as calculated before the there is evidence of impairment, the cumulative loss measured modification of terms and the loan is no longer considered past as the difference between the acquisition cost and the current due. Management continually reviews renegotiated loans to ensure fair value, less any impairment loss on that investment previously that all criteria are met and that future payments are likely to occur. recognised in the Income Statement is removed from equity and The loans continue to be subjected to an individual or collective recognised in the Income Statement. However, any subsequent impairment assessment, calculated using the loan’s original EIR. recovery in the fair value of an impaired available for sale equity security is recognised in Other Comprehensive Income. 3.3.10.1.6 Collateral Valuation The Group seeks to use collateral, where possible, to mitigate its The Group writes-off certain Financial Investments - Available for risks on financial assets. The collateral comes in various forms Sale when they are determined to be uncollectible. such as cash, gold, securities, letters of credit/guarantees, real estate, receivables, inventories, other non-financial assets and 3.3.11 Derivative Financial Instruments and Hedge credit enhancements such as netting agreements. The fair value Accounting of collateral is generally assessed, at a minimum, at inception and Derivatives are financial instruments that derive their value in based on the guidelines issued by the Central Bank of Sri Lanka. response to changes in interest rates, financial instrument prices, commodity prices, foreign exchange rates, credit risk and indices. To the extent possible, the Group uses active market data for Derivatives are categorized as trading unless they are designated valuing financial assets, held as collateral. Other financial assets as hedging instruments. which do not have readily determinable market value are valued using models. Non-financial collateral, such as real estate, is valued All derivatives are initially recognized and subsequently measured based on data provided by third parties such as independent at fair value, with all revaluation gains recognized in the Income valuers, Audited Financial Statements and other independent Statement (except where cash flow or net investment hedging has sources. been achieved, in which case the effective portion of changes in fair value is recognized within Other Comprehensive Income). 3.3.10.1.7 Collateral Repossessed The Group’s policy is to determine whether a repossessed asset Fair values may be obtained from quoted market prices in active is best used for its internal operations or should be sold. Assets markets, recent market transactions, and valuation techniques, determined to be useful for the internal operations are transferred including discounted cash flow models and option pricing models, to their relevant asset category at the lower of their repossessed as appropriate. Where the initially recognized fair value of a value or the carrying value of the original secured asset. derivative contract is based on a valuation model that uses inputs that are not observable in the market, it follows the same initial 3.3.10.2 Impairment of Financial Assets - Available for Sale recognition accounting policy as for other financial assets and For available for sale financial investments, the Group assesses liabilities. All derivatives are carried as assets when fair value at each reporting date whether there is objective evidence that an is positive and as liabilities when fair value is negative. Certain investment is impaired. derivatives embedded in other financial instruments, such as the conversion option in a convertible bond held, are valued as separate In the case of debt instruments classified as available for sale, the derivatives when their economic characteristics and risks are not Group assesses individually whether there is objective evidence of closely related to those of the host contract and the host contract impairment based on the same criteria as financial assets carried is not carried at fair value through profit or loss. These embedded Annual Report 2013 Sampath Bank PLC PLC Bank Sampath 2013 Annual Report
233 NOTES TO THE FINANCIAL STATEMENTS
derivatives are measured at fair value, with changes in fair value arrangement is dependent on the use of a specific asset or assets recognized in the Income Statement. Embedded derivatives continue and the arrangement conveys a right to use the asset. to be presented with the host contract and are not separately disclosed or included within derivatives. 3.4.1 Finance Lease Agreements which transfer to counterparties substantially all the The method of recognizing the resulting fair value gain or loss risks and rewards incidental to the ownership of assets, but not depends on whether the derivative is designated as a hedging necessarily legal title, are classified as finance leases. When the instrument, and if so, the nature of the item being hedged. The Bank is the lessor under finance leases the amounts due under Group designates certain derivatives as either: the leases, after deduction of unearned charges, are included in (1) hedges of the fair value of recognised assets or liabilities or ‘loans and advances to banks’ or ‘loans and advances to customers’, firm commitments (fair value hedge); as appropriate. The finance income receivable is recognised in (2) hedges of highly probable future cash flows attributable to a ‘net interest income’ over the periods of the leases so as to give a recognised asset or liability, or a forecast transaction (cash constant rate of return on the net investment in the leases. flow hedge); or (3) hedges of the net investment of a foreign operation (net When the Bank is a lessee under finance leases, the leased assets investment hedges). are capitalised and included in ‘property, plant and equipment’ and the corresponding liability to the lessor is included in ‘other liabilities’. Hedge accounting is used for derivatives designated in this way A finance lease and its corresponding liability are recognised initially provided certain criteria are met. The Group documents, at the at the fair value of the asset or, if lower, the present value of the inception of the transaction, the relationship between hedging minimum lease payments. Finance charges payable are recognised instruments and hedged items, as well as its risk management in ‘net interest income’ over the period of the lease based on the objective and strategy for undertaking various hedge transactions. interest rate implicit in the lease so as to give a constant rate of The Group also documents its assessment, both at hedge inception interest on the remaining balance of the liability. and on an ongoing basis, of whether the derivatives that are used in hedging transactions are highly effective in offsetting changes in 3.4.2 Operating Lease fair values or cash flows of hedged items. All other leases are classified as operating leases. When acting as lessor, the Bank includes the assets subject to operating leases in Details of the derivative financial instruments held by the Group, ‘property, plant and equipment’ and accounts for them accordingly. including those held for hedge accounting are provided in Note 22 Impairment losses are recognised to the extent that residual values to the Financial Statements. are not fully recoverable and the carrying value of the assets is thereby impaired. 3.3.11.1 Cash Flow Hedge The effective portion of changes in the fair value of derivatives When the Bank is the lessee, leased assets are not recognised on that are designated and qualify as cash flow hedging instruments the Statement of Financial Position. Rentals payable and receivable is recognised in Equity. The gain or loss relating to the ineffective under operating leases are accounted for on a straight-line basis portion is recognized immediately in the Income Statement. over the periods of the leases and are included in ‘other operating expenses’ and ‘other operating income’, respectively. Amounts accumulated in Equity are reclassified to the Income Statement in the periods in which the hedged item affects profit or 3.5 Gold Inventory loss. When a hedging instrument expires or is sold, or when a hedge The gold inventory is valued at lower of cost and net realizable value. no longer meets the criteria for hedge accounting, any cumulative Cost includes all costs of purchase, costs of conversion and other gain or loss existing in Equity at that time remains in Equity and is costs incurred in bringing the inventory to its present location and recognised when the forecast transaction is ultimately recognised condition. Net realizable value is the estimated selling price in the in the Income Statement. When a forecast transaction is no longer ordinary course of business less the estimated cost necessary to expected to occur, the cumulative gain or loss that was reported in make the sale. Equity is immediately transferred to the Income Statement. 3.6 Property, Plant and Equipment 3.3.11.2 Derivatives that do not qualify for Hedge Accounting Property, plant and equipment are tangible items that are held for Changes in the fair value of any derivative instruments not qualifying use in the production or supply of goods or services, for rental to for hedge accounting are recognized immediately in the Income others or for administrative purposes and are expected to be used Statement. during more than one period. The Group applies the requirements of the Sri Lanka Accounting Standard - LKAS 16 (Property, Plant and 3.4 Finance and Operating Leases Equipment) in accounting for these assets. The determination of whether an arrangement is a lease, or it contains a lease, is based on the substance of the arrangement and requires an assessment of whether the fulfillment of the
234 3.6.1 Recognition be reliably measured. The costs of day to day servicing of property, Property, plant and equipment are recognised if it is probable that plant and equipment are charged to the Income Statement as future economic benefits associated with the asset will flow to the incurred. Costs incurred in using or redeploying an item is not Group and the cost of the asset can be reliably measured. included under carrying amount of an item.
3.6.2 Measurement 3.6.6 Derecognition An item of property, plant and equipment that qualifies for The carrying amount of an item of property, plant and equipment is recognition as an asset is initially measured at its cost. Cost derecognised on disposal or when no future economic benefits are includes expenditure that is directly attributable to the acquisition of expected from its use or disposal. The gain or loss arising from de- the asset and cost incurred subsequently to add to, replace part of, recognition of an item of property, plant and equipment is included or service it. The cost of self constructed assets includes the cost in the Income Statement when the item is derecognised. of materials and direct labour, any other costs directly attributable to bringing the asset to a working condition for its intended use and When replacement costs are recognised in the carrying amount the costs of dismantling and removing the items and restoring the of an item of property, plant and equipment, the remaining site on which they are located. Purchased software that is integral carrying amount of the replaced part is derecognised. Major to the functionality of the related equipment is capitalised as part of inspection costs are capitalised. At each such capitalisation, the computer equipment. remaining carrying amount of the previous cost of inspections is derecognised. 3.6.3 Cost Model The Group applies cost model to property, plant and equipment 3.6.7 Depreciation except for freehold land and buildings and records at cost of The Group provides depreciation from the date the assets are purchase or construction together with any incidental expenses available for use up to the date of disposal, at the following rates on thereon less accumulated depreciation and any accumulated a straight line basis over the periods appropriate to the estimated impairment losses. Such cost includes the cost of replacing part of useful lives based on the pattern in which the asset’s future the equipment when that cost is incurred, if the recognition criteria economic benefits are expected to be consumed by the Group of are met. the different types of assets. Depreciation of an asset ceases at the earlier of the date that the asset is classified as held for sale 3.6.4 Revaluation Model or the date that the asset is derecognised. Depreciation does not The Group applies the revaluation model to the entire class of cease when the assets become idle or is retired from active use freehold land and buildings. Such properties are carried at a unless the asset is fully depreciated. revalued amount, being their fair value at the date of revaluation less any subsequent accumulated depreciation and subsequent Asset Category Depreciation Rate accumulated impairment losses. Freehold land and buildings of per annum the Group are revalued every three years on a roll over basis to Freehold buildings 2% - 2.5% ensure that the carrying amounts do not differ materially from Leasehold properties and improvements 10% - 25% the fair values at the reporting date. On revaluation of an asset, Computer equipment 5% - 20% any increase in the carrying amount is recognised in ‘Other Motor vehicles 12.5% Comprehensive Income’ and accumulated in Equity, under capital Office equipment 5% - 20% reserve or used to reverse a previous revaluation decrease relating to the same asset, which was charged to the Income Statement. 3.6.8 Changes in Estimates In this circumstance, the increase is recognised as income to the Depreciation methods, useful lives and residual values are extent of the previous write down. Any decrease in the carrying reassessed at each reporting date and adjusted if appropriate. amount is recognised as an expense in the Income Statement or debited in the Other Comprehensive Income to the extent of any During the year ended 31st December 2013 the Group conducted credit balance existing in the capital reserve in respect of that an operational efficiency review and concluded that there is no asset. The decrease recognised in Other Comprehensive Income requirement to change estimates. reduces the amount accumulated in Equity under capital reserves. Any balance remaining in the revaluation reserve in respect of an 3.6.9 Capital Work in Progress asset is transferred directly to Retained Earnings on retirement or Capital work-in-progress is stated at cost. These are expenses of disposal of the asset. a capital nature directly incurred in the construction of buildings, major plant and machinery and system development, awaiting 3.6.5 Subsequent Cost capitalisation. Capital work-in-progress would be transferred to The subsequent cost of replacing a component of an item of the relevant asset when it is available for use, i.e. when it is in the property, plant and equipment is recognised in the carrying amount location and condition necessary for it to be capable of operating in of the item if it is probable that the future economic benefits the manner intended by management. Capital work-in-progress is embodied within that part will flow to the Group and its cost can stated at cost less any accumulated impairment losses. Annual Report 2013 Sampath Bank PLC PLC Bank Sampath 2013 Annual Report
235 NOTES TO THE FINANCIAL STATEMENTS
3.6.10 Borrowing Costs Asset Category Useful life Borrowing costs that are directly attributable to the acquisition, Years construction or production of a qualifying asset have been Computer software 2 - 6 capitalised as part of the cost of the asset in accordance with Licenses 5 - 20 Sri Lanka Accounting Standard - LKAS 23 (Borrowing Costs). Capitalisation of borrowing costs ceases when substantially all the 3.8 Fiduciary Assets activities necessary to prepare the qualifying asset for its intended The Group provides fiduciary services that result in the holding use are completed. of the assets on behalf of its customers. Assets held in fiduciary capacity are not reported in the Financial Statements, as they are 3.7 Intangible Assets not assets of the Group. An intangible asset is an identifiable non monetary asset without physical substance held for use in the production or supply of goods 3.9 Impairment of Non-financial Assets or services, for rental to others or for administrative purposes. The Group and the Bank assess at each reporting date whether there is an indication that an asset may be impaired. If any indication 3.7.1 Basis of Recognition exists, or when annual impairment testing for an asset is required, An intangible asset is recognised if it is probable that the future the Group estimates the asset’s recoverable amount. An asset’s economic benefits that are attributable to the asset will flow to recoverable amount is the higher of an asset’s or Cash Generating the entity and the cost of the assets can be measured reliably. An Unit’s (CGU’s) fair value less costs to sell and its value in use. Where intangible asset is initially measured at cost. the carrying amount of an asset or CGU exceeds its recoverable amount, the asset is considered impaired and is written down to its 3.7.2 Computer Software recoverable amount. Cost of purchased licenses and all computer software costs incurred, licensed for use by the Group, which are not integrally In assessing value in use, the estimated future cash flows are related to associated hardware, which can be clearly identified, discounted to their present value using a pre–tax discount rate that reliably measured and it’s probable that they will lead to future reflects current market assessments of the time value of money and economic benefits, are included in the Statement of Financial the risks specific to the asset. In determining fair value less costs to Position under the category Intangible Assets and carried at cost sell, an appropriate valuation model is used. These calculations are less accumulated amortisation and any accumulated impairment corroborated by valuation multiples, quoted share prices for publicly losses. traded subsidiaries or other available fair value indicators.
3.7.3 Subsequent Expenditure For assets excluding goodwill, an assessment is made at each Expenditure incurred on software is capitalised only when it is reporting date as to whether there is any indication that previously probable that this expenditure will enable the asset to generate recognised impairment losses may no longer exist or may have future economic benefits in excess of its originally assessed decreased. If such indication exists, the Group estimates the asset’s standard of performance and this expenditure can be measured and or CGU’s recoverable amount. A previously recognised impairment attributed to the asset reliably. All other expenditure is expensed as loss is reversed only if there has been a change in the assumptions incurred. used to determine the asset’s recoverable amount since the last impairment loss was recognised. The reversal is limited so that 3.7.4 Derecognition of Intangible Assets the carrying amount of the asset does not exceed its recoverable The carrying amount of an item of intangible asset is derecognised amount, nor exceeds the carrying amount that would have been on disposal or when no future economic benefits are expected from determined, net of depreciation, had no impairment loss been its use. The gain or loss arising from de-recognition of an item of recognised for the asset in prior years. Such reversal is recognised intangible asset is included in the Income Statement when the item in the Income Statement. is derecognised. Impairment losses relating to goodwill are not reversed in future 3.7.5 Amortisation of Intangible Assets periods. Intangible assets, except for goodwill, are amortised on a straight line basis in the Income Statement from the date when the asset 3.10 Dividend Payable is available for use, over the best estimate of its useful economic Provision for final dividend is recognized at the time the dividend life based on a pattern in which the asset’s economic benefits are recommended and declared by the Board of Directors, is approved consumed by the Group. Amortisation methods, useful lives and by the shareholders. Interim dividend payable is recognised residual values are reviewed at each financial year-end and adjusted when the Board approves such dividend in accordance with the if appropriate. The Group and the Bank assume that there is no Companies Act No 7 of 2007. residual value for its intangible assets.
236 Dividend for the year that are declared after the reporting date are eligible for pension resign before retirement age, the Bank is are disclosed in Note No 45 to the Financial Statements as an liable to pay gratuity to such employees. Event after the Reporting Period in accordance with the Sri Lanka Accounting Standard - LKAS 10 (Events after the Reporting Period). An actuarial valuation is carried out at every year end to ascertain the full liability under the Fund. The valuation was carried out 3.11 Employee Benefits as at 31st December 2013 by Messrs Piyal S. Goonetilleke & 3.11.1 Defined Benefit Plans Associates, a qualified actuary. A defined benefit plan is a post employment benefit plan other than a defined contribution plan’ as defined in the Sri Lanka Accounting Recognition of Actuarial gains and losses: The Bank recognises Standard - LKAS 19 (Employee Benefits). Please refer 3.11.2 for the total actuarial gains and losses that arise in calculating the the definition of defined contribution plan. Bank’s obligation in respect of the plan in Other Comprehensive Income during the period in which it occurs. 3.11.1.1 Pension Fund The Bank has a Pension Fund for all members who joined the Bank Expected Return on Assets: Expected return on assets is zero as for permanent employment before 1st June 2003. A member is the plan is not pre funded. eligible for a monthly pension after attainment of 55 years of age and completion of 10 years uninterrupted service. Funding Arrangements: The Gratuity liability is not externally funded. The Bank measures the present value of the Pension obligation, which is a defined benefit plan with the advice of an independent All Subsidiary companies carry out actuarial valuations to ascertain professional actuary using the Projected Unit Credit method their respective gratuity liabilities. (PUC) as required by Sri Lanka Accounting Standard - LKAS 19 (Employee Benefits) 3.11.1.3 Other Long-term Employee Benefits The Bank’s net obligation in respect of long-term employee An actuarial valuation is carried out at every year end to ascertain benefits other than the pension fund and gratuity is the amount the full liability under the Fund. The last such valuation was carried of future benefit that employees have earned in return for their out as at 31st December 2013 by Messrs Piyal S. Goonetilleke & service in the current and prior periods; that benefit is discounted Associates, a qualified actuary. to determine its present value. The discount rate is the yield at the reporting date on government bonds that have maturity dates Recognition of Actuarial Gains and Losses: Actuarial gains and approximating to the terms of the Bank’s obligation. The calculation losses occur when the actual plan experience differs from the is performed using the Projected Unit Credit method. Any actuarial assumed. The Bank recognises the total actuarial gains and losses gains and losses are recognised in profit or loss in the period in that arise in calculating the Bank’s obligation in respect of the which they arise. The Bank’s liability towards the portion of the plan in Other Comprehensive Income during the period in which it accumulated leave which is expected to be utilised beyond one occurs. year from the end of the reporting period is treated as other long- term employee benefits. Expected Return on Assets: Expected return on assets is the expected return on pension fund at the assumed rate of return. 3.11.2 Defined Contribution Plans A defined contribution plan is a post employment benefit plan under Funding Arrangements: The assets of the fund are held which an entity pays fixed contributions into a separate entity (a separately from those of the Bank’s assets and are administered fund) and will have no legal or constructive obligation to pay further independently. contributions if the fund does not hold sufficient assets to pay all employee benefits relating to employee services in the current and The Subsidiaries do not operate pension funds. prior periods’ as defined in the Sri Lanka Accounting Standard - LKAS 19 (Employee Benefits). 3.11.1.2 Gratuity In compliance with the Gratuity Act No 12 of 1983 provision is The contribution payable to a defined contribution plan is in made in the accounts from the first year of service for gratuity proportion to the services rendered to the Group by the employees payable to employees who joined the Bank on or after 1st June and is recorded as an expense under ‘personnel expenses’ as and 2003, as they are not in pensionable service of the Bank. when they become due. Unpaid contributions are recorded as a liability. Provision is not made in the accounts for gratuity payable to employees who joined prior to 1st June 2003 and complete five 3.11.2.1 Employees’ Provident Fund or more years of continuous service, as the Bank has its own non- The Bank and the Employees contribute 12% and 8% respectively contributory pension scheme in force. However, if employees who on the salary of each employee to the approved private Provident Annual Report 2013 Sampath Bank PLC PLC Bank Sampath 2013 Annual Report
237 NOTES TO THE FINANCIAL STATEMENTS
Fund. All Subsidiary companies and their employees contribute 12% The amount recognised as a provision is the best estimate of the and 8% respectively on the salary of each employee to Employees’ expenditure required to settle the present obligation as at the Provident Fund. reporting date, taking into account the risks and uncertainties that surround the events and circumstances that affect the provision. 3.11.2.2 Employees’ Trust Fund The Group contributes 3% of the salary of each employee to the 4. SIGNIFICANT ACCOUNTING POLICIES - RECOGNITION Employees’ Trust Fund. OF INCOME AND EXPENSES Revenue is recognised to the extent that it is probable that the 3.11.3 Share Based Payment Transactions economic benefits will flow to the Group or Bank and the revenue 3.11.3.1 Equity Settled Share Based Payments Granted Prior to 1st can be reliably measured. The following specific recognition criteria January 2012 must also be met before revenue is recognised. In respect of employee share options granted prior to 1st January 2012, Sri Lanka Accounting Standard - SLFRS 2 (Share-based 4.1 Interest Income and Interest Expense Payment) standard is not applicable. For all financial instruments measured at amortised cost, interest bearing financial assets classified as available for sale and financial The shareholders approved an Employee Share Ownership Plan instruments designated at fair value through profit or loss, interest (ESOP 2010) at the Extraordinary General Meeting held on 21st income or expense is recorded using the effective interest rate EIR August 2010. ESOP 2010 was introduced in the year 2011, having (method). EIR is the rate that exactly discounts estimated future achieved the targets set for 2010. The total number of share cash payments or receipts through the expected life of the financial options available to the eligible employees is 3,056,159. The option instrument or a shorter period, where appropriate, to the net carrying exercisable period would be 3 years, from the entitlement date of amount of the financial asset or financial liability. 30th June 2011. The calculation of EIR takes into account all contractual terms of 3.12 Provisions the financial instrument (for example, prepayment options) and Provisions are recognised when the Group or Bank has a present includes any fees or incremental costs that are directly attributable obligation (legal or constructive) as a result of a past event, and it is to the instrument and are an integral part of the EIR, but not future probable that an outflow of resources embodying economic benefits credit losses. will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. The expense relating The carrying amount of the financial asset or financial liability is to any provision is presented in the Income Statement net of any adjusted if the Group revises its estimates of payments or receipts. reimbursement. The adjusted carrying amount is calculated based on the original EIR and the change in carrying amount is recorded as ’interest 3.13 Financial Guarantees income’ for financial assets and ’interest expense’ for financial In the ordinary course of business, the Bank gives financial liabilities. However, for a reclassified financial asset for which the guarantees, consisting of letters of credit, guarantees and Group subsequently increases its estimates of future cash receipts acceptances. Financial guarantees are initially recognised in the as a result of increased recoverability of those cash receipts, the Financial Statements (within ‘other liabilities’) at fair value, being effect of that increase is recognised as an adjustment to the EIR the premium received. Subsequent to initial recognition, the Bank’s from the date of the change in estimate. liability under each guarantee is measured at the higher of the amount initially recognised less cumulative amortization recognised Once the recorded value of a financial asset or a group of similar in the Income Statement, and the best estimate of expenditure financial assets has been reduced due to an impairment loss, required to settle any financial obligation arising as a result of the interest income continues to be recognised using the rate of guarantee. interest used to discount the future cash flows for the purpose of measuring the impairment loss. Any increase in the liability relating to financial guarantees is recorded in the Income Statement in ‘impairment gain or loss on 4.2 Fee and Commission Income loans and receivables’. The premium received is recognised in the The Group earns fee and commission income from a diverse range Income Statement in ‘net fees and commission income’ on a straight of services it provides to its customers. Fee income can be divided line basis over the life of the guarantee. into the following two categories:
3.14 Operational Risk Events 4.2.1 Fee Income Earned from Services that are provided over Provisions for operational risk events are recognised for losses a Certain Period of Time incurred by the Bank which do not relate directly to amounts of Fees earned for the provision of services over a period of time are principal outstanding for loans and advances. accrued over that period. These fees include professional fees, trade service fees, commission income and asset management
238 fees, loan commitment fees for loans that are likely to be drawn Accordingly, provision for taxation is based on the profit for the year down and other credit related fees are deferred (together with any adjusted for taxation purposes in accordance with the provisions incremental costs) and recognised as an adjustment to the EIR on of the Inland Revenue Act No 10 of 2006 and the amendments the loan. When it is unlikely that a loan will be drawn down, the loan thereto at the rates specified in Note 15 to the Financial commitment fees are recognised over the commitment period on a Statements. straight line basis. 5.2 Deferred Taxation 4.2.2 Fee Income from Providing Transaction Services Deferred tax is provided on temporary differences at the reporting Fees arising from negotiating or participating in the negotiation date between the tax bases of assets and liabilities and their of a transaction for a third party, such as the arrangement of the carrying amounts for financial reporting purposes for all Group acquisition of shares or other securities or the purchase or sale entities. Deferred tax liabilities are recognised for all taxable of businesses, are recognised on completion of the underlying temporary differences, except: transaction. Fees or components of fees that are linked to a certain Where the deferred tax liability arises from the initial performance are recognised after fulfilling the corresponding recognition of goodwill or of an asset or liability in a criteria. transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit 4.3 Fee and Commission Expenses nor taxable profit or loss. Fee and commission expense relate mainly to transaction and In respect of taxable temporary differences associated with services fee, which are expensed as the services are received. Fee investments in subsidiaries, where the timing of the reversal and commission expenses are recognised on an accrual basis. of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in 4.4 Net Trading Income the foreseeable future. Net trading income includes all gains and losses from changes in fair value and related dividend for financial assets and financial Deferred tax assets are recognised for all deductible temporary liabilities ‘held for trading’ other than interest income. differences, carry forward of unused tax credits and unused tax losses (if any), to the extent that it is probable that taxable profit will 4.5 Dividend Income be available against which the deductible temporary differences, Dividend income is recognised when the Group’s right to receive and the unused tax credits and unused tax losses carried forward the payment is established. can be utilised except: Where the deferred tax asset relating to the deductible 4.6 Customer Loyalty Programmes temporary difference arises from the initial recognition of Award credits under customer loyalty programmes are accounted an asset or liability in a transaction that is not a business for as a separately identifiable component of the transaction in combination and, at the time of the transaction, affects which they are granted. The fair value of the consideration received neither the accounting profit nor taxable profit or loss. in respect of the initial sale is allocated between the award In respect of deductible temporary differences associated credits and the other components of the sale. Expense incurred with investments in Subsidiaries, deferred tax assets are from customer loyalty programmes is charged to ‘other operating recognised only to the extent that it is probable that the expenses’. temporary differences will reverse in the foreseeable future and taxable profit will be available against which the 5. SIGNIFICANT ACCOUNTING POLICIES - TAX EXPENSE temporary differences can be utilised. As per Sri Lanka Accounting Standard - LKAS 12 (Income Taxes), tax expense is the aggregate amount included in determination The carrying amount of deferred tax assets is reviewed at each of profit or loss for the period in respect of current and deferred reporting date and reduced to the extent that it is no longer taxation. Income tax expense is recognised in the Income probable that sufficient taxable profit will be available to allow Statement except to the extent it relates to items recognised all or part of the deferred tax asset to be utilised. Unrecognised directly in ‘Equity’ or ‘other comprehensive income (OCI)’, in which deferred tax assets are reassessed at each reporting date and are case it is recognised in Equity or in OCI. recognised to the extent that it has become probable that future taxable profit will allow the deferred tax asset to be recovered. 5.1 Current Taxation Current tax assets and liabilities consist of amounts expected to Deferred tax assets and liabilities are measured at the tax rates be recovered from or paid to the Commissioner General of Inland that are expected to apply in the year when the asset is realised or Revenue in respect of the current year and any adjustment to tax the liability is settled, based on tax rates (and tax laws) that have payable in respect of prior years. The tax rates and tax laws used been enacted or substantively enacted at the reporting date. to compute the amount are those that are enacted or substantially enacted by the reporting date. Annual Report 2013 Sampath Bank PLC PLC Bank Sampath 2013 Annual Report
239 NOTES TO THE FINANCIAL STATEMENTS
Current tax and deferred tax relating to items recognised directly each segment and assess its performance, and for which discrete in Equity are also recognised in Equity and not in the Income financial information is available. Statement. For management purposes, the Bank has identified four operating Deferred tax assets and deferred tax liabilities are offset if a legally segments based on products and services, as follows: enforceable right exists to set off current tax assets against current Banking tax liabilities and the deferred taxes relate to the same taxable entity Leasing and the same taxation authority. Dealing/Investment Others 5.3 Value Added Tax (VAT) on Financial Services VAT on Financial Services is calculated in accordance with Value Management monitors the operating results of its business units Added Tax Act No 14 of 2002 and subsequent amendments separately for the purpose of making decisions about resource thereto. The base for the computation of Value Added Tax on allocation and performance assessment. Segment performance Financial Services is the accounting profit before VAT and income is evaluated based on operating profits or losses which, in certain tax adjusted for the economic depreciation and emoluments of respects, are measured differently from operating profits or losses in employees computed on prescribed rate. the Consolidated Financial Statements. Income taxes are managed on a group basis and are not allocated to operating segments. 5.4 Withholding Tax (WHT) on Dividend Dividend distributed out of taxable profit of the local Subsidiaries Interest income is reported net as management primarily relies attracts a 10% deduction at source and is not available for set on net interest revenue as a performance measure, not the gross off against the tax liability of the Bank. Thus, the WHT deducted income and expense. Transfer prices between operating segments at source is added to the tax expense of the Subsidiaries in the are on an arm’s length basis in a manner similar to transactions with Consolidated Financial Statements as a consolidation adjustment. third parties.
WHT that arise from the distribution of dividend by the Bank are No revenue from transactions with a single external customer or recognised at the same time as the liability to pay the related counterparty amounted to 10% or more of the Bank’s total revenue dividend is recognised. in 2013 or 2012.
5.5 Economic Service Charge (ESC) 6.3 Cash Flow Statement As per provisions of the Economic Service Charge (ESC) Act No The cash flow statement has been prepared by using ‘The Direct 13 of 2006 and subsequent amendments thereto, ESC is payable Method’ in accordance with the Sri Lanka Accounting Standard - only on exempt turnover of the Bank at 0.25% and is deductible LKAS 7 (Statement of Cash Flows), whereby gross cash receipts from income tax payable. ESC is not payable on turnover on which and gross cash payments of operating activities, finance activities income tax is payable. and investing activities have been recognised. Cash and cash equivalents comprise short term, highly liquid investments that are 6 OTHER readily convertible to known amounts of cash and are subject to an 6.1 Earnings per Share (EPS) insignificant risk of changes in value. The cash and cash equivalent The Group presents Basic and Diluted Earnings per Share (EPS) include cash in hand, balances with banks, placements with banks, data for its ordinary shares. Basic EPS is calculated by dividing the money at call and short notice. profit or loss attributable to ordinary shareholders of the Bank by the weighted average number of ordinary shares outstanding during 6.4 Changes in Accounting Policies and Disclosures: the period. Diluted EPS is determined by adjusting the profit or loss New and Amended Standards and Interpretations attributable to the ordinary shareholders and the weighted average number of ordinary shares outstanding for the effects of all dilutive Sri Lanka Accounting Standard – LKAS 19 (Employee potential ordinary shares, which comprise share options granted to Benefits) employees. The Bank and the Group applied, for the first time, Sri Lanka Accounting Standard - LKAS 19 (Employee Benefits) and this 6.2 Segment Reporting necessitates restatement of previous Financial Statements. An operating segment is a component of the Group that engages in business activities from which it may earn revenues and In accordance with the transitional provisions set out in LKAS 19, incur expenses, including revenues and expenses that relate to the Bank and the Group applied the Standard with retrospective transactions with any of the Group’s other components, whose effect. The opening Statement of Financial Position of the earliest operating results are reviewed regularly by the chief operating comparative period is 1st January 2012 and therefore the decision maker to make decisions about resources allocated to comparative figures have been restated with effect from 1st January 2012.
240 Some of the key changes that impacted on the Financial The interest cost and expected return on plan assets used Statements include the following: in the previous Standard was replaced with a net interest All past service costs are recognised at the earlier of when amount under LKAS 19, which is calculated by applying the the amendment / curtailment occurs or when the related discount rate to the net defined benefit liability or asset at restructuring or termination costs are recognised. Hence the commencement of each Annual Reporting Period. In view the unvested past services cost can no longer be deferred of this change, Rs 133.5 Mn was recognised as a credit to to be recognised over the future vesting period. As at 1st the Bank’s Retained Earnings as at 31st December 2012 January 2012, the over recognition of the Pension Fund on account of the Pension Fund and Rs 4.1 Mn was charged service cost by the Bank amounted to Rs 572.6 Mn, while the to its Retained Earnings as at that date on account of other unrecognised service cost on account of other Retirement Retirement Benefit Plans. Benefit Plans amounted to Rs 179.3 Mn (net of tax Rs 129.1 LKAS 19 has been applied retrospectively with the following Mn). Upon transition to LKAS 19, on 1st January 2012, the permitted exceptions: over provided service cost on Pension Fund was credited to The carrying amount of other assets has not been the Retained Earnings and under provided service cost on adjusted for changes in employee benefit costs that other Retirement Benefit Plans was charged to the Retained were included before 1st January 2012 Earnings. Sensitivity disclosures for the defined benefit obligation for comparative period (year ended 31st December 2012) have not been provided as the sensitivity analysis for 2012 has been done based on the previous Accounting Standard.
Impact on profit and OCI [increase/(decrease) in profit/OCI]
2013 2012 Rs Mn Rs Mn
Income Statement Personnel Expenses * 148.38 Operating profit before Value Added Tax (VAT) * 148.38 Less: Value Added Tax on Financial Services * (15.42) Operating profit after Value Added Tax (VAT) * 132.97 Less: Income tax expense * (41.55) Profit for the year * 91.42
Statement of Other Comprehensive Income Remeasurement gain & losses on defined benefit plans (460.57) 12.26 Deferred tax effect 128.96 (3.43) Other comprehensive income net of tax (331.61) 8.83
Total comprehensive income for the period net of tax (331.61) 100.25
Attributable to: Equity holders of the Bank (331.61) 100.25 Non controlling interest - -
The transition did not have any impact on Cash Flow Statement. There is no significant impact on the basic and diluted EPS.
* Impact on application of new accounting standards to the profit and loss can not be separately recognized due to practical difficulties as actuarial valuations are carried out only under new accounting standards. Annual Report 2013 Sampath Bank PLC PLC Bank Sampath 2013 Annual Report
241 NOTES TO THE FINANCIAL STATEMENTS
Impact on equity [increase/(decrease) in net equity]:
As at 31st December 31st December 1st January 2013 2012 2012 Rs Mn Rs Mn Rs Mn
Recognition of unrecognised past service costs 93.29 553.86 393.21 Less: Value Added Tax on Financial Services (15.42) (15.42) Consequential deferred tax impact 134.20 5.24 50.22 Net Increase / (decrease) in equity 212.07 543.68 443.43
Attributable to Equity holders of the Bank 212.07 543.68 443.43 Non-controlling interests - - -
6.5 Standards issued but not yet effective SLFRS 11 removes the option to account for jointly controlled The following Sri Lanka Accounting Standards were issued by the entities (JCEs) using proportionate consolidation method. Instead, Institute of Chartered Accountants of Sri Lanka and is effective for JCEs that meet the definition of a joint venture must be accounted the periods commencing on or after of 1st January 2014. for using the equity method.
6.5.1 SLFRS 9 - Financial Instruments: Classification and The impact on the implementation of the above Standard was Measurement assessed as at the reporting date and concluded that there is no SLFRS 9, as issued, reflects the first phase of work on replacement impact on the Bank’s Financial Statements. of LKAS 39 and applies to classification and measurement of financial assets and liabilities as defined in LKAS 39. 6.5.4 SLFRS 12 - Disclosure of Interests in Other Entities SLFRS 12 includes all of the disclosures that were previously SLFRS 9, was issued in 2012 and effective date of this standard in LKAS 27 (Consolidated and Separate Financial Statements) has been deferred until further notice. related to consolidated financial statements, as well as all of the disclosures that were previously included in LKAS 31 (Interests 6.5.2 SLFRS 10 - Consolidated Financial Statements in Joint Ventures) and LKAS 28 (Investments in Associates). SLFRS 10 replaces the portion of LKAS 27 (Consolidated and These disclosures relate to an entity’s interest in subsidiaries, joint Separate Financial Statements) that addresses the accounting arrangements, associates and structured entities. for consolidated financial statements. It also addresses the issues raised in SIC 12 (Consolidation Special Purpose Entities). The impact on the implementation of the above Standard was assessed as at the reporting date and concluded that there is no SLFRS 10 establishes a single control model that applies to all impact on the Bank’s Financial Statements. entities including special purpose entities. The changes introduced by SLFRS 10 will require the management to exercise significant 6.5.5 SLFRS 13 - Fair Value Measurement judgment to determine which entities are controlled and therefore SLFRS 13 establishes a single source of guidance under SLFRS for are required to be consolidated by a parent. all fair value measurements. SLFRS 13 does not change when an entity is required to use fair value, but rather provides guidance on The impact on the implementation of the above Standard was how to measure fair value under SLFRS when fair value is required assessed as at the reporting date and concluded that there is no or permitted. Use of principles of measurement in this standard is impact on the Bank’s Financial Statements. currently encouraged.
6.5.3 SLFRS 11 - Joint Arrangements Pending the completion of full study of this standard, the financial SLFRS 11 replaces LKAS 31 (Interests in Joint Ventures) and SIC impact is not yet known and reasonably estimable. 13 (Jointly Controlled Entities).
242 7 GROSS INCOME Bank Group 2013 2012 2013 2012 Rs 000 Rs 000 Rs 000 Rs 000
Interest income (Note 8.1) 40,921,433 31,881,948 42,320,239 32,712,018 Fee & commission Income 3,002,660 2,803,755 3,099,195 2,876,724 Net trading income (Note 10) (69,735) 6,227 (69,735) 6,227 Other operating income (Note 11) 2,671,162 4,104,251 2,716,474 4,132,768 46,525,520 38,796,181 48,066,173 39,727,737
8 NET INTEREST INCOME 8.1 Interest Income Bank Group 2013 2012 2013 2012 Rs 000 Rs 000 Rs 000 Rs 000
Placements with other banks 215,215 367,212 215,214 387,484 Financial investments: held for trading 4,684,190 3,051,101 4,684,190 3,051,101 Loans & receivables from other customers 34,583,221 27,639,099 35,984,402 28,447,444 Other loans & receivables 885,619 494,010 882,209 494,298 Interest income accrued on impaired financial assets 75,777 78,717 76,690 78,717 Securities borrowed & reverse repurchase agreements 450,503 127,655 449,399 127,945 Financial investments: held to maturity 26,908 124,154 28,135 125,029 40,921,433 31,881,948 42,320,239 32,712,018
8.2 Interest Expense Bank Group 2013 2012 2013 2012 Rs 000 Rs 000 Rs 000 Rs 000
Due to other customers 24,421,479 18,217,669 24,388,404 18,210,896 Term borrowings 1,002,213 1,112,733 1,653,147 1,464,021 Refinance borrowings 391,074 333,269 391,074 333,269 Securities lend & repurchase agreements 314,830 281,031 306,860 281,031 Due to banks 125,279 114,774 125,279 129,385 Debentures 300,690 209,899 360,740 254,368 26,555,565 20,269,375 27,225,504 20,672,970
8.3 Net Interest Income from Sri Lanka Government Securities Bank Group 2013 2012 2013 2012 Rs 000 Rs 000 Rs 000 Rs 000
Interest income 5,496,476 3,593,567 5,497,702 3,594,729 Less: Interest expense 314,830 281,031 306,860 281,031 Net interest income 5,181,646 3,312,536 5,190,842 3,313,698
Notional tax credit on secondary market transactions According to section 137 of the Inland Revenue Act No 10 of 2006, Net Interest Income of the Bank derived from the secondary market transactions in treasury bills and treasury bonds (Interest income accrued or received on outright or reverse repurchase transactions on such securities, bonds or bills less interest expenses on repurchase transaction with securities, treasury bonds or treasury bills from which such interest income was earned) for the period 1st January 2013 to 31 st December 2013 has been grossed up by Rs 81.995 Mn (2012: Rs 21.433 Mn) for the notional tax credit, consequent to the interest income on above instruments being subjected to withholding tax. Annual Report 2013 Sampath Bank PLC PLC Bank Sampath 2013 Annual Report
243 NOTES TO THE FINANCIAL STATEMENTS
9 NET FEE AND COMMISSION INCOME Bank Group 2013 2012 2013 2012 Rs 000 Rs 000 Rs 000 Rs 000
Trade related services 631,961 565,614 631,961 565,614 Foreign remittance related services 134,195 106,767 134,195 106,767 Credit & debit card services 949,767 800,659 949,767 800,659 Other banking services 827,422 675,958 902,823 728,548 2,543,345 2,148,998 2,618,746 2,201,588
10 NET TRADING INCOME Net Income / (Expense) from Financial Instruments Held for Trading & Derivative Financial Instruments
Bank Group 2013 2012 2013 2012 Rs 000 Rs 000 Rs 000 Rs 000
Net income / (expense) arising on: Forward exchange contract revaluation gain / (loss) (Note A) (137,377) 4,419 (137,377) 4,419 Capital gain / (loss) from dealing securities & unit trusts (Note B) 34,931 (31,072) 34,931 (31,072) Income from dealing securities (Note C) 32,711 32,880 32,711 32,880 (69,735) 6,227 (69,735) 6,227
Note A - Forward exchange contract revaluation gain/(loss) includes profit or loss arising from forward rate fluctuations. Note B - Capital gain / (loss) from dealing securities & unit trusts includes the income arising from buying & selling transactions & changes in the fair value of equity securities. Note C - Income from Dealing Securities includes the dividend received from the dealing securities.
11 OTHER OPERATING INCOME Bank Group 2013 2012 2013 2012 Rs 000 Rs 000 Rs 000 Rs 000
Dividend income from available for sale financial investments 31,755 35,100 31,755 35,100 Income from investment securities 3,825 9,141 3,825 9,141 Dividend income from Subsidiaries 95,872 79,155 - - Exchange income: currency notes 381,082 345,204 381,082 345,204 Exchange income: revaluation 276,556 1,804,189 276,556 1,804,189 Bad debt recoveries 558,584 782,731 557,383 782,167 Profit on disposal of property, plant & equipment 1,093 22,098 1,093 22,412 Rental & other income 9,333 6,165 85,822 74,708 Charges recovered 837,358 654,897 840,547 662,022 Others 475,704 365,571 538,411 397,825 2,671,162 4,104,251 2,716,474 4,132,768
244 12 IMPAIRMENT CHARGE / (REVERSAL) FOR LOANS AND OTHER LOSSES Bank Group 2013 2012 2013 2012 Rs 000 Rs 000 Rs 000 Rs 000
To Banks (12,498) 3,819 (12,498) 3,819 To other Customers - - - Individual impairment 798,313 729,202 775,282 744,555 Collective impairment - Pawning 3,509,121 - 3,511,230 - Collective impairment - Other loans & advances (572,024) (596,115) (490,649) (611,206) To other debtors - - 23,493 15,000 Loss on gold inventory 34,276 - 34,276 - Financial investment (275,744) (72,023) (275,744) (72,023) Impairment loss on property, plant & equipment 8,685 - 8,685 - 3,490,129 64,883 3,574,075 80,145
13 PERSONNEL EXPENSES Bank Group 2013 2012 2013 2012 Rs 000 Rs 000 Rs 000 Rs 000
Salaries & bonus 3,441,193 3,153,418 3,660,543 3,302,432 Contributions to defined contribution plan 378,088 332,695 396,918 345,700 Contributions to defined benefit plan 142,777 128,217 145,343 127,557 Others 455,045 394,976 469,436 405,227 4,417,103 4,009,306 4,672,240 4,180,916
14 OTHER OPERATING EXPENSES Bank Group 2013 2012 2013 2012 Rs 000 Rs 000 Rs 000 Rs 000
Directors’ emoluments 42,791 37,985 59,144 51,179 Auditors’ remuneration (Note 14.1) 19,818 18,192 23,728 21,796 Professional & legal expenses 66,065 61,868 87,452 70,877 Depreciation of property, plant & equipment 522,759 535,656 563,343 587,859 Amortisation of intangible assets 47,270 43,567 52,904 47,163 Deposit insurance premium 304,680 260,021 304,680 260,021 Donations 54,009 3,922 54,011 3,924 Office administration & establishment 2,766,360 2,127,578 2,652,257 2,127,578 Others 2,392,834 2,150,305 2,596,287 2,118,864 6,216,586 5,239,094 6,393,806 5,289,261 Annual Report 2013 Sampath Bank PLC PLC Bank Sampath 2013 Annual Report
245 NOTES TO THE FINANCIAL STATEMENTS
14 OTHER OPERATING EXPENSES CONTD. 14.1 Auditors’ Remuneration Bank Group 2013 2012 2013 2012 Rs 000 Rs 000 Rs 000 Rs 000
Audit fees & expenses 8,871 8,544 12,516 10,759 Audit related fees & expenses 6,283 5,618 6,283 5,618 Non - audit expenses 4,664 4,030 4,929 5,419 19,818 18,192 23,728 21,796
15 INCOME TAX EXPENSES Bank Group 2013 2012 2013 2012 Rs 000 Rs 000 Rs 000 Rs 000
Income taxation - Taxation based on profits for the year (Note 15.1) 1,978,564 2,189,860 2,052,403 2,234,650 - (Over) / under provision in respect of previous year (354,769) (43,600) (354,769) (50,492) 1,623,795 2,146,260 1,697,634 2,184,158 Deferred taxation - Transfers to / (from) deferred taxation (Note 15.2) (562,835) 23,897 (546,334) 28,902 Total tax charge 1,060,960 2,170,157 1,151,300 2,213,060
Effective tax rate 23.6% 29.3% 24.0% 28.9% Effective tax rate (excluding deferred tax ) 36.2% 29.0% 35.4% 28.5%
15.1 Reconciliation of the Accounting Profit to Income Tax Expense A reconciliation between the taxable income and the accounting profit multiplied by income tax rate for the years ended 31st December 2013 and 2012 is given below: Bank Group 2013 2012 2013 2012 Rs 000 Rs 000 Rs 000 Rs 000
Profit before tax 4,491,427 7,400,640 4,788,965 7,653,084 Add: Disallowable expenses 4,767,176 2,086,294 4,877,731 2,131,400 Less: Tax deductible expenses (1,207,092) (960,133) (1,344,861) (1,076,489) Exempt income (985,210) (705,870) (889,338) (620,525) Elimination of profit liable for Turnover based tax - - (86,449) (114,482) Adjusted profit / (loss) for tax purposes 7,066,301 7,820,931 7,346,048 7,972,988 Income from other sources - - 1,368 1,326 Assessable income 7,066,301 7,820,931 7,347,416 7,974,314 Less: Qualifying payments - - - (50,417) Tax losses - - (71,855) - Net taxable income 7,066,301 7,820,931 7,275,561 7,923,897 Taxable losses carried forward to future periods - - 41,764 43,440 Taxable income 7,066,301 7,820,931 7,317,325 7,967,337
Turnover liable for income tax - - 177,580 189,823
Income tax @ 28% 1,978,564 2,189,860 2,048,851 2,230,854 Income tax @ 2% on liable turnover - - 3,552 3,796 Income tax on current year’s profit 1,978,564 2,189,860 2,052,403 2,234,650
246 15.1.1 Applicable Rates of Tax 2013 2012
Income tax on Sampath Bank 28% 28%
Income tax on S C Securities (Pvt) Ltd. 28% 28%
Income tax on Siyapatha Finance Ltd 28% 28%
Income tax on Sampath Information Technology Solutions Ltd 28% 28%
15.1.2 Income Tax on Sampath Centre Ltd. Sampath Centre Ltd, is a company approved under BOI Law and the company was exempted from taxation for a period of seven years commencing from the first year of assessment. The first year of assessment is the year in which the company commenced making profits in relation to its transactions in that year, or any year of assessment not later than five years from the date of its first commercial operations, whichever is earlier. Accordingly, Sampath Center Ltd is liable for taxation at the rate of 2.0% of the rental income commencing from the year of assessment 2006 / 2007. Income other than rental income is liable for tax at 28%.
15.1.3 Notional Tax Credit on Secondary Market Transactions Any company which derived income from the secondary market transactions involving any security or treasury bonds or treasury bills on which the income tax has been deducted at the rate of 10% at the time of issue of such security, such company is entitled to a notional tax credit at 10% of the grossed up amount of net interest income from such secondary market transaction to an amount of one ninth of the same. Accordingly, the net interest income earned by the Bank from above transactions has been grossed up in the Financial Statements for the year ended 31st December 2013 and the notional tax credit amounts to Rs 81.995 Mn (2012 Rs 21.433 Mn).
15.2 Deferred Tax Expense / (Income ) The following table shows deferred tax expense recorded in the Income Statement arising from changes in the deferred tax assets and liabilities.
Bank Group 2013 2012 2013 2012 Rs 000 Rs 000 Rs 000 Rs 000
Deferred tax liability Depreciation of property, plant & equipment 115,693 1,657 105,037 6,376 Depreciation of lease assets 65,161 33,320 95,146 36,782 180,854 34,977 200,183 43,158
Deferred tax asset Unclaimed impairment provision - loans & receivables 721,047 - 730,281 - Unclaimed impairment provision - investment - - - (59,282) Tax losses 12,629 - 5,450 62,747 Defined benefit obligation 24,816 7,866 25,589 7,578 Others (14,803) 3,214 (14,803) 3,213 743,689 11,080 746,517 14,256 Deferred tax expense for the year (562,835) 23,897 (546,334) 28,902 Annual Report 2013 Sampath Bank PLC PLC Bank Sampath 2013 Annual Report
247 NOTES TO THE FINANCIAL STATEMENTS
16 EARNINGS PER ORDINARY SHARE 16.1 Earnings per Share: Basic Basic Earnings per Share has been calculated by dividing the profit for the year attributable to equity holders of the Bank by the weighted average number of ordinary shares on issue during the year, as per Sri Lanka Accounting Standard - LKAS 33 ( Earnings per Share).
Group 2013 2012
Amount used as the numerator Profit for the year of the Group attributable to equity holders (Rs) 3,634,957,281 5,436,681,587
No of ordinary shares used as the denominator Weighted average number of ordinary shares (Note 16.1.1) 167,738,569 166,912,785 Basic earnings per ordinary share (Rs ) 21.67 32.57
Weighted average number of ordinary shares Weighted average number of ordinary shares held as at 31st December 2012 was 161,996,778. However, it was restated as 166,912,785 in the comparative column as the change in number of ordinary shares due to final scrip dividend paid for 2012 does not effect a corresponding change in resources.
16.1.1 Weighted Average Number of Ordinary Shares for Basic EPS Group 2013 2012 Weighted Weighted Outstanding Average Outstanding Average
Number of shares held as at 1st January 162,736,665 162,736,665 156,854,190 156,854,190 Add: Number of shares issued due to final scrip dividend 2011 - - 3,682,039 3,682,039 Add: Number of shares issued due to final scrip dividend 2012 4,916,007 4,916,007 4,916,007 4,916,007 167,652,672 167,652,672 165,452,236 165,452,236 Add : Number of shares issued under ESOP 2010 134,933 85,897 2,200,436 1,460,549 Number of shares held as at 31st December 167,787,605 167,738,569 167,652,672 166,912,785
16.2 Earnings per Share: Diluted Group 2013 2012
Amount used as the numerator Profit for the year of the Group attributable to equity holders (Rs) 3,634,957,281 5,436,681,587 No of ordinary shares used as the denominator Weighted average number of ordinary shares (Note 16.2.1) 167,856,022 167,096,644 Diluted Earnings per Ordinary Share (Rs) 21.66 32.54
248 16.2.1 Weighted Average Number of Ordinary Shares for Diluted EPS
Group 2013 2012
Weighted average number of ordinary shares used for Basic EPS 167,738,569 166,912,785 Weighted average number of potential ordinary shares outstanding under ESOP 2010 effective from 30 June 2011 195,866 330,799 Weighted average number of potential ordinary shares that would have been issued at average market price (78,413) (146,940) Weighted average number of potential ordinary shares that would have been issued for no consideration under ESOP 2010 117,453 183,859 Weighted average number of ordinary shares adjusted for the effect of dilution 167,856,022 167,096,644
17 DIVIDEND PAID AND PROPOSED 2013 2012 Gross Dividend Net Gross Dividend Net Dividend Tax Dividend Dividend Tax Dividend Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000
Final dividend paid for the years 2012 & 2011 respectively Out of dividend received - free of tax 120,554 - 120,554 44,039 - 44,039 Out of normal profits 1,833,542 183,229 1,650,313 1,382,945 138,294 1,244,651 Scrip / cash dividend paid 1,954,096 183,229 1,770,867 1,426,984 138,294 1,288,690
Final dividend proposed for the years 2013 & 2012 respectively Out of dividend received - free of tax 131,838 - 131,838 120,554 - 120,554 Out of current year’s profits 1,210,463 121,046 1,089,417 1,832,286 183,229 1,649,057 Scrip / cash dividend payable / paid 1,342,301 121,046 1,221,255 1,952,840 183,229 1,769,611 Dividend per Ordinary Share (Rs) 8.00 7.28 12.00 10.87
The Board of Directors of the Bank has recommended the payment of a final cash dividend of Rs 8.00 per share for the year ended 31st December 2013, a distribution of approximately Rs 1,342.3 Mn.
The total proposed dividend amount is subject to changes in number of shares in issue due to changes in ESOP 2010.
In accordance with Sri Lanka Accounting Standard - LKAS 10 (Events after the Reporting Period), above proposed final dividend has not been recognized as a liability as at the year end.
18 ANALYSIS OF FINANCIAL INSTRUMENTS BY MEASUREMENT BASIS Financial instruments are measured on an ongoing basis either at fair value or at amortised cost. The summary of Significant Accounting Policies describes how each category of financial instruments is measured and how income and expenses, including fair value gains and losses, are recognized. The following table analyses the carrying amounts of the financial instruments by category as defined in Sri Lanka Accounting Standard - LKAS 39 (Financial Instruments: Recognition & Measurement) under headings of the Statement of Financial Position. Annual Report 2013 Sampath Bank PLC PLC Bank Sampath 2013 Annual Report
249 NOTES TO THE FINANCIAL STATEMENTS
18 ANALYSIS OF FINANCIAL INSTRUMENTS BY MEASUREMENT BASIS CONTD. 18.1 Analysis of Financial Instruments by Measurement Basis - Bank
As at 31st December 2013 Held for Amortised Held to Available Trading Cost Maturity for Sale Total Rs 000 Rs 000 Rs 000 Rs 000 Rs 000
Financial Assets Cash & cash equivalents - 8,302,576 - - 8,302,576 Balances with Central Bank of Sri Lanka - 15,766,967 - - 15,766,967 Placements with banks - 1,791,329 - - 1,791,329 Reverse re-purchase agreements - 18,043,918 - - 18,043,918 Derivative financial instruments 230,517 - - - 230,517 Financial investments held for trading 46,974,516 - - - 46,974,516 Financial assets held for trading pledged as collaterals 3,496,141 - - - 3,496,141 Loans & receivables from banks 638,244 638,244 Loans & receivables from other customers - 259,401,578 - - 259,401,578 Other loans & advances - 12,150,588 - - 12,150,588 Financial investments available for sale - - - 2,393,118 2,393,118 Financial investments held to maturity - - 1,845,903 - 1,845,903 Other assets - 1,751,374 - - 1,751,374 Total Financial Assets 50,701,174 317,846,574 1,845,903 2,393,118 372,786,769
Financial Liabilities Due to banks - 2,211,281 2,211,281 Derivative financial instruments 638,724 - 638,724 Securities sold under re-purchase agreements - 3,389,684 3,389,684 Due to other customers - 300,549,350 300,549,350 Debt issued & other borrowed funds - 38,862,331 38,862,331 Unclaimed dividend - 54,981 54,981 Other liabilities - 64,701 64,701 Total Financial Liabilities 638,724 345,132,328 345,771,052
18.2 Analysis of Financial Instruments by Measurement Basis - Bank
As at 31st December 2012 Held for Amortised Held to Available Trading Cost Maturity for Sale Total Rs 000 Rs 000 Rs 000 Rs 000 Rs 000
Financial Assets Cash & cash equivalents - 10,432,135 - - 10,432,135 Balances with Central Bank of Sri Lanka - 17,200,792 - - 17,200,792 Placements with banks - 8,788,127 - - 8,788,127 Reverse repurchase agreements - 3,300,817 - - 3,300,817 Derivative financial instruments 279,022 - - - 279,022 Financial investments held for trading 35,181,084 - - - 35,181,084 Financial assets held for trading pledged as collaterals 2,856,321 - - - 2,856,321 Loans & receivables from banks 816,119 816,119 Loans & receivables from other customers - 208,184,369 - - 208,184,369 Other loans & advances - 10,515,756 - - 10,515,756 Financial investments available for sale - - - 1,923,624 1,923,624 Financial investments held to maturity - - - - - Other assets - 1,399,091 - - 1,399,091 Total Financial Assets 38,316,427 260,637,206 - 1,923,624 300,877,257
250 As at 31st December 2012 Held for Amortised Held to Available Trading Cost Maturity for Sale Total Rs 000 Rs 000 Rs 000 Rs 000 Rs 000
Financial Liabilities Due to banks - 624,784 624,784 Derivative financial instruments 381,838 - 381,838 Securities sold under re-purchase agreements - 2,757,117 2,757,117 Due to other customers - 243,330,990 243,330,990 Debt issued & other borrowed funds - 28,825,029 28,825,029 Unclaimed dividend - 49,185 49,185 Other liabilities - 71,448 71,448 Total Financial Liabilities 381,838 275,658,553 276,040,391
18.3 Analysis of Financial Instruments by Measurement Basis - Group
As at 31st December 2013 Held for Amortised Held to Available Trading Cost Maturity for Sale Total Rs 000 Rs 000 Rs 000 Rs 000 Rs 000
Financial Assets Cash in hand - 8,340,838 - - 8,340,838 Balances with Central Bank of Sri Lanka - 15,766,967 - - 15,766,967 Placements with Banks - 1,791,329 - - 1,791,329 Reverse re-purchase agreements - 18,043,918 - - 18,043,918 Derivative financial instruments 230,517 - - - 230,517 Financial investments held for trading 46,974,516 - - - 46,974,516 Financial assets held for trading pledged as collaterals 3,496,141 - - - 3,496,141 Loans & receivables from banks - 638,244 - 638,244 Loans & receivables from other customers - 265,909,593 - - 265,909,593 Other loans & advances - 12,150,588 - - 12,150,588 Financial investments available for sale - - - 2,393,174 2,393,174 Financial investments held to maturity - - 1,845,903 - 1,845,903 Other assets - 2,222,016 - - 2,222,016 Total Financial Assets 50,701,174 324,863,493 1,845,903 2,393,174 379,803,744
Financial Liabilities Due to banks - 2,250,372 2,250,372 Derivative financial instruments 638,724 - 638,724 Securities sold under re-purchase agreements - 3,055,257 3,055,257 Due to other customers - 300,381,786 300,381,786 Debt issued & other borrowed funds - 44,748,530 44,748,530 Unclaimed dividend - 54,981 54,981 Other liabilities - 64,701 64,701 Total Financial Liabilities 638,724 350,555,627 351,194,351 Annual Report 2013 Sampath Bank PLC PLC Bank Sampath 2013 Annual Report
251 NOTES TO THE FINANCIAL STATEMENTS
18 ANALYSIS OF FINANCIAL INSTRUMENTS BY MEASUREMENT BASIS CONTD. 18.4 Analysis of Financial Instruments by Measurement Basis - Group
As at 31st December 2012 Held for Amortised Held to Available Trading Cost Maturity for Sale Total Rs 000 Rs 000 Rs 000 Rs 000 Rs 000
Financial Assets Cash in hand - 10,442,259 - - 10,442,259 Balances with Central Bank of Sri Lanka - 17,200,792 - - 17,200,792 Placements with Banks - 8,788,127 - - 8,788,127 Reverse re-purchase agreements - 3,300,373 - - 3,300,373 Derivative financial instruments 279,022 - - - 279,022 Financial investments held for trading 35,181,084 - - - 35,181,084 Financial assets held for trading pledged as collaterals 2,856,321 - - - 2,856,321 Loans & receivables from banks 816,119 816,119 Loans & advances to customers - 212,480,041 - - 212,480,041 Loans & receivables from other customers - 10,224,474 - - 10,224,474 Financial investments available for sale - - - 1,923,680 1,923,680 Financial investments held to maturity - - 9,765 - 9,765 Other assets - 1,858,276 - - 1,858,276 38,316,427 265,110,461 9,765 1,923,680 305,360,333
Financial Liabilities Due to banks - 668,198 668,198 Derivative financial instruments 381,838 - 381,838 Securities sold under re-purchase agreements - 2,751,332 2,751,332 Due to other customers - 243,088,236 243,088,236 Debt issued & other borrowed funds - 32,218,014 32,218,014 Unclaimed dividend - 49,185 49,185 Other liabilities - 71,448 71,448 381,838 278,846,413 279,228,251
19 CASH AND CASH EQUIVALENTS Bank Group As at 31st December 2013 2012 2013 2012 Rs 000 Rs 000 Rs 000 Rs 000
Local currency in hand 4,731,387 4,483,580 4,740,751 4,483,791 Foreign currency in hand 2,257,858 1,089,882 2,257,858 1,089,882 Balances with local banks 112,777 71,025 141,675 80,937 Balances with foreign banks 1,200,554 1,774,914 1,200,554 1,774,915 Money at call & short notice - 3,012,734 - 3,012,734 8,302,576 10,432,135 8,340,838 10,442,259
20 BALANCES WITH CENTRAL BANK OF SRI LANKA Bank Group As at 31st December 2013 2012 2013 2012 Rs 000 Rs 000 Rs 000 Rs 000
Statutory Reserve Requirement 15,766,967 17,200,792 15,766,967 17,200,792 15,766,967 17,200,792 15,766,967 17,200,792
As required by the provisions of Section 93 of the Monetary Law Act, a cash balance is maintained with the Central Bank of Sri Lanka. As at 31st December 2013, the minimum cash reserve requirement was 6% (2012 : 8%) of the Rupee deposit liabilities. There is no reserve requirement for foreign currency deposit liabilities of the Domestic Banking Unit (DBU) & the deposit liabilities of the Foreign Currency Banking Unit (FCBU).
252 21 PLACEMENTS WITH BANKS Bank Group As at 31st December 2013 2012 2013 2012 Rs 000 Rs 000 Rs 000 Rs 000
Placements - in Sri Lanka - - - - Placements - out side Sri Lanka 1,791,329 8,788,127 1,791,329 8,788,127 1,791,329 8,788,127 1,791,329 8,788,127
22 DERIVATIVE FINANCIAL INSTRUMENTS Bank & Group The table below shows the fair values of derivative financial instruments, recorded as assets or liabilities, together with their notional amounts. The notional amounts indicate the volume of transactions outstanding at the year end and are indicative of neither the market risk nor the credit risk.
As at 31st December 2013 2012 Notional Notional Assets Liabilities Amount Assets Liabilities Amount Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000
Forward foreign exchange contracts - Sales 59,749 7,880 23,699,656 40,712 28,441 20,393,065 - Purchases 4,218 30,576 13,393,481 10,498 37,096 8,291,383 Currency SWAPs - Sales 164,397 1,060 6,381,962 202,985 39,083 4,266,290 - Purchases 2,153 599,208 16,346,588 24,827 277,218 15,540,650 230,517 638,724 59,821,687 279,022 381,838 48,491,388
Hedge Accounting The Bank has raised USD 100 Mn on 28th March 2013 through foreign borrowings for a period of one year, against which a SWAP arrangement has been entered into with the Central Bank of Sri Lanka for the same value with same maturity on 28th March 2014.
As per Sri Lanka Accounting Standard - LKAS 39 (Financial Instruments: Recognition & Measurement) the Bank has identified this particular transaction as a ‘ Cash Flow Hedge’ after documenting the hedge relationship.
The objective of the hedge is to reduce the variability of the cash flows of a foreign currency denominated above mentioned borrowing (only the capital portion) attributable to changes in LKR / USD exchange rate.
The brief description of the hedge is given below.
Details Description of the Hedge
Hedge instrument SWAP contract Counterparty - Central Bank of Sri Lanka Notional amount - USD 100 Mn Hedge item 1 year USD denominated borrowing - USD 100 Mn Capital is repayable in full on 28th March 2014 The periods when the cash flows are expected to occur 28th March 2014 The amount recognised in Other Comprehensive Income during the year Rs 168 Mn charged to the Retained earnings Fair Value of the Hedge item as at 31st December 2013 Rs 13,075 Mn Fair Value of the Hedge instrument as at 31st December 2013 Rs 13,157 Mn Any forecast transaction for which hedge accounting had previously been used but which is no longer expected to occur None The amount that was reclassified from equity to profit or loss as a reclassification adjustment None Annual Report 2013 Sampath Bank PLC PLC Bank Sampath 2013 Annual Report
253 NOTES TO THE FINANCIAL STATEMENTS
22 DERIVATIVE FINANCIAL INSTRUMENTS CONTD. The expected impact to the Income Statement on the Hedge is as follows: Less than one year Rs Mn
Forecast receivable cash flow 13,157 Forecast payable cash flow 13,720 (563)
23 FINANCIAL ASSETS HELD FOR TRADING Bank Group As at 31st December 2013 2012 2013 2012 Rs 000 Rs 000 Rs 000 Rs 000
Government of Sri Lanka - Treasury Bills (Note 23.1) 45,962,143 34,182,709 45,962,143 34,182,709 Quoted equities (Note 23.2) 1,012,373 998,375 1,012,373 998,375 46,974,516 35,181,084 46,974,516 35,181,084
23.1 Government of Sri Lanka - Treasury Bills Bank & Group This represents the financial assets (Treasury Bills) at fair value through profit or loss which are held for trading purposes. The cumulative change in fair value of the assets attributed to changes in market risk amounts to a gain of Rs 332.4 Mn (2012: loss of Rs 46.6 Mn) and movement for the current year is a gain of Rs 379.1Mn (2012: gain of Rs 94.8 Mn).
The change in fair value of the Treasury Bills - Trading attributable to changes in market risk have been calculated by determining the changes in interest rate spread implicit in the fair value of the Treasury Bills.
As at 31st December 2013 2012 Cost Market Value Cost Market Value Rs 000 Rs 000 Rs 000 Rs 000
Amortised cost 45,629,746 45,962,143 34,229,365 34,182,709
Gain / (loss) from marked to market valuation as at 01st January (46,656) - (141,457) - Movement during the year 379,053 - 94,801 - Gain / (loss) from marked to market valuation as at 31st December 332,397 - (46,656) - Market value 45,962,143 45,962,143 34,182,709 34,182,709
254 23.2 Quoted Equities Bank & Group
As at 31st December 2013 2012 No of No of Ordinary Cost of Market Ordinary Cost of Market Shares Investment Value Shares Investment Value Rs 000 Rs 000 Rs 000 Rs 000
Name of the company Banks, finance & insurance Nations Trust Bank PLC - - - 110,000 4,173 6,160 Commercial Bank of Ceylon PLC 809,182 78,426 97,425 795,857 78,426 81,973 Pan Asia Banking Corporation PLC 1,380,532 10,932 21,398 1,380,532 10,932 26,230 Merchant Bank of Sri Lanka PLC - - - 207,600 3,354 4,131 Hatton National Bank PLC 175,646 35,822 25,820 175,646 35,822 25,996 NDB Bank PLC 600,000 107,943 96,300 600,000 107,943 82,740 DFCC Bank PLC 39,000 7,559 5,031 39,000 7,559 4,403 Union Bank of Colombo PLC 26,347,027 276,176 437,361 26,347,027 276,176 363,589 People’s Leasing & Finance PLC 5,000,000 90,000 67,000 5,901,600 106,229 77,901 606,858 750,335 630,614 673,123
Diversified holdings Hemas Holdings PLC - - - 647,000 16,252 17,469 Aitken Spence PLC 270,000 54,512 27,621 270,000 54,512 32,400 John Keells Holdings PLC 677,694 117,156 154,040 587,335 101,344 129,155 John Keells Holdings Warrant 2022 30,120 - 2,410 - - - John Keells Holdings Warrant 2023 30,120 - 2,846 - - - Softlogic Holdings PLC 3,594,000 104,226 30,190 3,594,000 104,226 39,175 Vallibel One PLC 245,600 6,140 4,052 245,600 6,140 4,445 282,034 221,159 282,474 222,644
Hotel & travel Asian Hotels & Properties PLC - - - 618,000 14,291 46,906 - - 14,291 46,906
Manufacturing Royal Ceramics PLC 483,200 10,237 40,879 483,200 10,237 47,837 10,237 40,879 10,237 47,837
Land & property C T Land Development PLC - - - 325,000 4,853 7,865 - - 4,853 7,865 Total 899,129 1,012,373 942,469 998,375
Gain / (loss) from marked to market valuation as at 1st January 55,906 215,480 Movement during the year 57,338 (159,574) Gain / (loss) from marked to market valuation as at 31st December 113,244 55,906 Market value 1,012,373 998,375 Annual Report 2013 Sampath Bank PLC PLC Bank Sampath 2013 Annual Report
255 NOTES TO THE FINANCIAL STATEMENTS
24 FINANCIAL ASSETS HELD FOR TRADING PLEDGED AS COLLATERALS Bank & Group
As at 31st December 2013 2012 Cost Market Value Cost Market Value Rs 000 Rs 000 Rs 000 Rs 000
Amortised cost 3,496,439 3,496,141 2,695,970 2,856,321 Add / (less): Provision for appreciation / (diminution) in market value b/f 160,351 - 23,555 - Provision for diminution in market value write back / (made) during the year (160,649) - 136,796 - Provision for appreciation / (diminution) in market value c/d (298) - 160,351 - Market value 3,496,141 3,496,141 2,856,321 2,856,321
25 LOANS AND RECEIVABLES TO BANKS Bank Group As at 31st December 2013 2012 2013 2012 Rs 000 Rs 000 Rs 000 Rs 000
Loans & receivables 638,244 828,617 638,244 828,617 638,244 828,617 638,244 828,617 Less: Impairment (Note 25.1) - (12,498) - (12,498) 638,244 816,119 638,244 816,119
25.1 Impairment on Loans and Receivables to Banks The movement of impairment losses on loan and receivables to banks is as follows:
Bank Group Rs 000 Rs 000
At 1st January 2012 8,679 8,679 Charge for the year (Note 12) 3,819 3,819 Recoveries - - Amounts written off - - Interest accrued - - At 31st December 2012 12,498 12,498
At 1st January 2013 12,498 12,498 Charge / (Reversal) for the year (Note 12) (12,498) (12,498) Recoveries - - Amounts written off - - Interest accrued - - At 31st December 2013 - -
256 26 LOANS AND RECEIVABLES TO OTHER CUSTOMERS Bank Group As at 31st December 2013 2012 2013 2012 Rs 000 Rs 000 Rs 000 Rs 000
Gross loans & receivables 271,090,006 216,586,855 277,751,627 220,994,262 Less: Staff loan fair value adjustment (1,708,351) (1,403,533) (1,708,351) (1,403,533) 269,381,655 215,183,322 276,043,276 219,590,729 Less: Individual impairment (Note 26.2.1) (3,152,348) (2,827,992) (3,192,766) (2,910,042) Collective impairment (Note 26.2.2) (6,827,729) (4,170,961) (6,940,917) (4,200,646) Total impairment (Note 26.3) (9,980,077) (6,998,953) (10,133,683) (7,110,688) Net loans & receivables 259,401,578 208,184,369 265,909,593 212,480,041
26.1 At Amortised Cost: Bank Group As at 31st December 2013 2012 2013 2012 Rs 000 Rs 000 Rs 000 Rs 000
Bills of exchange 2,813,713 2,687,435 2,813,713 2,687,435 Leasing (Note 26.4) 5,642,001 5,548,059 9,635,040 8,875,501 Housing 12,157,134 10,351,619 12,157,134 10,351,619 Export loans 12,119,106 8,239,867 12,119,106 8,239,867 Import loans 40,519,111 23,347,064 40,519,111 23,347,064 Refinance 6,720,581 5,106,974 6,720,581 5,106,974 Term loans 80,245,523 61,698,407 79,159,974 60,647,493 Hire purchases (Note 26.5) 79,591 - 3,507,098 2,184,420 Loans against Investment Fund Account (IFA) 2,357,512 1,360,762 2,388,121 1,384,096 Overdraft 44,415,284 34,871,166 44,296,436 34,794,291 Staff loans 4,888,092 4,076,050 4,888,092 4,076,050 Pawning 53,469,185 54,946,225 53,884,048 54,946,225 Credit card 5,520,208 4,246,627 5,520,208 4,246,627 Others 142,965 106,600 142,965 106,600 271,090,006 216,586,855 277,751,627 220,994,262 Less: Staff loan fair value adjustment (Note 34.2) (1,708,351) (1,403,533) (1,708,351) (1,403,533) 269,381,655 215,183,322 276,043,276 219,590,729 Less: Provision for impairment losses (Note 26.2) (9,980,077) (6,998,953) (10,133,683) (7,110,688) 259,401,578 208,184,369 265,909,593 212,480,041
26.2 Movement in Provision for Impairment Losses 26.2.1 Individually significant customer loan impairment Bank Group 2013 2012 2013 2012 Rs 000 Rs 000 Rs 000 Rs 000
Opening Balance as at 01 st January 2,827,992 2,764,531 2,910,042 2,831,229 Charge / (reversal) to Income Statement 798,313 729,201 775,282 744,555 Write-off during the year (42,762) (104,814) (61,651) (104,814) Provision Reversal (558,584) (782,731) (557,383) (782,731) Interest accrued on impaired loans and receivables (75,776) (78,716) (76,689) (78,717) Other movements 203,165 300,521 203,165 300,520 Closing balance as at 31st December 3,152,348 2,827,992 3,192,766 2,910,042 Gross amount of loans individually determined to be impaired, before deducting the individually assessed impairment provision 4,187,089 4,153,004 4,244,392 4,506,738 Annual Report 2013 Sampath Bank PLC PLC Bank Sampath 2013 Annual Report
257 NOTES TO THE FINANCIAL STATEMENTS
26 LOANS AND RECEIVABLES TO OTHER CUSTOMERS CONTD. 26.2.2 Collective loan impairment Bank Group 2013 2012 2013 2012 Rs 000 Rs 000 Rs 000 Rs 000
Opening Balance as at 01 st January 4,170,961 4,767,076 4,200,646 4,811,431 Charge / (reversal) to Income Statement 2,937,097 (596,115) 3,020,581 (611,206) Write-off during the year (283,372) - (283,372) - Provision Reversal - - - 564 Other adjustment 3,043 - 3,062 (143) Closing balance as at 31st December 6,827,729 4,170,961 6,940,917 4,200,646
26.3 Movement in Provision for Impairment Losses - Productwise Bank 2013 2012 Lease & Loans & Pawning Total Total Hire Purchases Receivables Rs 000 Rs 000 Rs 000 Rs 000 Rs 000
Balance as at 1st January 126,563 6,872,390 - 6,998,953 7,531,607 Provision for the Year (35,764) 262,053 3,509,121 3,735,410 133,087 Amounts Written-off - (46,172) (279,961) (326,133) (104,813) Provision reversals - (558,584) - (558,584) (782,731) Other adjustment - 206,208 - 206,208 300,520 Interest accrued on impaired loans & receivables - (75,777) - (75,777) (78,717) Balance as at 31st December 90,799 6,660,118 3,229,160 9,980,077 6,998,953
Group 2013 2012 Lease & Loans & Pawning Total Total Hire Purchases Receivables Rs 000 Rs 000 Rs 000 Rs 000 Rs 000
Balance as at 1st January 238,298 6,872,390 - 7,110,688 7,642,660 Provision for the Year 22,580 262,053 3,511,230 3,795,863 133,349 Amounts written-off (18,889) (46,173) (279,960) (345,022) (104,813) Provision reversals 1,201 (558,584) - (557,383) (782,167) Other adjustment 19 206,208 - 206,227 300,376 Interest accrued on impaired loans & receivables (913) (75,777) - (76,690) (78,717) Balance as at 31st December 242,296 6,660,117 3,231,270 10,133,683 7,110,688
258 26.4 Lease Rentals Receivables Bank Group As at 31st December 2013 2012 2013 2012 Rs 000 Rs 000 Rs 000 Rs 000
Total lease rentals receivable 7,086,666 7,004,034 12,021,745 11,291,887 Unearned lease income (1,444,665) (1,455,975) (2,386,705) (2,416,386) Gross lease receivable 5,642,001 5,548,059 9,635,040 8,875,501 Impairment allowance for lease receivable - Collective (90,696) (126,563) (208,279) (209,261) Net lease receivable 5,551,305 5,421,496 9,426,761 8,666,240
Gross lease receivable with in one year (Note 26.4.1) 2,097,805 1,197,034 4,288,800 2,687,558 Gross lease receivable after one year (Note 26.4.2) 3,544,196 4,351,025 5,346,240 6,187,943 5,642,001 5,548,059 9,635,040 8,875,501
26.4.1 Gross Lease Receivable within one year Bank Group As at 31st December 2013 2012 2013 2012 Rs 000 Rs 000 Rs 000 Rs 000
Total lease receivable within one year from reporting date 2,803,779 1,851,059 5,475,006 3,799,962 Unearned lease income (705,974) (654,025) (1,186,206) (1,112,404) 2,097,805 1,197,034 4,288,800 2,687,558 Impairment allowance for lease receivable (47,642) (55,228) (121,719) (113,152) 2,050,163 1,141,806 4,167,081 2,574,406
26.4.2 Gross Lease Receivable after one year Bank Group As at 31st December 2013 2012 2013 2012 Rs 000 Rs 000 Rs 000 Rs 000
Total lease receivable after one year from reporting date 4,282,887 5,152,975 6,546,739 7,491,925 Unearned lease income (738,691) (801,950) (1,200,499) (1,303,982) 3,544,196 4,351,025 5,346,240 6,187,943 Impairment allowance for lease receivable (43,054) (71,335) (86,560) (96,109) 3,501,142 4,279,690 5,259,680 6,091,834
26.5 Hire Purchase Receivables Bank Group As at 31st December 2013 2012 2013 2012 Rs 000 Rs 000 Rs 000 Rs 000
Total hire purchase rentals receivable 107,786 - 4,857,055 3,062,881 Unearned hire purchase income (28,195) - (1,349,957) (878,461) Gross hire purchase receivable 79,591 - 3,507,098 2,184,420 Impairment allowance for hire purchase receivable (103) (34,017) (29,038) Net hire purchase receivable 79,488 3,473,081 2,155,382
Gross hire purchase receivable with in one year (Note 26.5.1) 20,852 - 1,235,335 716,451 Gross hire purchase receivable after one year (Note 26.5.2) 58,739 - 2,271,762 1,467,969 79,591 - 3,507,098 2,184,420 Annual Report 2013 Sampath Bank PLC PLC Bank Sampath 2013 Annual Report
259 NOTES TO THE FINANCIAL STATEMENTS
26 LOANS AND RECEIVABLES TO OTHER CUSTOMERS CONTD. 26.5.1 Gross Hire Purchase Receivable with in One year Bank Group As at 31st December 2013 2012 2013 2012 Rs 000 Rs 000 Rs 000 Rs 000
Total hire purchase receivable with in one year from reporting date 32,679 - 1,913,732 1,119,736 Unearned hire purchase income (11,827) - (678,397) (403,285) 20,852 - 1,235,335 716,451 Impairment allowance for hire purchase receivable (103) - (12,179) (12,453) 20,749 - 1,223,156 703,998
26.5.2 Gross Hire Purchase Receivable after One year Bank Group As at 31st December 2013 2012 2013 2012 Rs 000 Rs 000 Rs 000 Rs 000
Total hire purchase receivable after one year from reporting date 75,107 - 2,943,323 1,943,145 Unearned hire purchase income (16,368) - (671,560) (475,176) 58,739 - 2,271,763 1,467,969 Impairment allowance for hire purchase receivable - - (21,838) (16,585) 58,739 - 2,249,925 1,451,384
26.6 Loans and Receivables to other Customers - Currencywise Bank Group As at 31st December 2013 2012 2013 2012 Rs 000 Rs 000 Rs 000 Rs 000
Sri Lanka Rupee 238,953,922 193,515,273 245,615,543 197,922,680 United States Dollar 30,500,343 22,082,724 30,500,343 22,082,724 Euro 1,000,016 377,301 1,000,016 377,301 Great Britain Pounds 633,885 609,367 633,885 609,367 Japanese Yen 747 297 747 297 Australian Dollar 408 1,829 408 1,829 Canadian Dollar 553 64 553 64 Swiss Franc 132 - 132 - 271,090,006 216,586,855 277,751,627 220,994,262
260 26.7 Loans and Receivables to Other Customers - By Product Bank Group As at 31st December 2013 2012 2013 2012 Rs 000 Rs 000 Rs 000 Rs 000
By Product - LKR Overdrafts 42,348,587 32,712,731 42,229,740 32,635,857 Term loans 67,076,406 52,458,371 65,990,856 51,407,456 Lease rentals receivable 5,642,001 5,548,059 9,635,040 8,875,501 Hire purchase rentals receivable 79,591 - 3,507,098 2,184,420 Credit cards 5,520,208 4,246,627 5,520,208 4,246,627 Pawning 53,469,185 54,946,225 53,884,048 54,946,225 Export loans 348,964 396,077 348,964 396,077 Housing loans 12,036,829 10,297,447 12,036,829 10,297,447 Loans against Investment Fund Account (IFA) 2,357,512 1,360,762 2,388,121 1,384,096 Import loans 38,100,920 21,741,008 38,100,920 21,741,008 Refinance loans 6,720,581 5,106,974 6,720,581 5,106,974 Bills of exchange 338,417 518,342 338,417 518,342 Staff loans 4,888,092 4,076,050 4,888,092 4,076,050 Others 26,629 106,600 26,629 106,600 Sub total 238,953,922 193,515,273 245,615,543 197,922,680
By Product - Foreign Currency Overdrafts 2,066,696 2,158,435 2,066,696 2,158,435 Term loans 13,169,117 9,240,036 13,169,117 9,240,036 Export loans 11,770,142 7,843,790 11,770,142 7,843,790 Housing loans 120,305 54,172 120,305 54,172 Import loans 2,418,191 1,606,056 2,418,191 1,606,056 Bills of exchange 2,475,296 2,169,093 2,475,296 2,169,093 Others 116,337 - 116,337 - Sub total 32,136,084 23,071,582 32,136,084 23,071,582 Total 271,090,006 216,586,855 277,751,627 220,994,262
26.8 Loans and Receivables to Other Customers - Industrywise Bank Group As at 31st December 2013 2012 2013 2012 Rs 000 Rs 000 Rs 000 Rs 000
Agriculture & Fishing 34,447,250 23,211,854 35,042,331 23,756,523 Manufacturing 35,648,616 28,146,897 35,648,616 28,146,897 Tourism 13,476,931 7,132,717 13,476,931 7,132,718 Transport 3,924,506 2,617,179 4,140,536 2,752,208 Construction 26,401,964 20,710,856 26,608,580 20,888,013 Traders 59,381,313 40,352,210 62,158,426 42,325,045 Banks, Financial and Business Services 17,851,608 11,271,224 16,175,023 11,271,224 Government 201,229 47,061 201,229 47,061 Infrastructure 8,291,865 6,613,877 8,291,865 6,613,877 Other Services 7,343,645 6,474,852 11,288,506 9,045,289 Consumers 64,121,079 70,008,128 64,719,584 69,015,407 271,090,006 216,586,855 277,751,627 220,994,262 Annual Report 2013 Sampath Bank PLC PLC Bank Sampath 2013 Annual Report
261 NOTES TO THE FINANCIAL STATEMENTS
26 LOANS AND RECEIVABLES TO OTHER CUSTOMERS CONTD. 26.8 Investment Fund Account (IFA) As per CBSL direction, the Bank is required to transfer the following amounts to the Investment Fund Account with effect from 1st January 2011.
1 8% of the profits calculated for the payment of Value Added Tax (VAT) on financial services on dates as specified in the VAT Act for payment of VAT. 2 5% of the profit before tax calculated for payment of income Tax purpose on dates specified in section 113 of the Inland Revenue Act.
As at 31st December 2013 2012 Bank Subsidiary Group Bank Subsidiary Group Company Company Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000
Utilization of Investment Fund Account (IFA) Balance available for utilization 2,439,495 58,488 2,497,983 1,530,768 30,004 1,560,772 Loans granted - Capital outstanding (Note No 26.8.1) (2,339,260) (30,609) (2,369,869) (1,355,696) (23,334) (1,379,030) Total investments in Government Securities (Note No 26.8.2) (100,235) (9,399) (109,634) (175,072) (5,121) (180,193) - 18,480 18,480 - 1,549 1,549
26.8.1 Total Loans granted The details of loans granted from the Investment Fund Account which were outstanding as at 31st December 2013 are as follows.
As at 31st December 2013 2013 Bank Group Interest Tenure Number of Amount Interest Number of Tenure Subsidiary Number of Amount rates Years Loans Outstanding rates Loans Years Amount Loans Outstanding % Granted % Granted Outstanding Granted Rs 000 Rs 000 Rs 000
Sector (a) Cultivation of agriculture / plantation crops 12.94-14.89 5 - 7 11 216,897 13.82% - 17.72% 12 5 16,912 23 233,809 11.44% -17.72% 10 5 13,697 10 13,697 (b) Factory / mills modernisation 12.89-14.89 5 - 8 99 742,342 - - - - 99 742,342 (c) Small & medium enterprises 12.94-19.00 5 - 7 101 629,406 - - - - 101 629,406 (d) Information technology & BPO 14.89 5 1 575 - - - - 1 575 (e) Infrastructure development 12.94-14.89 5 - 8 13 183,433 - - - - 13 183,433 (f) Education 14.89 6 - 7 4 64,446 - - - - 4 64,446 (g) Housing ------(h) Construction of hotels & related purposes 12.94-14.89 5 - 8 49 502,161 - - - - 49 502,161 (i) Restructuring of loans extended for above purposes ------278 2,339,260 22 30,609 300 2,369,869
26.8.2 Investments in Government Securities
As at 31st December 2013 2013 Bank Group Face Year of Cost of Carrying Year of Cost of Subsidiaries Amount Value Maturity Investment value / Maturity Investment Carrying Total Amortised value / cost Amortised cost Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000
(a) Treasury bonds over 5 years ------(b) Treasury bills 102,852 2014 100,235 101,261 2014 9,399 9,776 109,634 102,852 100,235 101,261 9,399 9,776 109,634
The carrying value of the investments in treasury bills using IFA balance was classified as available for sale.
262 27 OTHER LOANS AND RECEIVABLES Bank Group As at 31st December 2013 2012 2013 2012 Rs 000 Rs 000 Rs 000 Rs 000
Debentures - Quoted (Note 27.1) 1,779,786 443,358 1,779,786 443,358 Preference shares (Note 27.2) - - - - Sri Lanka Development Bonds (SLDBs) 8,611,352 6,714,292 8,611,352 6,714,293 Leased backed Trust Certificates (Note 27.3) 1,759,450 324,947 1,759,450 324,947 Commercial papers (Note 27.4) - 3,033,159 - 2,741,876 12,150,588 10,515,756 12,150,588 10,224,474
27.1 Quoted - Debentures Bank & Group
As at 31st December 2013 2012 Amortised Amortised Cost Cost Rs 000 Rs 000
Vanik Incorporation Ltd 750 750 (17% redeemable un-secured debentures Rs 100/- each redeemable on or before 31st August 2003) Urban Development Authority 217,870 217,870 (10% fully secured redeemable debentures Rs 100/- each redeemable on 5th October 2015) Urban Development Authority 225,488 225,488 (11% fully secured redeemable debentures Rs 100/- each redeemable on 5th October 2015) Singer Sri Lanka PLC 181,074 - (14.5% unsecured redeemable debentures Rs 100/- each redeemable on 31st May 2015 & 31st May 2016) Central Finance Company PLC 129,886 - (14.75% unsecured redeemable debentures Rs 100/- each redeemable on 19th June 2018) (14.25% unsecured redeemable debentures Rs 100/- each redeemable on 16th June 2016) (13.00% secured redeemable debentures Rs 100/- each redeemable on 13th December 2016) (13.25% secured redeemable debentures Rs 100/- each redeemable on 13th December 2017) Housing Development Finance Corporation 131,986 - (15.50 % secured redeemable debentures Rs 100/- each redeemable on 28th October 2018) (14.50 % secured redeemable debentures Rs 100/- each redeemable on 28th October 2016) Abans PLC 244,941 - (14.00 % secured redeemable debentures Rs 100/- each redeemable on 24th December 2016) (14.50 % secured redeemable debentures Rs 100/- each redeemable on 24th December 2018) (14.25 % secured redeemable debentures Rs 100/- each redeemable on 24th December 2017) Alliance Finance PLC 104,025 - (15.50 % secured redeemable debentures Rs 100/- each redeemable on 02nd October 2016) Senkadagala Finance PLC 40,934 - (17.00 % secured redeemable debentures Rs 100/- each redeemable on 27th May 2016) (17.25 % secured redeemable debentures Rs 100/- each redeemable on 27th May 2017) People’s Leasing & Finance PLC 503,582 - (17.00 % unsecured redeemable debentures Rs 100/- each redeemable on 28th March 2018) (16.75 % unsecured redeemable debentures Rs 100/- each redeemable on 28th March 2018) (16.50 % unsecured redeemable debentures Rs 100/- each redeemable on 28th March 2017) 1,780,536 444,108 Less: Provision for diminution in market value (750) (750) 1,779,786 443,358 Annual Report 2013 Sampath Bank PLC PLC Bank Sampath 2013 Annual Report
263 NOTES TO THE FINANCIAL STATEMENTS
27 OTHER LOANS AND RECEIVABLES CONTD. 27.2 Un-quoted - Preference Shares Bank & Group
As at 31st December 2013 2012 Amortised Cost Amortised Cost Rs 000 Rs 000
Texpro Industries Ltd (Non cumulative redeemable preference shares of Rs 10/- each @ 15% interest. Redeemable over a period of 6 years commencing from 30th June 2003) 12,604 12,604 12,604 12,604
Less: Provision for diminution in market value (12,604) (12,604) - -
27.3 Leased backed Trust Certificates Bank & Group
As at 31st December 2013 2012 Amortised Cost Amortised Cost Rs 000 Rs 000
Senkadagala Finance PLC 70,594 - Citizens Development Bank PLC 568,157 324,947 People’s Leasing & Finance PLC 871,030 - Associate Motor Finance Ltd 40,100 - Mercantile Investment & Finance PLC 209,569 - 1,759,450 324,947
27.4 Commercial Papers Bank
As at 31st December 2013 2012 Amortised Cost Amortised Cost Rs 000 Rs 000
People’s Leasing & Finance PLC - 1,557,701 Hayleys Agriculture Holdings Ltd - 458,159 Siyapatha Finance Ltd - 291,283 House of Fashion Garment (Pvt) Ltd - 726,016 - 3,033,159
Group
As at 31st December 2013 2012 Amortised Cost Amortised Cost Rs 000 Rs 000 People’s Leasing & Finance PLC - 1,557,701 Hayleys Agriculture Holdings Ltd - 458,159 House of Fashion Garment (Pvt) Ltd - 726,016 - 2,741,876
264 28 FINANCIAL INVESTMENTS AVAILABLE FOR SALE
As at 31st December Bank Group 2013 2012 2013 2012 Rs 000 Rs 000 Rs 000 Rs 000
Quoted Investments Government debt securities (Note 28.1) 100,462 179,176 100,462 179,176 Equity securities (Note 28.2) 2,216,100 1,686,021 2,216,100 1,686,021
Unquoted Investments Equity securities (Note 28.3) 76,556 58,427 76,612 58,483 2,393,118 1,923,624 2,393,174 1,923,680
28.1 Government Debt Securities Bank & Group As per the ‘Guidelines dated 29th April 2011 issued by the Central Bank of Sri Lanka to Licensed Commercial Banks and Licensed Specialised Banks on the operation of the Investment Fund Account’ the funds available in Investment Fund Account (IFA) can be invested in Government Treasury Bills for a maximum period of three months from the date of transfer to the fund until loans are granted.
2013 2012 Cost Market Value Cost Market Value Rs 000 Rs 000 Rs 000 Rs 000
Amortised cost 100,235 100,462 179,106 179,176 Gain / (loss) from marked to market valuation as at 01st January 70 - 405 - Movement during the year 157 - (335) - Gain / (loss) from marked to market valuation as at 31st December 227 - 70 - Market value 100,462 100,462 179,176 179,176
28.2 Quoted Equity Securities Bank & Group
As at 31st December 2013 2012 No of Cost of Market No of Cost of Market Ordinary Investment Value Ordinary Investment Value Shares Shares Rs 000 Rs 000 Rs 000 Rs 000
LankaBangla Finance Ltd (Note 28.2.1) 19,734,000 272,065 2,216,100 17,940,000 236,320 1,686,021 272,065 2,216,100 236,320 1,686,021 Annual Report 2013 Sampath Bank PLC PLC Bank Sampath 2013 Annual Report
265 NOTES TO THE FINANCIAL STATEMENTS
28 FINANCIAL INVESTMENTS AVAILABLE FOR SALE CONTD. 28.2.1 LankaBangla Finance Ltd Bank & Group
As at 31st December 2013 2012 Cost Market Value Cost Market Value Rs 000 Rs 000 Rs 000 Rs 000
Balance as at 01 st January 272,065 1,686,021 236,320 1,858,787 Exchange Gain/(loss) - 6,658 - 16,061 Scrip dividend received - 29,087 - 159,656 Gain/(loss) from marked to market valuation - 494,334 - (348,483) Balance as at 31st December 272,065 2,216,100 236,320 1,686,021
28.3 Unquoted Equity Securities
As at 31st December 2013 2012 No of Cost of Market No of Cost of Market Ordinary Investment Value Ordinary Investment Value Shares Shares Rs 000 Rs 000 Rs 000 Rs 000
Bank Name of the company LankaBangla Securities Ltd 210,000 37,930 37,930 210,000 35,317 35,317 Credit Information Bureau 1,700 170 170 1,700 170 170 S.W.I.F.T 18 65 65 18 65 65 Fitch Rating Lanka Ltd 62,500 625 625 62,500 625 625 Lanka Clear (Pvt) Ltd 2,000,000 20,000 20,000 2,000,000 20,000 20,000 Lanka Financial Services Bureau Ltd 225,000 2,250 2,250 225,000 2,250 2,250 RAM Ratings Lanka Ltd 1,241,263 15,516 15,516 - - - 76,556 76,556 58,427 58,427
Group Name of the company LankaBangla Securities Ltd 210,000 37,930 37,930 210,000 35,317 35,317 Credit Information Bureau 1,800 226 226 1,800 226 226 S.W.I.F.T 18 65 65 18 65 65 Fitch Rating Lanka Ltd 62,500 625 625 62,500 625 625 Lanka Clear (Pvt) Ltd 2,000,000 20,000 20,000 2,000,000 20,000 20,000 Lanka Financial Services Bureau Ltd 225,000 2,250 2,250 225,000 2,250 2,250 RAM Ratings Lanka Ltd 1,241,263 15,516 15,516 - - - 76,612 76,612 58,483 58,483
All unquoted available for sale investments are recorded at cost, since there is no market value for these investments and the Bank intends to hold them for the long term.
29 FINANCIAL INVESTMENTS HELD TO MATURITY Bank Group As at 31st December 2013 2012 2013 2012 Rs 000 Rs 000 Rs 000 Rs 000
Government securities Treasury bills 1,845,903 - 1,845,903 9,765 1,845,903 - 1,845,903 9,765
266 30 INVESTMENT IN SUBSIDIARIES - BANK
As at 31st December 2013 2012 Unquoted Principal Activity Cost Directors’ Cost Directors’ Valuation Valuation Rs 000 Rs 000 Rs 000 Rs 000
Sampath Centre Ltd Renting of Commercial Property 447,000 3,025,456 447,000 2,142,526
S C Securities (Pvt) Ltd Share Broking 78,921 174,282 78,921 184,595
Siyapatha Finance Ltd Leasing & Factoring (formerly known as Sampath & accepting fixed & saving Leasing & Factoring Ltd) deposits 525,000 1,073,903 525,000 882,682
Sampath Information Technology Solutions Ltd Developing Software Solutions & Maintenance of Hardware 9,000 38,621 9,000 19,150 1,059,921 4,312,262 1,059,921 3,228,953
The Directors’ valuation of investments in Subsidiaries has been carried out on net asset basis as at the reporting date.
31 PROPERTY, PLANT AND EQUIPMENT 31.1 Bank Freehold Land Leasehold Computer Office Fixtures & Motor Capital 2013 2012 & Buildings properties & Equipment Equipment Fittings Vehicles Work-in Total Total improvements Progress Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000
Cost / Valuation As at 1st January 2,719,200 994,591 2,415,052 1,625,242 - 212,722 68,614 8,035,421 7,549,627 Revaluation adjustment on accumulated depreciation (114,932) ------(114,932) - Net Revaluation surplus 415,445 ------415,445 - Net impairment charge (8,685) ------(8,685) - Additions & Improvements 65,770 115,332 332,998 178,204 97 955 110,427 803,783 630,904 Disposals during the year (16) (8,982) (31,713) (12,578) - - - (53,289) (90,263) Written off during the year (229) (68,155) (415,328) (172,469) - (4,368) - (660,549) - Sub category transfers during the year (19,355) (97) - - 19,452 - - - - Transfers / adjustments - - (76,307) (27,909) - - - (104,216) (54,847) Transferred from capital work-in-progress 120,061 - - - - - (120,087) (26) - Cost / Valuation as at 31st December 3,177,259 1,032,689 2,224,702 1,590,490 19,549 209,309 58,954 8,312,952 8,035,421
Accumulated Depreciation As at 1st January 99,788 626,235 1,780,828 851,872 - 116,892 - 3,475,615 3,021,843 Revaluation adjustment on accumulated depreciation (114,932) ------(114,932) - Charge for the year 18,389 129,482 183,689 164,904 7,746 18,549 - 522,759 535,656 Disposals during the year (1) (5,540) (30,571) (10,978) - - - (47,090) (81,774) Written off during the year (229) (68,143) (415,328) (172,436) - (4,368) - (660,504) - Sub category transfers during the year (1,843) - - - 1,843 - - - - Transfers / adjustments 565 5,268 29,340 (1,534) - (31,266) - 2,373 (110) Accumulated depreciation as at 31st December 1,737 687,302 1,547,958 831,828 9,589 99,807 - 3,178,221 3,475,615 Net book value as at 31st December 3,175,522 345,387 676,744 758,662 9,960 109,502 58,954 5,134,731 4,559,806
There were no capitalized borrowing costs related to the acquisition of property, plant and equipment during the year.
As set out in Note No 31.3, the Bank had revalued its freehold land and buildings as at 30th October 2013, by professionally qualified independent valuers. The revaluation was carried out by taking into account the observable prices in active market or recent market transactions on arm’s length basis. Accordingly, a revaluation surplus amounting to Rs 415.4 Mn had been credited to the revaluation reserve account in 2013. Net impairment loss of Rs 8.7 Mn in respect of freehold land & buildings based on the above revaluation was charged to Income Statement in 2013.
The carrying amount of Bank’s revalued land and buildings, if they were carried at cost less depreciation, would be as follows: Annual Report 2013 Sampath Bank PLC PLC Bank Sampath 2013 Annual Report
267 NOTES TO THE FINANCIAL STATEMENTS
31 PROPERTY, PLANT AND EQUIPMENT CONTD. 31.1 Bank
As at 31st December 2013 2012 Cost Accumulated Carrying Cost Accumulated Carrying Depreciation Value Depreciation Value Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000
Land 718,309 - 718,309 700,195 - 700,195 Freehold Buildings 727,650 105,576 622,074 589,897 90,040 499,857 Total 1,445,959 105,576 1,340,383 1,290,092 90,040 1,200,052
31.2 Group Freehold Leasehold Computer Office Fixtures & Motor Work-in 2013 2012 Land & Properties & Equipment equipment Fittings Vehicle Progress Total Total Building Improvements Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000
Cost / Valuation as at 1st January 4,968,486 994,591 2,520,584 1,655,418 7,918 289,089 68,614 10,504,700 9,939,354 Revaluation adjustment on accumulated depreciation (114,932) ------(114,932) - Net revaluation surplus 1,379,114 ------1,379,114 - Net impairment charge (8,685) ------(8,685) - Additions & Improvements 72,625 126,816 382,641 198,596 28,765 11,317 110,427 931,187 725,904 Disposals during the year (210,503) (8,982) (34,913) (12,578) - (50,043) - (317,019) (105,685) Written off during the year (229) (68,155) (415,328) (172,469) - (4,368) - (660,549) - Sub category transfers during the year (19,355) (97) - - 19,452 - - - - Transfers / adjustments - - (76,307) (27,909) - - - (104,216) (54,873) Transferred from capital work-in-progress 120,061 - - - - - (120,087) (26) - Cost / Valuation As at 31st December 6,186,582 1,044,173 2,376,677 1,641,058 56,135 245,995 58,954 11,609,574 10,504,700
Accumulated Depreciation As at 1st January 292,401 626,235 1,812,772 867,892 3,471 137,556 - 3,740,327 3,248,201 Revaluation adjustment on accumulated depreciation (114,932) ------(114,932) - Charge for the year 18,389 131,261 206,288 169,748 12,135 25,522 - 563,343 587,859 Disposals during the year (183,088) (5,540) (30,782) (12,194) - (16,448) - (248,052) (95,622) Written off during the year (229) (68,143) (415,328) (172,436) - (4,368) - (660,504) - Sub category transfers during the year (1,843) - - - 1,843 - - - - Transfers / adjustments 565 5,268 29,340 (1,534) - (31,266) - 2,373 (110) Accumulated depreciation as at 31st December 11,263 689,081 1,602,290 851,476 17,449 110,996 - 3,282,555 3,740,328 Net book value as at 31st December 6,175,319 355,092 774,387 789,582 38,686 134,999 58,954 8,327,019 6,764,372
The Group had revalued their freehold land and buildings, by professionally qualified independent valuers. The revaluation was carried out by taking into account the observable prices in active market or recent market transactions on arm’s length basis. Accordingly a revaluation surplus, amounting to Rs 1,379.1 Mn had been credited to the revaluation reserve account in 2013. Net impairment loss of Rs 8.7 Mn in respect of freehold land & buildings based on the above revaluation was charged to Income Statement in 2013.
There were no capitalized borrowing costs related to the acquisition of property, plant & equipment during the year.
The carrying amount of Group revalued land and buildings, if they were carried at cost less depreciation, would be as follows:
As at 31st December 2013 2012 Cost Accumulated Carrying Cost Accumulated Carrying Depreciation Value Depreciation Value Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000
Land 853,309 - 853,309 835,195 - 835,195 Freehold Buildings 1,423,142 249,091 1,174,051 1,276,621 216,168 1,060,453 Total 2,276,451 249,091 2,027,360 2,111,816 216,168 1,895,648
268 31.3 Details of Bank’s land and buildings stated at valuation are given below.
Bank 2013 2010 Date Of Method of Cost Revaluation Revaluation Location Valuation Valuation Rs Mn Rs Mn Rs Mn
Valuer-P B Kalugalagedara No 180 (part), Bodiraja Mawatha, Pettah 8.11.2013 Open Market value 21.40 62.40 55.00 No 261, Galle Road, Ratmalana 8.11.2013 Open Market value / Fair Value 25.50 43.50 41.00 No 61A, Moratuwa Road, Piliyandala 8.11.2013 Open Market value / Fair Value 38.10 87.50 76.00 No 371, Old Moor St, Masangasweediya, Colombo 12 8.11.2013 Open Market value / Fair Value 38.28 152.00 126.00 No 475, Elvitigala Mawatha, Narahenpita 8.11.2013 Open Market value / Fair Value 81.87 85.00 77.70
Valuer-C Wellappili No 1022, Maradana Road, Borella 7.11.2013 Income Basis / Contractors’ Basis 70.21 211.00 192.57 No 81 & 81 A, High Level Road, Maharagama 8.11.2013 Income Basis / Contractors’ Basis 34.42 73.00 59.38 No 05, Wakwella Road, Galle 9.11.2013 Income Basis / Contractors’ Basis 26.80 99.30 71.39 No 312, Galle Road, Kalutara 9.11.2013 Comparative Method 62.40 67.50 60.00 No 7/5, Giriulla Road, Alawwa 8.11.2013 Income Basis / Contractors’ Basis 6.50 38.00 25.40 No 42, Anguruwatota Road, Horana 9.11.2013 Comparative Method 18.50 31.13 20.80 No 150, Colombo Road, Gampaha (Land only) 8.11.2013 Contractors’ Basis 20.00 49.80 29.90
Valuer-E M Wimalasena “Nuwarawewakele”, Maithreepala Senanayake Mw, Anuradhapura 19.10.2013 Fair Value Basis / Open Market Value 10.90 123.85 92.80
Valuer-G M Gamage No 05, Hakmana Road, Matara 2.11.2013 Income Basis / Contractors’ Basis 39.15 161.75 161.00 No 69, Main Street, Deniyaya 2.11.2013 Income Basis / Contractors’ Basis 15.00 37.00 11.80 No 117, Hapugahawalawatta, Ihalagama Road, Deniyaya 2.11.2013 Income Basis / Contractors’ Basis 3.95 6.00 4.20 No 25-27, Main Street, Tissamaharama 19.10.2013 Income Basis / Contractors’ Basis 34.30 43.00 37.00
Valuer-K T D Tissera No 256/1, Negombo Road, Wattala 26.11.2013 Investment Basis 44.20 120.00 53.90
Valuer-Sarath Fernando No 31 & 33, Negombo Road, Kurunegala 24.10.2013 Income Basis / Comparative Method 77.05 196.00 145.00 No 373 A, Galle Road, Panadura 21.11.2013 Income Basis / Comparative Method 42.00 100.00 55.30 No 187, Madawala Road, Katugastota 28.10.2013 Income Basis / Comparative Method 14.35 130.00 43.38 No 591, Galle Road, Wellawatta 22.11.2013 Income Basis / Comparative Method 112.30 173.00 107.50 No 29, Cross Street, Kandy 24.10.2013 Income Basis / Comparative Method 102.18 323.00 300.00 No 103, Dharmapala Mawatha, Hunupitiya, Colombo 7 21.11.2013 Income Basis / Comparative Method 26.20 700.00 597.00 No 1/87, Victoria Range, Digana, Kandy 24.10.2013 Comparative Method 15.94 15.60 - Annual Report 2013 Sampath Bank PLC PLC Bank Sampath 2013 Annual Report
269 NOTES TO THE FINANCIAL STATEMENTS
31 PROPERTY, PLANT AND EQUIPMENT CONTD. 31.4 Freehold Land and Buildings - Bank
2013 2012 Land Buildings Cost / Cost / Total Accumulated Net Book As a % Net Book Location Extent- Sq.ft Revaluation Revaluation Value Depreciation Value of Total Value Perches of Land of Buildings NBV Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 % Rs 000
1 Pettah - 5,124 - 62,400 62,400 129 62,271 2.0% 51,943 No 180, Bodiraja Mawatha, Pettah 2 Borella 25.5 16,345 140,250 70,750 211,000 146 210,854 6.6% 193,308 No 1022, Maradana Road, Borella 3 Kurunegala 37.4 11,206 121,795 75,000 196,795 154 196,641 6.2% 141,492 No 31 & 33, Negombo Road, Kurunegala 4 Wattala 42.5 5,314 80,000 40,000 120,000 82 119,918 3.8% 72,115 No 256/1, Negombo Road, Wattala 5 Matara 47.7 11,141 131,148 30,598 161,746 63 161,683 5.1% 161,047 No 05, Hakmana Road, Matara 6 Maharagama 15.5 6,310 46,350 26,650 73,000 55 72,945 2.3% 54,527 No 81 & 81 A, High Level Road, Maharagama 7 Deniyaya 17.5 5,325 16,644 20,356 37,000 42 36,958 1.2% 15,889 No 69, Main Street, Deniyaya 8 Deniyaya 40.0 Bare Land 6,000 - 6,000 - 6,000 0.2% 11,800 No 117, Hapugahawalawatta, Ihalagama Road, Deniyaya 9 Ratmalana 10.9 5,520 22,000 21,500 43,500 44 43,456 1.4% 42,354 No 261, Galle Road, Ratmalana 10 Piliyandala 37.5 8,037 56,000 31,500 87,500 65 87,435 2.8% 75,527 No 61A, Moratuwa Road, Piliyandala 11 Anuradhapura 41.3 Under 123,850 4,765 128,615 - 128,615 4.1% 99,014 “Nuwarawewakele”, Maithreepala Senanayake Mw, Construction Anuradhapura 12 Panadura 27.3 6,020 54,000 46,000 100,000 95 99,905 3.1% 79,232 No 373 A, Galle Road, Panadura 13 Old Moor Street 24.0 10,280 126,000 26,000 152,000 53 151,947 4.8% 126,323 No 371, Old Moor St, Masangasweediya, Colombo 12 14 Tissamaharama 22.2 10,815 14,430 28,570 43,000 59 42,941 1.3% 43,640 No 25-27, Main Street, Tissamaharama 15 Katugastota 24.1 7,811 63,800 66,200 130,000 136 129,864 4.1% 108,052 No 187, Madawala Road, Katugastota 16 Galle 17.5 5,400 78,660 20,640 99,300 42 99,258 3.1% 70,939 No 05, Wakwella Road, Galle 17 Wellawatte 21.5 7,776 113,000 60,000 173,000 123 172,877 5.4% 161,153 No 591, Galle Road, Wellawatta 18 Narahenpita 18.5 Under 85,000 2,136 87,136 - 87,136 2.7% 77,700 No 475, Elvitigala Mawatha, Narahenpita Construction 19 Kalutara 30.0 Under 67,500 3,463 70,963 - 70,963 2.2% 60,000 No 312, Galle Road, Kalutara Construction 20 Alawwa 20.7 8,245 16,520 21,480 38,000 44 37,956 1.2% 24,517 No 7/5, Giriulla Road, Alawwa 21 Horana 20.8 Bare Land 31,000 - 31,000 - 31,000 1.0% 20,750 No 42, Anguruwatota Road, Horana 22 Kandy Corporate 25.4 15,026 228,500 94,500 323,000 194 322,806 10.2% 296,118 No 29, Cross Street, Kandy 23 Dharmapala Mawatha 119.4 5,600 645,400 54,600 700,000 112 699,888 22.0% 645,901 No 103, Dharmapala Mawatha, Hunupitiya, Colombo 7 24 Gampaha 25.0 4,485 49,800 36,904 86,704 78 86,626 2.7% 39,694 No 150, Colombo Road, Gampaha 25 Victoria Range 20.1 2,320 5,500 10,100 15,600 21 15,579 0.5% 14,850 No 1/87, Victoria Range, Digana, Kandy Total 732.2 158,100 2,323,147 854,112 3,177,259 1,737 3,175,522 100.0% 2,687,885
31.5 (a) Leasehold Buildings-Bank 2013 2012 As at 31st December Cost of Accumulated Net Book Net Book Buildings Depreciation Value Value Rs 000 Rs 000 Rs 000 Rs 000
01 - 05 years 515,575 360,486 155,089 123,360 05 - 10 years 517,114 326,816 190,298 244,996 1,032,689 687,302 345,387 368,356
270 31.5 (b) Fully depreciated property, plant and equipment - Bank A classwise analysis of the initial cost of fully depreciated property, plant and equipment of the Bank which are still in use as at reporting date is as follows.
As at 31st December 2013 2012 Rs 000 Rs 000
Asset class Leasehold properties & improvements 337,922 341,235 Computer equipment 1,526,126 1,777,921 Office equipment 276,799 394,166 Fixtures & fittings 6,242 - Motor vehicles 21,247 73,715 2,168,336 2,587,037
31.5 (c) Temporarily idle property, plant and equipment- Bank Two lands worth of Rs 37.0 Mn were idle as at 31st December 2013 (2012: Rs 162.6 Mn). The Bank holds these lands with the intention of constructing branches in the near future.
31.5 (d) Property, plant and equipment retired from active use - Bank There were no property, plant and equipment retired from active use as at the reporting date (2012: NIL)
31.5 (e) Title restriction of property, plant and equipment-Bank There were no restrictions on the title of property, plant and equipment as at 31st December 2013.
31.5 (f) Property, plant and equipment pledged as security for liabilities-Bank There were no items of property, plant and equipment pledged as securities for liabilities.
31.5 (g) Compensation from third parties for items of property, plant and equipment-Bank Compensation received from third parties for items of property, plant and equipment that were impaired, lost or given up is Nil. (2012 : Rs 2.8 Mn)
32 INTANGIBLE ASSETS Bank Group As at 31st December 2013 2012 2013 2012 Rs 000 Rs 000 Rs 000 Rs 000
Computer Software and Licenses (Note 32.1) 297,359 311,758 313,305 316,412 Annual Report 2013 Sampath Bank PLC PLC Bank Sampath 2013 Annual Report
271 NOTES TO THE FINANCIAL STATEMENTS
32 INTANGIBLE ASSETS CONTD. 32.1 Intangible Assets Bank Group 2013 2012 2013 2012 Rs 000 Rs 000 Rs 000 Rs 000
Cost As at 1st January 988,916 700,885 1,009,191 718,987 Additions & improvements 41,385 288,031 58,311 290,204 Disposals during the year - - - - Transfers / adjustments (10,853) - (10,853) - Cost / Valuation as at 31st December 1,019,448 988,916 1,056,649 1,009,191
Accumulated amortisation As at 1st January 677,158 633,592 692,779 645,616 Charge for the year 47,270 43,566 52,904 47,163 Disposals during the year - - - - Transfers / adjustments (2,339) - (2,339) - Accumulated amortisation as at 31st December 722,089 677,158 743,344 692,779 Net book value as at 31st December 297,359 311,758 313,305 316,412
33 DEFERRED TAX (ASSETS) / LIABILITIES
Bank Group Temporary difference Tax effect Temporary difference Tax effect
As at 31st December 2013 2012 2013 2012 2013 2012 2013 2012 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000
Deferred tax liability Depreciation of property, plant and equipment 1,037,973 624,784 290,632 174,940 1,037,781 662,649 290,579 185,542 Depreciation of lease assets 1,106,494 873,775 309,818 244,657 1,477,494 1,137,686 413,698 318,552 Revaluation on buildings - OCI 265,749 174,657 74,410 48,904 265,749 174,657 74,410 48,904 2,410,216 1,673,216 674,860 468,501 2,781,024 1,974,992 778,687 552,998
Deferred tax asset Unclaimed impairment provisions - loans & receivables 2,575,168 - 721,047 - 2,608,147 - 730,282 - Unclaimed impairment provision - investment ------Tax losses 45,105 - 12,629 - 243,561 224,098 68,197 62,747 Defined benefit obligation - Income Statement 241,196 152,567 67,535 42,719 255,923 164,535 71,658 46,070 Defined benefit obligation - OCI 627,656 167,085 175,744 46,784 627,656 167,085 175,744 46,784 Others 24,005 76,873 6,721 21,524 24,005 76,873 6,721 21,524 3,513,130 396,525 983,676 111,027 3,759,292 632,591 1,052,602 177,125 (1,102,914) 1,276,691 (308,816) 357,474 (978,268) 1,342,401 (273,915) 375,873
272 33.1 Deferred Tax charge/(reversal) to Income Statement/OCI Bank
Deferred tax (assets) / liabilities Tax effect Income Statement OCI 2013 2012 2013 2012 2013 2012 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000
Deferred tax liability Depreciation of property, plant and equipment 290,632 174,940 115,693 1,657 - - Depreciation of lease assets 309,818 244,657 65,161 33,320 - - Revaluation on buildings - OCI 74,410 48,904 - - 25,506 - 674,860 468,501 180,854 34,977 25,506 -
Deferred tax asset Unclaimed impairment provisions - loans & receivables 721,047 - 721,047 - - - Unclaimed impairment provision - investment ------Tax losses 12,629 - 12,629 - - - Defined benefit obligation - Income Statement 67,535 42,719 24,816 7,866 - - Defined benefit obligation - OCI 175,744 46,784 - - 128,960 (3,434) Others 6,721 21,524 (14,803) 3,214 - - 983,676 111,027 743,689 11,080 128,960 (3,434) (308,816) 357,474 (562,835) 23,897 (103,454) 3,434
Group
Deferred tax (assets) / liabilities Tax effect Income Statement OCI 2013 2012 2013 2012 2013 2012 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000
Deferred tax liability Depreciation of property, plant and equipment 290,579 185,542 105,037 6,376 - - Depreciation of lease assets 413,698 318,552 95,146 36,783 - - Revaluation on buildings - OCI 74,410 48,904 - - 25,506 - 778,687 552,998 200,183 43,159 25,506 -
Deferred tax asset Unclaimed impairment provisions - loans & receivables 730,282 - 730,281 - - - Unclaimed impairment provision - investment - - - (59,282) - - Tax losses 68,197 62,747 5,450 62,747 - - Defined benefit obligation - Income Statement 71,658 46,070 25,589 7,578 - - Defined benefit obligation - OCI 175,744 46,784 - - 128,960 (3,434) Others 6,721 21,524 (14,803) 3,213 - - 1,052,602 177,125 746,517 14,256 128,960 (3,434) (273,915) 375,873 (546,334) 28,903 (103,454) 3,434 Annual Report 2013 Sampath Bank PLC PLC Bank Sampath 2013 Annual Report
273 NOTES TO THE FINANCIAL STATEMENTS
34 OTHER ASSETS Bank Group As at 31st December 2013 2012 2013 2012 Rs 000 Rs 000 Rs 000 Rs 000
Pre-paid expenses 744,337 1,196,456 744,337 1,196,456 Other debtors (Note 34.1) 1,540,628 1,184,199 2,146,853 1,706,138 Pre-paid staff cost (Note 34.2) 1,708,351 1,403,533 1,708,351 1,403,533 Refundable deposits at fair value 73,158 72,328 10,404 9,574 Pre-paid cost on refundable deposits 1,379 1,593 1,379 1,593 Financial guarantees (Note 34.3) 137,589 142,565 137,589 142,565 4,205,442 4,000,674 4,748,913 4,459,859
34.1 Other Debtors Bank Group As at 31st December 2013 2012 2013 2012 Rs 000 Rs 000 Rs 000 Rs 000
Amortised cost 1,540,628 1,184,199 2,212,076 1,751,515 Impairment: Balance as at 1st January - - (45,377) (30,377) Charge / (reversal) during the year - - (19,846) (15,000) Balance as at 31st December - - (65,223) (45,377) Balance net of impairment 1,540,628 1,184,199 2,146,853 1,706,138
34.2 The Movement in the Pre-Paid Staff Cost 2013 2012 Rs 000 Rs 000
Bank / Group As at 1st January 1,403,533 1,086,527 Add / (Less): Adjustment for new grants & settlements 461,370 473,594 Less: charge to Personnel cost (156,552) (156,588) As at 31st December 1,708,351 1,403,533
34.3 Financial Guarantee The movement during the year is as follows: 2013 2012 Rs 000 Rs 000
Bank / Group At at 1st January 142,565 146,489 Interest income 11,871 12,275 Income received (16,847) (16,199) At at 31st December 137,589 142,565
274 35 DUE TO BANKS Bank Group As at 31st December 2013 2012 2013 2012 Rs 000 Rs 000 Rs 000 Rs 000
Call & time deposits 1,879,531 244,038 1,879,531 244,038 Local & foreign bank borrowings 331,750 380,746 370,841 424,160 2,211,281 624,784 2,250,372 668,198
The maturity analysis of borrowings is given in Note 48.
36 DUE TO OTHER CUSTOMERS Bank Group As at 31st December 2013 2012 2013 2012 Rs 000 Rs 000 Rs 000 Rs 000
Local Currency Deposits Demand 15,391,320 13,667,508 15,363,552 13,644,907 Savings 75,231,103 60,785,509 75,091,307 60,652,599 Call deposits 1,097,400 845,834 1,097,400 845,834 Fixed deposits 172,187,451 137,446,329 172,187,451 137,359,083 Certificates of deposits 11,055,013 9,520,143 11,055,013 9,520,146 Margin deposits 1,909,645 511,598 1,909,645 511,598 276,871,932 222,776,921 276,704,368 222,534,167
Foreign Currency Deposits Demand 1,706,987 1,405,312 1,706,987 1,405,312 Savings 7,936,362 6,462,657 7,936,362 6,462,657 Call deposits - 5,953 - 5,953 Fixed deposits 13,997,646 12,655,641 13,997,646 12,655,641 Margin deposits 36,423 24,506 36,423 24,506 23,677,418 20,554,069 23,677,418 20,554,069 Total 300,549,350 243,330,990 300,381,786 243,088,236
37 DEBT ISSUED AND OTHER BORROWED FUNDS Bank Group As at 31st December 2013 2012 2013 2012 Rs 000 Rs 000 Rs 000 Rs 000
Commercial papers - - 611,241 828,991 Redeemable debentures (Note 37.1) 6,500,000 1,500,000 6,852,830 1,937,207 Long term bond (Note 37.2) 1,494,001 1,368,723 1,494,001 1,368,723 Call borrowings 3,924,825 - 3,924,825 - Term borrowings - 3,033,650 4,922,128 5,160,437 Foreign currency borrowings 22,322,900 18,084,125 22,322,900 18,084,125 Refinance borrowings 4,620,605 4,838,531 4,620,605 4,838,531 38,862,331 28,825,029 44,748,530 32,218,014
The Bank has not had any default of principal, interest or other breaches with regard to any liability during 2012 and 2013. Annual Report 2013 Sampath Bank PLC PLC Bank Sampath 2013 Annual Report
275 NOTES TO THE FINANCIAL STATEMENTS
37 DEBT ISSUED AND OTHER BORROWED FUNDS CONTD. 37.1 Redeemable Debentures Bank Group As at 31st December 2013 2012 2013 2012 Rs 000 Rs 000 Rs 000 Rs 000
Balance as at 1 st January (Note 37.1.1) 1,500,000 1,761,618 1,937,207 1,861,688 Debentures issued (Note 37.1.2) 5,000,000 1,500,000 5,000,000 1,800,000 Interest payable - - 60,050 37,137 Debentures redeemed - (1,750,000) (85,500) (1,750,000) Interest paid - (11,618) (58,927) (11,618) Balance as at 31 st December 6,500,000 1,500,000 6,852,830 1,937,207
37.1.1 The Debentures include 15,000,000 Unsecured Subordinated Redeemable 5-year Debentures of Rs 100/- each issued in 2012. The debentures are quoted on the Colombo Stock Exchange.
Amortised cost
No of Debentures Face Value 2013 2012 Allotment Date Maturity Date Rate of Interest Rs 000 Rs 000 Rs 000
10,776,800 1,077,680 1,077,680 1,077,680 12-Oct-12 31-Oct-17 Fixed - 16.5 % per annum payable annually 2,477,900 247,790 247,790 247,790 12-Oct-12 31-Oct-17 Fixed - 15.0 % per annum payable monthly 1,745,300 174,530 174,530 174,530 12-Oct-12 31-Oct-17 Floating rate is equivalent to the six months Treasury Bill rate (gross) plus 2.0 % 15,000,000 1,500,000 1,500,000 1,500,000
37.1.2 The Debentures include of 50,000,000 unsecured Subordinated Redeemable 5-year Debentures of Rs 100/- each issued in 2013. The debentures are quoted on the Colombo Stock Exchange.
Value
No of Debentures Face Value 2013 2012 Allotment Date Maturity Date Rate of Interest Rs 000 Rs 000 Rs 000
15,541,900 1,554,190 1,554,190 - 04-Dec-13 04-Dec-18 Fixed - 13.00 % per annum payable semi-annually 34,458,100 3,445,810 3,445,810 - 04-Dec-13 04-Dec-18 Fixed - 13.40 % per annum payable annually 50,000,000 5,000,000 5,000,000
37.2 Long Term Bond Bank Group 2013 2012 2013 2012 Rs 000 Rs 000 Rs 000 Rs 000
Balance as at 1st January 1,368,723 1,253,949 1,368,723 1,253,949 Interest accrued 125,278 114,774 125,278 114,774 Balance as at 31st December 1,494,001 1,368,723 1,494,001 1,368,723
276 38 CURRENT TAX LIABILITIES Bank Group As at 31st December 2013 2012 2013 2012 Rs 000 Rs 000 Rs 000 Rs 000
Balance as at 1st January 3,041,259 1,851,834 3,073,243 1,881,142 Current year provision 1,623,795 2,146,260 1,697,634 2,184,158 Less: Payment of tax (1,973,189) (956,835) (2,017,539) (992,057) Balance as at 31st December 2,691,865 3,041,259 2,753,338 3,073,243
39 OTHER PROVISIONS Bank Group As at 31st December 2013 2012 2013 2012 Rs 000 Rs 000 Rs 000 Rs 000
Provision for retiring gratuity (Note 39.1) 255,548 202,994 271,439 215,716 Leave accrual plan (Note 39.2) 127,682 96,402 127,682 96,402 EPF Interest Guarantee plan (Note 39.3) 57,979 43,240 57,979 43,240 441,209 342,636 457,100 355,358
39.1 Provision for Retiring Gratuity 39.1.1 Net Asset (Liability) Recognised in the Statement of Financial Position Bank Group 2013 2012 2013 2012 Rs 000 Rs 000 Rs 000 Rs 000
Balance as at 1st January 202,994 164,182 215,715 177,220 Provision made during the year 63,500 51,528 66,066 50,868 266,494 215,710 281,781 228,088 Benefits paid by the plan (10,946) (12,716) (10,342) (12,372) 255,548 202,994 271,439 215,716
39.1.2 Amounts Recognised in Income Statement Bank Group 2013 2012 2013 2012 Rs 000 Rs 000 Rs 000 Rs 000
Service cost 29,853 24,389 30,794 23,729 Net interest on the net defined benefit liability (asset) 22,329 16,418 22,329 16,418 Total amount recognised in Income Statement 52,182 40,807 53,123 40,147
39.1.3 Amounts Recognised in OCI Bank Group 2013 2012 2013 2012 Rs 000 Rs 000 Rs 000 Rs 000
Liability (gains) losses due to changes in assumptions - (26) - (26) Liability experience (gains) losses arising during the year 11,318 10,747 12,943 10,747 11,318 10,721 12,943 10,721 Annual Report 2013 Sampath Bank PLC PLC Bank Sampath 2013 Annual Report
277 NOTES TO THE FINANCIAL STATEMENTS
39 OTHER PROVISIONS CONTD. 39.1.4 Defined Benefit Obligation Reconciliation Bank Group 2013 2012 2013 2012 Rs 000 Rs 000 Rs 000 Rs 000
Benefit obligation at end of prior year 202,994 164,183 215,715 177,221 Service cost 29,853 24,388 30,794 23,728 Interest cost 22,329 16,418 22,329 16,418 Actual benefits paid from plan (10,946) (12,716) (10,342) (12,372) (Gain) / loss due to changes in assumptions 11,318 10,747 12,943 10,747 Experience (gain) / loss - (26) - (26) 255,548 202,994 271,439 215,716
An actuarial valuation of the gratuity fund was carried out as at 31st December 2013 by Messrs Piyal S Goonetilleke & Associates, a firm of professional actuaries. The valuation method used by the actuary to value the Fund is the “Projected Unit Credit Method”, recommended by Sri Lanka Accounting Standards-LKAS 19 (Employee Benefits).
Actuarial assumptions 2013 2012
Discount rate as at 31st December 11% 11% Future salary increment rate 10% 10% EPF Fund investment rate 8.75% 9.75% Guarantee investment rate 9% 10% Mortality GA 1983 Mortality Table GA 1983 Mortality Table Retirement age 55 years 55 years
Sensitivity of assumptions employed in actuarial valuation The following table demonstrates the sensitivity to a reasonably possible change in the key assumptions employed with all other variables held constant in the employment benefit liability measurement.
The sensitivity of the Comprehensive Income Statement and the Statement of Financial Position is the effect of the assumed changes in discount rate and salary increment rate on the profit or loss & employment benefit obligation for the year.
Increase / Increase / 2013 (decrease) (Decrease) in Sensitivity Effect on Comprehensive Sensitivity Effect on Employment in discount rate Salary Increment Income Statement Increase/ (Reduction) Benefit Obligation Increase/ (Decrease) in results for the year (Rs Mn) in the Liability (Rs Mn) 1% - 40.6 (40.6) (1%) - (48.1) 48.1 - 1% (41.5) 41.5 - (1%) 35.6 (35.6)
Sensitivity disclosures for the defined benefit obligation for comparative period (year ended 31st December 2012) have not been presented as the sensitivity analysis for 2012 has been done based on the previous Accounting Standard.
39.2 Leave Accrual Plan 39.2.1 Net Asset (Liability) Recognised in the Statement of Financial Position Bank Group 2013 2012 2013 2012 Rs 000 Rs 000 Rs 000 Rs 000
Balance as at 1st January 96,402 96,402 96,402 96,402 Provision made during the year 31,280 - 31,280 - Balance as at 31st December 127,682 96,402 127,682 96,402
278 39.3 EPF Interest Guarantee plan 39.3.1 Net Asset (Liability) Recognised in the Statement of Financial Position
Bank Group 2013 2012 2013 2012 Rs 000 Rs 000 Rs 000 Rs 000
Present value of funded benefit obligation as at 1st January 43,240 - 43,240 - Provision made during the year 14,739 43,240 14,739 43,240 Balance as at 31st December 57,979 43,240 57,979 43,240
39.4 Pension Fund 39.4.1 Net Asset (Liability) Recognised in the Statements of Financial Position
Bank Group 2013 2012 2013 2012 Rs 000 Rs 000 Rs 000 Rs 000
Fair value of plan assets as at 31st December (Note 39.4.5) 4,371,027 4,106,345 4,371,027 4,106,345 Present value of funded obligations as at 31 st December (Note 39.4.4) (3,986,426) (3,227,914) (3,986,426) (3,227,914) Funded status 384,601 878,431 384,601 878,431 Present value of unfunded benefit obligations - - - - Net asset (liability) recognised 384,601 878,431 384,601 878,431
39.4.2 Amounts Recognised in Income Statement
Bank Group 2013 2012 2013 2012 Rs 000 Rs 000 Rs 000 Rs 000
Service cost 157,330 150,120 157,330 150,120 Net interest on the net defined benefit liability (asset) (92,910) (62,709) (92,910) (62,709) Total amount recognised in Income Statement 64,420 87,411 64,420 87,411
Note: This over payment is recognised under pre-paid expenses in “other assets” category.
39.4.3 Amounts Recognised in OCI
Bank Group 2013 2012 2013 2012 Rs 000 Rs 000 Rs 000 Rs 000
Liability (gains) losses due to changes in assumptions - (210,067) - (210,067) Liability experience (gains) losses arising during the year 308,502 194,375 308,502 194,375 Asset (gains) losses arising during the year 120,907 (7,293) 120,907 (7,293) Total amount recognised in OCI 429,409 (22,985) 429,409 (22,985) Annual Report 2013 Sampath Bank PLC PLC Bank Sampath 2013 Annual Report
279 NOTES TO THE FINANCIAL STATEMENTS
39 OTHER PROVISIONS CONTD. 39.4.4 Defined Benefit Obligation Reconciliation
Bank Group 2013 2012 2013 2012 Rs 000 Rs 000 Rs 000 Rs 000
Benefit obligation at end of prior year 3,227,914 2,882,369 3,227,914 2,882,369 Service cost 157,330 150,120 157,330 150,120 Interest cost 355,071 288,237 355,071 288,237 Actual benefits paid from plan (62,391) (77,120) (62,391) (77,120) (Gain) loss due to changes in assumptions 308,502 194,375 308,502 194,375 Experience (gain)/loss - (210,067) - (210,067) 3,986,426 3,227,914 3,986,426 3,227,914
39.4.5 Fair Value of Plan Assets Reconciliation
Bank Group 2013 2012 2013 2012 Rs 000 Rs 000 Rs 000 Rs 000
Fair value of plan assets at end of prior year 4,106,345 3,551,235 4,106,345 3,551,235 Interest income on plan assets 447,980 350,946 447,980 350,946 Asset gain (loss) (120,907) 7,293 (120,907) 7,293 Actual employer contributions - 273,991 - 273,991 Actual benefits paid from plan (62,391) (77,120) (62,391) (77,120) 4,371,027 4,106,345 4,371,027 4,106,345
An actuarial valuation of the Pension Fund was carried out as at 31st December 2013 by Messrs Piyal S Goonetilleke & Associates, a firm of professional actuaries. The valuation method used by the actuary to value the Fund is the “Projected Unit Credit Actuarial Cost Method”, recommended by Sri Lanka Accounting Standard - LKAS 19 (Employee Benefits).
2013 2012
Actuarial assumptions Discount rate as at 31st December 11% 11% Future salary increment rate 10% 10% Annual return on assets 9% 10% Mortality GA 1983 Mortality Table GA 1983 Mortality Table Retirement age Normal retirement age or age Normal retirement age or on valuation date, if greater age on valuation date, if greater
The plan assets are term deposits, government debt securities and debenture investments in listed companies. Average duration of the defined benefit plan obligation is 13 years at the end of the reporting period. All actuarial gains & losses occurred due to changes in financial assumptions.
280 39.4.6 Sensitivity of Assumptions Employed in Actuarial Valuation The following table demonstrates the sensitivity to a reasonably possible change in the key assumptions employed with all other variables held constant in the employment benefit liability measurement.
The sensitivity of the Comprehensive Income Statement and the Statement of Financial Position is the effect of the assumed changes in discount rate & salary increment rate on the profit or loss & employment benefit obligation for the year.
Increase / Increase / 2013 (decrease) (Decrease) in Salary Sensitivity Effect on Comprehensive Income Sensitivity Effect on Employment Benefit in discount Increment Statement Increase/ (Reduction) in results Obligation Increase/ (Decrease) in the rate for the year (Rs Mn) Liability (Rs Mn) 1% 471.3 (471.3) (1%) (570.8) 570.8 1% (291.5) 291.5 (1%) 263.3 (263.3 )
Sensitivity disclosures for the defined benefit obligation for comparative period (year ended 31st December 2012) have not been presented as the sensitivity analysis for 2012 has been done based on the previous Accounting Standard.
40 OTHER LIABILITIES Bank Group As at 31st December 2013 2012 2013 2012 Rs 000 Rs 000 Rs 000 Rs 000
Provision for deposit insurance scheme 81,731 69,941 81,731 69,941 Financial guarantee liability 64,701 71,448 64,701 71,448 Other payable 4,637,555 3,914,099 4,998,787 4,120,930 4,783,987 4,055,488 5,145,219 4,262,319
41 STATED CAPITAL Bank Group 2013 2012 2013 2012 Rs 000 Rs 000 Rs 000 Rs 000
Ordinary shares as at 1st January 3,564,172 2,743,780 3,564,172 2,743,780 Issue of shares under ESOP 10,794 176,035 10,794 176,035 Scrip dividend 885,373 644,357 885,373 644,357 As at 31st December 4,460,339 3,564,172 4,460,339 3,564,172
Number of shares as at 31st December 2013 increased to 167,787,605 from 162,736,665 as at 31st December 2012 due to effect of the scrip dividend & ESOP 2010.
Rights, preferences and restrictions of classes of capital The holders of ordinary shares have the right to receive dividend as declared from time to time and are entitled to one vote per share at the Annual General Meeting of the Bank. Annual Report 2013 Sampath Bank PLC PLC Bank Sampath 2013 Annual Report
281 NOTES TO THE FINANCIAL STATEMENTS
41 STATED CAPITAL CONTD. 41.1 Employee Share Option Plan (ESOP) - 2010
As at 31st December 2013 2012 Number of Number of ESOP Position shares shares
Number of options available 3,056,159 3,056,159 Number of options exercised 2,860,293 2,725,360 Number of remaining options (shares) 195,866 330,799
Option price (Rs) 80 80 Weighted average Market price (Rs) 199.83 180.10
The option exercisable period would be 3 years, from the entitlement date of 30th June 2011. In the event of options being fully exercised by the eligible staff, the stated capital of the Bank would rise by Rs 244.5 Mn, as a result of the consideration to be paid by the staff under the ESOP.
No financial assistance will be provided by the Bank to the staff to purchase the share options. The remaining contractual life of share options is 6 months.
42 COMMITMENTS AND CONTINGENCIES To meet the financial needs of customers in the ordinary course of business, the Bank enters into various irrevocable commitments and incurs certain contingent liabilities. These consist of financial guarantees, letters of credit and other undrawn commitments to lend.
Even though these obligations may not be recognised on the Statement of Financial Position, they do contain credit risk and are therefore part of the overall risk of the Bank.
Letters of credit & guarantees (including standby letters of credit) commit the Bank to make payments on behalf of customers in the event of a specific act, generally related to the import or export of goods. Guarantees and standby letters of credit carry a similar credit risk to loans.
No material losses are anticipated as a result of these commitments and contingencies.
42.1 Commitments and Contingencies Bank Group As at 31st December 2013 2012 2013 2012 Rs 000 Rs 000 Rs 000 Rs 000
Commitments Commitment for unutilised facilities (direct advances) 37,346,053 27,340,066 37,464,520 27,543,720 37,346,053 27,340,066 37,464,520 27,543,720
Contingent Liabilities Acceptances 7,871,824 6,308,188 7,871,824 6,308,188 Documentary credit 12,014,404 11,310,366 12,014,404 11,310,366 Guarantees 28,333,570 21,993,951 28,333,570 21,993,951 Bills sent for collection 164,448 129,388 164,448 129,388 Others 14,791 352,396 14,791 352,396 48,399,037 40,094,289 48,399,037 40,094,289 Forward exchange contracts 37,093,136 28,684,448 37,093,136 28,684,448 Currency SWAPs 22,728,550 19,806,940 22,728,550 19,806,940 108,220,723 88,585,677 108,220,723 88,585,677 Commitment & contingencies 145,566,776 115,925,743 145,685,243 116,129,397
282 42.2 Other Contingent Liabilities Litigation against the Bank Litigation is a common occurrence in the banking industry due to the nature of the business undertaken. The Bank has formal controls and policies for managing legal claims. Once professional advice has been obtained and the amount of loss reasonably estimated, the Bank makes adjustments to account for any adverse effects which the claims may have on its financial standing. At the year end, the Bank had several unresolved legal claims.
I. Before the Labour Tribunal: LT application before the Labour Tribunal in Case No LT1/ADD/20/2012, LT application in High Court pending in case No HC ALT 14/2012.
II. Commercial High Court Case No HC (Civil) 11/2004(1) The above case has been filed against the Bank in the Commercial High Court by Claremont Capital Limited (a company incorporated in the British Virgin Islands) for the recovery of a sum of Rs 272,232,295.16 on the allegation that the Bank had wrongfully debited the said amount from the Bank account of Claremont Capital Limited. The said party has also claimed a sum of Rs 53,411,299.34 on account of the alleged loss suffered by them up to date of institution of the action and a sum of Rs 4,906,796.63 per month as alleged continuing losses.
Claremont Capital subsequently filed a notice of appeal and the Bank filed a motion objecting to the said notice on various grounds. The order with regard to the motion has been reserved for the 20th of January 2012 and the action is now pending before Supreme Court. lll. Following cases are filed against the Bank in order to recover damages (a) Case No - DMR 5787/10 The above case has been filed against the Bank claiming a sum of Rs 210,000/- for auctioning pawned articles by the Bank. The Plaintiff is seeking Legal interest from June 2010 until the payment of damages and legal interest from the date of Judgment until the payment of total amount.
(b) Case No - 250/12/DSP The Plaintiff has filed a case against the Bank claiming Rs 1.0 Mn on the basis that he has tendered Omanian Rial 400/- for encashment. The equivalent rupee amount has been credited to his account. Subsequently it was realized that the Bank has encashed not actual Omanian Rial but they are Omanian Baisa which is having a very lower value than Omanian Rial. Accordingly Bank has recovered the said amount and credited only the value of the Baisa’s tendered by the customer. Bank has filed necessary papers to defend our case and it is hopeful that we will be succeeded in this case since Bank has the currencies tendered for the encashment by the customer.
(c) Case No - DMR 1904/2012 The above case has been filed against the Bank claiming a sum of Rs 2,500,000/- as damages on the basis that the Bank has illegally submitted the Certificate of Registration of a Vehicle leased under the Lease Agreement No L/0/16/SBL/Kuli, to the spouse and the letter of consent given by the spouse is challenging in Courts.
(d) Case No - 7058/DMR The Plaintiff has allegedly instituted this action against the Bank claiming a sum of Rs 20,000,000/- on the basis that the Bank has increased the rate of interest of the housing loan that he has obtained and he suffered damages as a result of that. However the Letter of Offer confirms that the Bank has the right to increase the rate of interest.
(e) Case No - CHC 320/2011 The Plaintiff has filed a case against the Bank (1st Defendant of the case) in order to obtain an order from the Commercial High Court of Western Province for the cancellation of resale of the property described in the plaint.
(f) Case No - 58032/MR The Plaintiff has filed this case against the Bank as well as the CRIB, claiming Rs 100,000,000/- as damages, on the basis that his company namely Jagath Robotics (Pvt) Ltd has been reported to the CRIB, under an irrelevant reference due to our negligence. Bank is defending the above action and chances for the plaintiff to win this case are very low.
(g) Case No - 11938/M - Embilipitiya The above case has been filed against the Bank claiming damages of Rs. 1,000,000/- for the payment of Rs. 100,000/- from a Savings Account, to a person who has forged the Plaintiff’s signature.
Annual Report 2013 Sampath Bank PLC PLC Bank Sampath 2013 Annual Report
283 NOTES TO THE FINANCIAL STATEMENTS
42 COMMITMENTS AND CONTINGENCIES CONTD. (h) DC Colombo Case No 891/13 - Jayantha Dadigama The Plaintiff has filed a case against the Bank claiming damages of Rs 143 Mn on the basis that the Bank has unlawfully auctioned his property under the provisions of Act No 04 of 1990. The case is unfavourable to the Plaintiff, since the Bank has acted according to the provision of law.
(i) CHC Colombo Case No 29/13/MR - R J Technology Systems The case is filed by D L D P Roshan Jayasinghe, the proprietor of R J Technology Systems against the Bank claiming a sum of Rs 40 Mn on the basis that the Bank illegally suspended his credit balance of Rs 299,209.43 and two cheques got returned due to that. The Bank’s position in relation to the above is over Rs 3 Mn due to the Bank from the said customer on a charge back created through the payment gateway, which was utilized by the plaintiff.
The Bank should be able to succeed in this action on the right of set off recognized by law relating to Banking facilities. iv. To prevent the Bank from enforcing the mortgages to recover its dues: (a) Eleven actions have been filed in Supreme Court in Case Nos SC/CHC 43/10, SC 19/10, SC 57/12, SC 94/12, SC 11/09, SC 196/11, SC 5/10, SC 14/11, 24/2008SC, SC 06/2013 and SC 253/11.
(b) Five actions have been filed in Court of Appeal in Case Nos CA/REV/690/2005, CALA/320/2001, CALA/48/2006, CA/12/97(CA) and CA (writ) 401/2013
(c ) Four actions have been filed in Civil Appeal in Case Nos 53/11 CALA, CALA 172/12 LA, 43/2012 Rev and 20/04 (F)
(d) Seven cases have been filed against the Bank in the Commercial High Court Case Nos HC/CIVIL/124/2009, 463/11 MR, 225/12 MR, 41/12 MR, 11/12 MR, 32/12/CO and 440/2013/MR
(e) Sixteen actions have been filed in District Court, Colombo by constituents in Case Nos 21508/L, 101/11 DLM, 112/11 DSP, 231/09 DSP, 03/10 DLM, 89/11 DSP, 102/11 DSP, 39/12 DSP, 173/2012 DSP, 253/12 DSP, 05/10 DLM, 212/12/DLM, 274/12 DSP, 46/2013/DSP, 21371/L and 223/2013 DSP
(f) Three in DC Marawila in Case Nos 1613/L, 1070/S & 1747/L, one in DC Kurunegala in Case No 7587/L, two in DC Kandy in Case Nos 228/10 & DPA, 36599/MR, two in DC Monaragala in Case Nos 1655/SPL & 1691/SPL, one in DC Minuwangoda in Case No 12/SPL, one in DC Chilaw in Case No 4127/11/L, one in DC Kalutara in Case No 4369/SPL, two in DC Rathnapura in Case Nos 26242/P & 24208/P, two in DC Awissawella in Case Nos 26350/L & 25293/L, two in DC Matale in Case Nos 6257/L & 6048/L, one in DC Galle in Case No 16381/L, four in DC Gampha in Case Nos 1885/L, 127 MB, 4392/12/M & 2313/L, one in DC Batticaloa in Case No 5487/L/11, one in DC Elpitiya in Case No 298/12/SPL, one in DC Bandarawela in Case No 302/SPL, one in DC Mt Lavinia in Case No 7171/12/M, one in DC Polonnaruwa in Case No 14916/12/SPL, one in DC Moratuwa in Case No 259/12/DSP, one in DC Kegalle in case No 8031/SPL and one in DC Pelmadulla in Case No 3036/L
Litigation against the Group Other than the litigations disclosed above Siyapatha Finance Limited has executed a legal proceeding against the Department of Custom in the Court of Appeal and contingency provision amounting to Rs 23 Mn has been made for any liability which may occur therein.
Other than those disclosed above there is no case filed against the Group which would have material impact on the financial position of the Group.
284 42.3 Capital Expenditure approved by the Board of Directors, for which provisions have not been made in these accounts, amounted to approximately;
Bank Group As at 31st December 2013 2012 2013 2012 Rs 000 Rs 000 Rs 000 Rs 000
Approved & contracted for 234,716 156,210 234,716 156,210 Approved but not contracted for 492,794 66,080 492,794 66,080 727,510 222,290 727,510 222,290
43 RELATED PARTY DISCLOSURES The Bank carries out transactions in the ordinary course of business with the parties who are defined as related parties in the Sri Lanka Accounting Standard - LKAS 24 (Related Party Disclosures), the details of which are reported below. The pricing applicable to such transactions is based on the assessment of risk and pricing model of the Bank and is comparable with what is applied to transactions between the Bank and its unrelated customers.
43.1 Parent and Ultimate Controlling Party The Bank does not have an identifiable parent of its own.
43.2 Transactions with Key Managerial Personnel (KMPs) According to Sri Lanka Accounting Standard - LKAS 24 (Related Party Disclosures) Key Managerial Personnel (KMP) are those having authority and responsibility for planning, directing and controlling the activities of the entity. Such KMPs include the Board of Directors of the Bank (including both Executive and Non Executive Directors), key employees who are holding directorship in Subsidiary companies of the Bank, Corporate Management Members in the grade of Deputy General Manager and above, Group Company Secretary, Head of Internal Audit, Chief Legal Officer and Senior Manager - System Audit and their Close Family Members (CFM).
Bank is the ultimate parent of its Subsidiaries. Thus the Board of Directors, Corporate Management Members in the grade of Deputy General Manager and above, Group Company Secretary, Head of Internal Audit, Chief Legal Officer and Senior Manager -System Audit have the authority and responsibility for planning, directing and controlling the activities of the Group as they are directly reporting to the Board or Board Sub Committees. Accordingly, the Board of Directors, Corporate Management Members in the grade of Deputy General Manager and above, Group Company Secretary, Head of Internal Audit, Chief Legal Officer and Senior Manager - System Audit and their Close Family Members (CFM) have been identified as KMPs of the Group.
Close Family Members (CFM) of the KMPs are those family members who may be expected to influence or be influenced by that KMPs in their dealing with the entity. They may include KMPs domestic partner and children of the KMPs domestic partner and dependants of the KMPs and the KMPs domestic partner. Annual Report 2013 Sampath Bank PLC PLC Bank Sampath 2013 Annual Report
285 NOTES TO THE FINANCIAL STATEMENTS
43 RELATED PARTY DISCLOSURES CONTD. 43.2.1 Transactions with Key Managerial Personnel (KMPs) Bank
For the Year Ended 31st December 2013 2012 Rs 000 Rs 000
Short term employee benefits 109,486 95,431 ESOP benefits 45,824 - Termination benefits - 22,006 Post-employment benefits 21,227 11,822 Directors’ fees & expenses 42,791 37,985 Total 219,328 167,244
In addition to the above, the Bank has also paid non cash benefits such as fuel and medical benefits to KMPs in line with the approved benefit plans of the Bank.
43.3 Transactions, Arrangements and Agreements Involving KMPs and Their CFMs 43.3.1 Loans and Advances to KMPs and their CFMs are detailed below:
2013 2012 Average Balance Limit Closing Limit Closing Balance Balance 2013 2012 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000
Loans & receivables 91,916 54,741 60,044 46,107 45,981 28,995
43.3.2 Credit Card Facilities to KMPs and their CFMs are detailed below:
2013 2012 Average Balance Limit Closing Limit Closing Balance Balance 2013 2012 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000
Credit card 20,745 5,136 13,775 2,553 3,963 2,989
43.3.3 Deposits and Investments from KMPs and their CFMs are detailed below:
Closing Balance Average Balance 2013 2012 2013 2012 Rs 000 Rs 000 Rs 000 Rs 000
Deposits & investments 534,714 252,710 304,734 299,141
43.3.4 Share Based Payments to KMPs Closing Balance 2013 2012 Rs 000 Rs 000
Cash dividend 148,600 106,272
286 43.3.4 Share Based Payments to KMPs Contd. Number of Shares 2013 2012
Scrip dividend 4,916,007 3,682,039
43.4 Transactions, Arrangements and Agreements involving Entities which are controlled and / or jointly controlled by the KMPs or their CFMs
Closing Balance Average Balance 2013 2012 2013 2012 Rs 000 Rs 000 Rs 000 Rs 000
Loans & receivables 3,220,515 1,331,610 2,276,062 1,225,601 Documentary Credits 334,297 453,720 394,009 345,302 Bills of acceptance 619,012 447,730 533,371 284,745 Guarantees 20,929 25,500 23,215 29,945 Commercial papers - 451,000 225,500 225,500 Total 4,194,753 2,709,560 3,452,157 2,111,093
43.5 Goods and Services Purchased During the year, the Bank purchased goods and services from entities where KMPs have either control and / or joint control.
For the year ended 31st December 2013 2012 Rs 000 Rs 000
Goods & services purchased 39,426 32,301
43.6 Transactions with Subsidiaries The Bank had the following financial dealings during the year with its Subsidiary companies.
31st December 2013 2012 Subsidiary company Nature of Facility/ Rs 000 Rs 000 Transaction
Sampath Centre Ltd As at Deposits 139,796 132,910 Loans & receivables 270 1,043 Other assets 62,754 62,754 Other liabilities 31,920 5,964 For the year ended Income & fees received 85,000 61,200 Expenses & fees paid 271,570 228,031
S C Securities (Pvt) Ltd As at Loans & receivables 45,791 47,675 Indirect facilities 1,750 1,750 Deposits 17 17 Repo borrowings 10,638 9,765 For the year ended Income & fees received 9,729 15,918 Expenses & fees paid 402 325 Interest expenses from treasury bills 1,104 - Annual Report 2013 Sampath Bank PLC PLC Bank Sampath 2013 Annual Report
287 NOTES TO THE FINANCIAL STATEMENTS
43 RELATED PARTY DISCLOSURES CONTD.
31st December 2013 2012 Subsidiary company Nature of Facility/ Rs 000 Rs 000 Transaction
Siyapatha Finance Ltd As at Loans and receivables 1,646,318 993,633 Other Liabilities 358,410 92,588 Commercial Papers - 291,283 For the year ended Income and fees received 208,113 216,539 Expenses and fees paid 19,262 20,562
Sampath Information Technology Solutions Ltd As at Loans and receivables 71,297 65,978 Other liabilities 9,560 6,758 For the year ended Income and fees received 9,822 6,358 Expenses and fees paid 60,216 55,827
43.7 Transactions with Post Employment Benefit Plans of the Bank
As at 31st December 2013 2012 Nature of Transaction Rs 000 Rs 000
Sampath Bank Employees’ Provident Fund Deposits 5,059,318 5,111,488 Debentures 147,750 147,750
Sampath Bank Employees’ Pension Fund Deposits 2,480,892 1,739,604 Treasury Bills 543,000 518,768 Reverse Repo - 1,136,000 Debentures 21,282 21,282 Investment in Sampath Bank Shares - Market Value 204,182 532,326 Investment Repo 690,676 -
288 44 SEGMENT INFORMATION For management purposes, the Group is organised into four operating segments based on services offered to customers as follows .
The following table presents income & profit & certain asset & liability information regarding the Bank’s operating segments.
Dealing/ Elimination/ Total Banking Leasing Investment Others Unallocated
For the year ended 2013 2012 2013 2012 2013 2012 2013 2012 2013 2012 2013 2012 31st December Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000
Net interest income 14,288,169 11,555,440 804,470 490,284 (2,184) (7,089) 4,280 413 - - 15,094,735 12,039,048 Dividend income - - - - 164,164 156,276 - - (95,872) (79,155) 68,292 77,121 Net fee & commission income 2,543,345 2,148,998 52,763 22,784 22,821 29,806 (183) - - - 2,618,746 2,201,588 Foreign exchange profit 520,260 2,153,812 ------520,260 2,153,812 Other income 1,917,002 1,800,390 68,544 38,826 3,702 162 250,055 244,158 (181,116) (175,474) 2,058,187 1,908,062
Total revenue from external customers 19,268,776 17,658,640 925,777 551,893 188,503 179,154 254,152 244,573 (276,988) (254,629) 20,360,220 18,379,631 Inter segment revenue ------Total Operating Income 19,268,776 17,658,640 925,777 551,893 188,503 179,154 254,152 244,573 (276,988) (254,629) 20,360,220 18,379,631
Impairment charges for loans & other losses (3,454,365) (8,280) (103,002) (56,865) (16,708) (15,000) - - - - (3,574,075) (80,145) Net Operating Income 15,814,411 17,650,360 822,775 495,028 171,795 164,152 254,153 244,573 (276,988) (254,629) 16,786,146 18,299,486
Segment result 5,309,122 8,501,633 427,512 327,218 (38,187) (37,669) 128,177 126,077 (106,525) (87,950) 5,720,099 8,829,309 Less : VAT on Financial Services (931,134) (1,176,225) Less : Income tax expenses (1,151,300) (2,213,060) Profit for the year 3,637,665 5,440,024 Non controlling interest (2,708) (3,342) Net profit attributable to equity holders of the parent 3,634,957 5,436,682
Segment assets 376,892,230 304,417,073 14,134,994 10,803,774 362,440 289,527 3,335,368 2,317,462 (3,421,118) (2,772,808) 391,303,914 315,055,028 Unallocated assets ------Total assets 376,892,230 304,417,073 14,134,994 10,803,774 362,440 289,527 3,335,368 2,317,462 (3,421,118) (2,772,808) 391,303,914 315,055,028
Segment liabilities 348,988,922 279,271,873 12,546,152 9,427,925 188,158 87,716 182,306 161,297 (2,361,197) (1,712,887) 359,544,341 287,235,924 Unallocated liabilities ------Total liabilities 348,988,922 279,271,873 12,546,152 9,427,925 188,158 87,716 182,306 161,297 (2,361,197) (1,712,887) 359,544,341 287,235,924
Cash flows from operating activities 10,706,532 6,796,854 (2,492,830) (1,430,975) 3,440 (11,870) 144,844 140,911 383,050 (225,027) 8,745,036 5,269,893 Cash flows from investing activities (28,637,986) (11,909,427) 31,146 (97,412) (693) (630) (54,479) (83,746) (472,732) 10,434 (29,134,744) (12,080,781) Cash flows from financing activities 8,854,094 8,349,443 2,811,069 1,470,633 - - (105,030) (10,042) (215,324) 194,134 11,344,809 10,004,168 Capital expenditure 750,449 864,198 88,319 12,052 693 630 57,159 83,746 (29,711) 718 866,910 961,345 Annual Report 2013 Sampath Bank PLC PLC Bank Sampath 2013 Annual Report
289 NOTES TO THE FINANCIAL STATEMENTS
45 EVENTS AFTER THE REPORTING PERIOD Bank No circumstances have arisen since the reporting date which would require adjustments to, or disclosure in the Financial Statements, other than those disclosed below.
Directors have recommended a final dividend of Rs 8.00 per share to be paid for the financial year ended 31st December 2013, in the form of cash dividend. Further this dividend is to be approved by the shareholders at the Annual General Meeting to be held on 31st March 2014.
In accordance with Sri Lanka Accounting Standard- LKAS 10 (Events After the Reporting Period), this proposed final dividend has not been recognised as a liability as at 31st December 2013. As required by section 56(2) of the Companies Act No 7 of 2007, the Board of Directors has confirmed that the Bank has satisfied the ‘Solvency Test’ in accordance with section 57 of the Companies Act No 7 of 2007, having obtained a certificate from the auditors, prior to recommending the final dividend for the year.
Under the Inland Revenue Act No 10 of 2006, a Withholding Tax of 10% has been imposed on dividend declared.
Group The Central Bank of Sri Lanka (CBSL), requested all Finance Companies to take necessary steps to comply with the Financial Sector Consolidation Programme, which was announced consequent to the last budget proposals. Currently Siyapatha Finance Ltd is in the process of evaluating suitable options available under this programme.
46 FAIR VALUE OF FINANCIAL INSTRUMENTS Financial Instruments Recorded at Fair Value The following is a description of how fair values are determined for financial instruments that are recorded at fair value using valuation techniques. These incorporate the Bank’s estimate of assumptions that a market participant would make when valuing the instruments.
Derivatives - Assets and Liabilities Derivative products are SWAPs, forward foreign exchange contracts and hedges, valued using a valuation technique with market-observable inputs. The most frequently applied valuation techniques include forward foreign exchange spot and forward premiums.
Financial Investments – Available for Sale Available for sale financial assets (primarily consist of quoted equities and Government debt securities) are valued using valuation techniques or pricing models. These assets are valued using models that use observable data. Government debt securities are valued using yield curve published by the Central Bank of Sri Lanka and quoted equities are valued using quoted market prices in the active market as at the reporting date.
Trading Assets and Other Assets Measured at Fair Value Trading assets and other assets measured at fair value are the Government debt securities and quoted equities. Government debt securities are valued using yield curve published by the Central Bank of Sri Lanka. For quoted equities the Bank uses quoted market prices in the active market as at the reporting date.
Determination of Fair Value and Fair Value Hierarchy For all financial instruments where fair values are determined by referring to externally quoted prices or observable pricing inputs to models, independent price determination or validation is obtained. In an inactive market, direct observation of a traded price may not be possible. In these circumstances, the Bank uses alternative market information to validate the financial instrument’s fair value, with greater weight given to information that is considered to be more relevant and reliable.
Fair values are determined according to the following hierarchy: Level 1 - Quoted Market Price (unadjusted): financial instruments with quoted prices for identical instruments in active markets.
Level 2 - Valuation Technique using observable inputs: financial instruments with quoted prices for similar instruments in active markets or quoted prices for identical or similar instruments in inactive markets and financial instruments valued using models where all significant inputs are observable.
Level 3 - Valuation Technique with significant unobservable inputs: financial instruments valued using valuation techniques where one or more significant inputs are unobservable.
290 The following table shows an analysis of financial instruments recorded at fair value by level of the fair value hierarchy:
Bank Group As at 31st December 2013 Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000
Financial Assets Derivative financial instruments Currency SWAPs - 166,550 - 166,550 - 166,550 - 166,550 Forward foreign exchange contracts - 63,968 - 63,968 - 63,968 - 63,968 - 230,518 - 230,518 - 230,518 - 230,518
Financial Assets Held for Trading Government debt securities 45,962,143 - - 45,962,143 45,962,143 - - 45,962,143 Quoted equities 1,012,373 - - 1,012,373 1,012,373 - - 1,012,373 Financial assets held for trading pledged as collaterals 3,496,141 - - 3,496,141 3,496,141 - - 3,496,141 50,470,657 - - 50,470,657 50,470,657 - - 50,470,657
Financial Investments Available for Sale Quoted investments 2,216,100 - - 2,216,100 2,216,100 - - 2,216,100 Government debt securities 100,462 - - 100,462 100,462 - - 100,462 2,316,562 - - 2,316,562 2,316,562 - - 2,316,562 52,787,219 230,518 - 53,017,737 52,787,219 230,518 - 53,017,737
Financial Liabilities Derivative financial instruments Currency SWAPs - 600,269 - 600,269 - 600,269 - 600,269 Forward foreign exchange contracts - 38,455 - 38,455 - 38,455 - 38,455 - 638,724 - 638,724 - 638,724 - 638,724
Bank Group As at 31st December 2012 Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000
Financial Assets Derivative financial instruments Currency SWAPs - 227,812 - 227,812 - 227,812 - 227,812 Forward foreign exchange contracts - 51,210 - 51,210 - 51,210 - 51,210 - 279,022 - 279,022 - 279,022 - 279,022
Financial Assets Held for Trading Government debt securities 34,182,709 - - 34,182,709 34,182,709 - - 34,182,709 Quoted equities 998,375 - - 998,375 998,375 - - 998,375 Financial assets held for trading pledged as collaterals 2,856,321 - - 2,856,321 2,856,321 - - 2,856,321 38,037,405 - - 38,037,405 38,037,405 - - 38,037,405
Financial Investments Available for Sale Quoted investments 1,721,339 - - 1,721,339 1,721,339 - - 1,721,339 Government debt securities 179,175 - - 179,175 179,175 - - 179,175 1,900,514 - - 1,900,514 1,900,514 - - 1,900,514 39,937,919 279,022 - 40,216,941 39,937,919 279,022 - 40,216,941
Financial Liabilities Derivative financial instruments Currency SWAPs - 316,301 - 316,301 - 316,301 - 316,301 Forward foreign exchange contracts - 65,537 - 65,537 - 65,537 - 65,537 - 381,838 - 381,838 - 381,838 - 381,838
There were no material transfers between Level 1 and Level 2 during 2012 and 2013. Annual Report 2013 Sampath Bank PLC PLC Bank Sampath 2013 Annual Report
291 NOTES TO THE FINANCIAL STATEMENTS
46 FAIR VALUE OF FINANCIAL INSTRUMENTS CONTD. Fair Value of Financial Assets and Liabilities not carried at Fair Value The following describes the methodologies and assumptions used to determine fair values for those financial instruments which are not already recorded at fair value in the Financial Statements.
Assets for which Fair Value Approximates Carrying Value For financial assets and liabilities that have a short term maturity it is assumed that the carrying amounts approximate their fair value. This assumption is also applied to demand deposits and saving deposits which do not have a specific maturity.
Fixed Rate Financial Instruments The fair value of fixed rate financial assets & liabilities carried at amortized cost are estimated by comparing market interest rates when they were first recognized with current market rates for similar financial instruments. The estimated fair value of fixed interest bearing deposits is based on discounted cash flows using prevailing money market interest rates for debts with similar credit risk and maturity. For quoted debt issued the fair values are determined based on quoted market prices. For those not issued where quoted market prices are not available, a discounted cash flow model is used based on a current interest rate yield curve appropriate for the remaining term to maturity and credit spreads. For other variable rate instruments, an adjustment is also made to reflect the change in required credit spread since the instrument was first recognized.
Set out below is a comparison, by class, of the carrying amounts and fair values of the Bank’s financial instruments that are not carried at fair value in the Financial Statements. This table does not include the fair values of non financial assets and non financial liabilities.
Bank Group As at 31st December 2013 Carrying Value Fair Value Carrying Value Fair Value Rs 000 Rs 000 Rs 000 Rs 000
Financial Assets Cash & cash equivalents 8,302,576 8,302,576 8,340,838 8,340,838 Balances with Central Bank of Sri Lanka 15,766,967 15,766,967 15,766,967 15,766,967 Placements with Banks 1,791,329 1,791,329 1,791,329 1,791,329 Reverse repurchase agreements 18,043,918 18,043,918 18,043,918 18,043,918 Loans & receivables to banks 638,244 638,244 638,244 638,244 Loans & receivables to other customers 259,401,578 259,383,500 265,909,593 266,213,784 Other loans & receivables 12,150,588 12,150,588 12,150,588 12,150,588 Financial investments held to maturity 1,845,903 1,865,610 1,845,903 1,865,610 Other assets 1,751,374 1,751,374 2,222,016 2,222,016 319,692,477 319,694,106 326,709,396 327,033,294
Financial Liabilities Due to banks 2,211,281 2,206,666 2,250,372 2,245,757 Securities sold under re-purchase agreements 3,389,684 3,389,690 3,055,257 3,055,260 Due to other customers 300,549,350 297,815,142 300,381,786 297,647,578 Debt issued & other borrowed funds 38,862,331 38,862,331 44,748,530 44,748,530 Unclaimed dividend 54,981 54,981 54,981 54,981 Other liabilities 64,701 64,701 64,701 64,701 345,132,328 342,393,511 350,555,627 347,816,807
292 Bank Group As at 31st December 2012 Carrying Value Fair Value Carrying Value Fair Value Rs 000 Rs 000 Rs 000 Rs 000
Financial Assets Cash & cash equivalents 10,432,135 10,432,135 10,442,259 10,442,259 Balances with Central Bank of Sri Lanka 17,200,792 17,200,792 17,200,792 17,200,792 Placements with Banks 8,788,127 8,788,127 8,788,127 8,788,127 Reverse repurchase agreements 3,300,817 3,300,817 3,300,373 3,300,373 Loans & receivables to banks 816,119 816,119 816,119 816,119 Loans & receivables to other customers 208,184,369 207,886,978 212,480,041 211,958,144 Other loans & receivables 10,515,756 10,515,756 10,224,474 10,224,474 Financial investments- held - to- maturity - - 9,765 9,765 Other assets 1,399,091 1,399,091 1,858,276 1,858,276 260,637,206 260,339,815 265,120,226 264,598,329
Financial Liabilities Due to banks 624,784 624,784 668,198 668,198 Securities sold under re-purchase agreements 2,757,117 2,757,119 2,751,332 2,751,334 Due to other customers 243,330,990 242,738,246 243,088,236 242,495,493 Debt issued & other borrowed funds 28,825,029 28,825,029 32,218,014 32,218,014 Unclaimed dividend 49,185 49,185 49,185 49,185 Other liabilities 71,448 71,448 71,448 71,448 275,658,553 275,065,811 278,846,413 278,253,672
Reclassification of Financial Assets There were no reclassifications during 2012 and 2013.
47 RISK MANAGEMENT 47.1 Introduction Risk is inherent in the Bank’s activities but is managed through a process of ongoing identification, measurement and monitoring, subject to risk limits and other controls. This process of risk management is critical to the Bank’s continuous profitability and each individual within the Bank is accountable for the risk exposures relating to his or her responsibilities. The Bank is mainly exposed to;
Credit Risk Liquidity risk Market risk Operational risk
Risk Management Framework The Board of Directors has overall responsibility for the establishment and oversight of the Bank’s risk management framework. The Board has delegated its authority to Board Risk Management Committee (BRMC) which is responsible for developing and monitoring Bank’s risk management policies. The Committee comprises of Executive and Non Executive Directors. Meetings of BRMC are held regularly, and the Board of Directors are duly updated of its activities.
In 2012, the Board instituted an additional Committee (Treasury Committee) to increase the focus on Treasury related operations and risks. The Committee comprises of Executive and Non Executive Directors and concentrates mainly on liquidity management, Balance Sheet optimization and new products/services. The Treasury Committee’s deliberations are informed to the BRMC and the Board of Directors.
The Bank’s risk management policies are established to identify and analyse the risks faced by the Bank, to set appropriate risk limits and controls, and to monitor adherence to established limits. Risk management policies and systems are reviewed regularly to reflect changes in market conditions, products and services offered. The Bank, through its training and management standards and procedures, continuously updates and maintains a disciplined and constructive control environment, in which all employees are assigned and made to understand their respective roles and responsibilities. Annual Report 2013 Sampath Bank PLC PLC Bank Sampath 2013 Annual Report
293 NOTES TO THE FINANCIAL STATEMENTS
47 RISK MANAGEMENT CONTD. Integrated Risk Management Unit The Business units (i.e. Credit Departments, Branches, Regional Offices,Treasury etc.) have primary responsibility for Risk Management. The Integrated Risk Management Unit, which has no responsibility for profit or volume targets, acts as the 2nd line of defense and reports to the Group Chief Risk Officer (GCRO) who in turn directly reports to the BRMC.
Assets and Liability Committee (ALCO) ALCO is chaired by the Managing Director and has representatives from Treasury Department, Credit Departments, Marketing Department, Finance Department, the Group Chief Financial Officer and the Group Chief Risk Officer. The Committee meets regularly to monitor and manage the assets and liabilities of the Bank and also overall liquidity position to keep the Bank’s liquidity at healthy levels, whilst satisfying regulatory requirements.
Risk Measurement and Reporting The Bank’s Risks are measured using appropriate techniques based on the type of risk and industry best practices. The Bank also carries out Stress Testing to identify the effect of extreme events/worst case scenarios in most of the major type of risks and the results are reported to Board Risk Management Committee on a periodic basis.
Monitoring and controlling risks is primarily performed based on policies, limits and thresholds established by the Bank. These limits reflect the business strategy and market environment of the Bank as well as the level of risk that the Bank is willing to accept (Risk Appetite).
Risk Mitigation As part of its overall risk management, the Bank obtains various types of collaterals to mitigate the risk. Details such as nature of the collateral that could be accepted, required security margin etc are clearly defined in the Credit Policy of the Bank and any deviations that require specific approval. However, respective approving authorities would take into account the availability of security only as the secondary source of repayment.
47.2 Credit Risk Credit risk is the risk of financial loss to the Bank if a borrower or counterparty to a financial instrument fails to meet its contractual obligations, and arises principally from the Bank’s loans and advances to customers/other banks and investments in debt securities. In addition to the credit risk from direct funding exposure, the Bank would also be exposed to indirect liabilities such as Letters of Credit, Guarantees etc, which would carry credit risk.
The Bank considers and consolidates all elements of credit risk exposure (such as individual obligor default risk, country and sector concentration risks) to ensure stringent Credit Risk Management.
47.2.1 Impairment Assessment The methodology of the impairment assessment has explained in the Note No 3.3.10 under Accounting Policies.
Derivative Financial Instruments Credit risk arising from derivative financial instruments is, at any time, limited to those with positive fair values, as recorded in the Statement of Financial Position. With gross settled derivatives, the Bank is also exposed to a settlement risk, being the risk that the Bank honors its obligation, but the counterparty fails to deliver the counter value.
47.2.2 Credit related Commitments Risks The Bank makes available to its customers guarantees that may require that the Bank makes payments on their behalf and enters into commitments to extend credit lines to secure their liquidity needs. Letters of Credit and Guarantees (including standby Letters of Credit) commit the Bank to make payments on behalf of customers in the event of a specific act, generally related to the import or export of goods. Such commitments expose the Bank to risks similar to loans and are mitigated by the same control processes and policies.
47.2.3 Collateral and Other Credit Enhancements The amount and type of collateral required depends on an assessment of the credit risk of the counterparty. Guidelines are in place covering the acceptability and valuation of each type of collateral. The main types of collateral obtained are, as follows:
294 For commercial lending: charges over real estate properties, inventory and trade receivables For retail lending: mortgages over residential properties
The Bank also obtains guarantees from parent companies for loans to their subsidiaries.
Management monitors the market value of collateral and will request additional collateral in accordance with the underlying agreement. It is the Bank’s policy to dispose of repossessed properties in an orderly manner. The proceeds are used to reduce or repay the outstanding claim. In general, the Bank does not occupy repossessed properties for Business use.
The following table shows the maximum exposure to credit risk by class of financial asset. It further shows the total fair value of collateral, any surplus collateral (the extent to which the fair value of collateral held is greater than the exposure to which it relates), and the net exposure to credit risk.
Bank - As at 31st December 2013
Maximum Net exposure to Exposure credit risk Rs 000 Rs 000
Placements with Banks 1,791,329 1,791,329 Reverse repurchase agreements 18,043,918 - Derivative financial instruments 230,517 230,517 Financial assets- held for trading 46,974,516 46,974,516 Financial assets- held for trading pledged as collaterals 3,496,141 3,496,141 Loans and receivables to banks 638,244 250,201 Loans and receivables to other customers 271,090,006 121,614,860 Other loans & receivables 12,150,588 1,779,786 Financial investments- available for sale 2,393,118 2,393,118 Financial investments- held to maturity 1,845,903 1,845,903 Other assets 1,751,374 1,751,374 360,405,654 182,127,745
Group - As at 31st December 2013
Maximum Net exposure to Exposure credit risk Rs 000 Rs 000
Placements with Banks 1,791,329 1,791,329 Reverse repurchase agreements 18,043,918 - Derivative financial instruments 230,517 230,517 Financial assets- held for trading 46,974,516 46,974,516 Financial assets- held for trading pledged as collaterals 3,496,141 3,496,141 Loans and receivables to banks 638,244 250,201 Loans and receivables to other customers 277,751,627 123,035,438 Other loans & receivables 12,150,588 1,779,786 Financial investments- available for sale 2,393,174 2,393,174 Financial investments- held to maturity 1,845,903 1,845,903 Other assets 2,222,016 2,222,016 367,537,973 184,019,021 Annual Report 2013 Sampath Bank PLC PLC Bank Sampath 2013 Annual Report
295 NOTES TO THE FINANCIAL STATEMENTS
47 RISK MANAGEMENT CONTD. 47.2.4 Credit Quality by Class of Financial Assets The Bank manages the credit quality of financial assets using internal credit ratings. The tables below show the credit quality by the class of asset for all financial assets exposed to credit risk, based on the Bank’s internal credit rating system. The amounts presented are gross of impairment allowances.
Definition of Past Due The Bank considers that any amounts uncollected one day or more beyond their contractual due date as ‘past due’.
(a) Bank - as at 31st December 2013
Neither past due nor impaired
High Standard Sub- Un Exposures Past due Individually Total grade grade standard Rated not subject but not impaired grade to ratings impaired Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000
Financial Assets Cash & cash equivalents 8,286,719 15,857 - - - - - 8,302,576 Balances with Central Bank of Sri Lanka 15,766,967 ------15,766,967 Placements with banks 564,279 1,227,050 - - - - - 1,791,329 Reverse repurchase agreements 18,043,918 ------18,043,918 Derivative financial instruments 217,270 - - 13,247 - - - 230,517 Financial assets held for trading 46,470,826 462,811 - 40,879 - - - 46,974,516 Financial assets held for trading pledged as collaterals 3,496,141 ------3,496,141 Loans & receivables to banks 12,376 625,868 - - - - - 638,244 Loans & receivables to other customers 64,461,727 46,313,373 5,076,953 9,178,619 42,885,856 97,278,038 4,187,089 269,381,655 Other loans & receivables 11,528,038 622,550 - - - - - 12,150,588
Financial investments available for sale Quoted - Government debt securities 100,462 ------100,462 Quoted - Other equity securities - - - 2,216,100 - - - 2,216,100 Unquoted - Equity securities - - - 76,556 - - - 76,556
Financial investments held to maturity Quoted - Government debt securities 1,845,903 ------1,845,903 Other assets - - - - 1,751,374 - - 1,751,374 Total 170,794,626 49,267,509 5,076,953 11,525,401 44,637,230 97,278,038 4,187,089 382,766,846
Age Analysis of past due (i.e. facilities in arrears of 1 day and above) but not impaired loans by Class of Financial Assets
Past due but not impaired Less than 31 to 60 61 to 90 More than 30 days days days 90 days Total
Loans & receivables to banks - - - - - Loans & receivables to other customers 57,651,624 13,020,879 20,259,284 6,346,251 97,278,038 Total 57,651,624 13,020,879 20,259,284 6,346,251 97,278,038
296 (b) Bank - as at 31st December 2012
Neither past due nor impaired
High Standard Sub- Un Exposures Past due Individually Total grade grade standard Rated not subject but not impaired grade to ratings impaired Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000
Financial Assets Cash & cash equivalents 10,398,140 33,995 - - - - - 10,432,135 Balances with Central Bank of Sri Lanka 17,200,792 ------17,200,792 Placements with banks 7,624,376 1,163,751 - - - - - 8,788,127 Reverse repurchase agreements 3,300,817 ------3,300,817 Derivative financial instruments 279,022 ------279,022 Financial assets held for trading 34,786,299 287,108 - 107,677 - - - 35,181,084 Financial assets held for trading pledged as collaterals 2,856,321 ------2,856,321 Loans & receivables to banks - 826,674 - - - 1,943 - 828,617 Loans & receivables to other customers 30,230,595 36,007,948 7,666,734 9,686,584 55,052,825 72,385,632 4,153,004 215,183,322 Other loans & receivables 9,006,633 - - 1,509,123 - - - 10,515,756
Financial investments available for sale Quoted - Government debt securities 179,175 ------179,175 Quoted - Other equity securities - - - 1,686,021 - - - 1,686,021 Unquoted - Equity securities - - - 58,428 - - - 58,428
Financial investments held to maturity Quoted - Government debt securities ------Other assets - - - - 1,399,091 - - 1,399,091 Total 115,862,170 38,319,476 7,666,734 13,047,833 56,451,916 72,387,575 4,153,004 307,888,708
Age Analysis of past due (i.e. facilities in arrears of 1 day and above) but not impaired loans by Class of Financial Assets
Past due but not impaired Less than 31 to 60 61 to 90 More than 30 days days days 90 days Total
Loans and receivables to banks 1,943 - - - 1,943 Loans and receivables to other customers 48,059,685 8,205,755 12,667,203 3,452,989 72,385,632 Total 48,061,628 8,205,755 12,667,203 3,452,989 72,387,575 Annual Report 2013 Sampath Bank PLC PLC Bank Sampath 2013 Annual Report
297 NOTES TO THE FINANCIAL STATEMENTS
47 RISK MANAGEMENT CONTD. 47.2.4 Credit Quality by Class of Financial Assets (c) Group - as at 31st December 2013
Neither past due nor impaired
High Standard Sub- Un Exposures Past due Individually Total grade grade standard Rated not subject but not impaired grade to ratings impaired Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000
Financial Assets Cash & cash equivalents 8,324,962 15,876 - - - - - 8,340,838 Balances with Central Bank of Sri Lanka 15,766,967 ------15,766,967 Placements with banks 564,279 1,227,050 - - - - - 1,791,329 Reverse repurchase agreements 18,043,918 ------18,043,918 Derivative financial instruments 217,270 - - 13,247 - - - 230,517 Financial assets held for trading 46,470,826 462,811 - 40,879 - - - 46,974,516 Financial assets held for trading pledged as collaterals 3,496,141 ------3,496,141 Loans & receivables to banks 12,376 625,868 - - - - - 638,244 Loans & receivables to other customers 64,461,727 46,313,373 5,076,953 11,940,400 42,885,856 101,120,575 4,244,392 276,043,276 Other loans & receivables 11,528,038 622,550 - - - - - 12,150,588
Financial investments available for sale Quoted - Government debt securities 100,462 ------100,462 Quoted - Other equity securities - - - 2,216,100 - - - 2,216,100 Unquoted - Equity securities - - - 76,612 - - - 76,612
Financial investments held to maturity Quoted - Government debt securities 1,845,903 ------1,845,903 Other assets - - - - 2,222,016 - - 2,222,016 Total 170,832,869 49,267,528 5,076,953 14,287,238 45,107,872 101,120,575 4,244,392 389,937,427
Age Analysis of past due (i.e. facilities in arrears of 1 day and above) but not impaired loans by class of Financial Assets
Past due but not impaired Less than 31 to 60 61 to 90 More than 30 days days days 90 days Total
Loans & receivables to banks - - - - - Loans & receivables to other customers 59,588,720 13,871,859 20,767,332 6,892,664 101,120,575 Total 59,588,720 13,871,859 20,767,332 6,892,664 101,120,575
298 (d) Group - as at 31st December 2012
Neither past due nor impaired
High Standard Sub- Un Exposures Past due Individually Total grade grade standard Rated not subject but not impaired grade to ratings impaired Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000
Financial Assets Cash & cash equivalents 10,398,351 43,908 - - - - - 10,442,259 Balances with Central Bank of Sri Lanka 17,200,792 ------17,200,792 Placements with banks 7,624,376 1,163,751 - - - - - 8,788,127 Reverse repurchase agreements 3,300,373 ------3,300,373 Derivative financial instruments 279,022 ------279,022 Financial assets held for trading 34,786,299 287,108 - 107,677 - - - 35,181,084 Financial assets held for trading pledged as collaterals 2,856,321 ------2,856,321 Loans & receivables to banks - 826,674 - - - 1,943 - 828,617 Loans & receivables to other customers 29,257,416 36,007,948 7,666,734 14,117,376 55,052,825 73,281,865 4,206,565 219,590,729 Other loans & receivables 8,715,351 - - 1,509,123 - - - 10,224,474
Financial investments available for sale Quoted - Government debt securities 179,175 ------179,175 Quoted - Other equity securities - - - 1,686,021 - - - 1,686,021 Unquoted - Equity securities - - - 58,484 - - - 58,484
Financial investments held to maturity Quoted - Government debt securities 9,765 ------9,765 Other assets - - - - 1,558,102 - 300,174 1,858,276 Total 114,607,241 38,329,389 7,666,734 17,478,681 56,610,927 73,283,808 4,506,739 312,483,519
Age Analysis of past due(i.e. facilities in arrears of 1 day and above) but not impaired loans by Class of Financial Assets
Past due but not impaired Less than 31 to 60 61 to 90 More than 30 days days days 90 days Total
Loans & receivables to banks 1,943 - - - 1,943 Loans & receivables to other customers 48,543,126 8,450,802 12,705,415 3,582,522 73,281,865 Total 48,545,069 8,450,802 12,705,415 3,582,522 73,283,808 Annual Report 2013 Sampath Bank PLC PLC Bank Sampath 2013 Annual Report
299 NOTES TO THE FINANCIAL STATEMENTS
47 RISK MANAGEMENT CONTD. 47.2.5 Credit Risk Exposure For Each Internal Credit Risk Rating It is the Bank’s policy to maintain accurate and consistent risk ratings across the credit portfolio. This facilitates focused management of the applicable risks and the comparison of credit exposures across all lines of business, geographic regions and products. The rating system is supported by a variety of qualitative as well as quantitative variables for the measurement of counterparty risk. All internal risk ratings are tailored to various categories and are derived in accordance with the Bank’s Rating Policy. The risk ratings of the business borrowers are updated at least annually or earlier if required. The table below shows the Bank’s internal credit rating of the loans & advances to banks and loans & advances to other customers.
Bank’s Internal Credit Rating Bank Fitch Historical Total Historical Total rating rating default 2013 default 2012 rate 2013 rate 2012 % Rs 000 % Rs 000
High grade Risk rating class 1 A+ AAA to AA+ 0.54 12,274,726 0.31 5,729,576 Risk rating class 2 A AA to AA- 0.52 20,512,627 0.46 8,158,629 Risk rating class 3 A- A+ to A 0.56 30,304,098 0.59 20,107,485 Risk rating class 4 B+ A- to BBB+ 1.84 26,238,481 1.95 13,549,461
Standard Grade Risk rating class 5 B BBB to BBB- 1.46 46,682,504 0.84 33,538,712 Risk rating class 6 B- BB+ to BB 2.22 22,039,465 1.95 15,609,176 Risk rating class 7 C+ BB- to B+ 2.20 20,985,233 1.60 25,162,285
Sub standard grade Risk rating class 8 C B to B- 3.39 9,416,453 1.71 12,096,134 Risk rating class 9 C- CCC to CC 3.25 2,968,738 1.73 3,646,729
Unrated 1.65 18,896,263 1.08 19,448,164
Impaired Risk rating class 10 D C to D 1.40 6,089,161 1.37 3,912,763
Exposures not subject for rating Pawning 53,469,185 54,946,225 Others 142,965 106,600 Grand Total 270,019,899 216,011,939
300 47.2.6 Analysis of Risk Concentration Risk concentrations: maximum exposure to credit risk without taking into account of any collateral and other credit enhancements.
The Concentration risk is monitored/managed through borrower/group, Sector, product etc. Maximum exposure of both funded and non funded facilities to a company and a group as at the reporting date was Rs 3,106 Mn (Limit: Rs 4,425 Mn) and Rs 5,767 Mn (Limit: Rs 6,192 Mn) respectively. The following tables show the maximum exposure to credit risk for the components of the Statement of Financial Position, including geography of counterparty, and sector.
47.2.6.1 Country Risk - Geographical Analysis (a) Bank - as at 31st December 2013 Sri Lanka Europe America South Asia Asia Pacific Middle East Total & Africa Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000
Financial Assets Cash & cash equivalents 7,102,023 361,929 489,052 123,819 214,610 11,143 8,302,576 Balances with Central Bank of Sri Lanka 15,766,967 - - - - - 15,766,967 Placements with banks - - 459,868 - 1,331,461 - 1,791,329 Reverse repurchase agreements 18,043,918 - - - - - 18,043,918 Derivative financial instruments 227,019 3,047 - - 451 - 230,517 Financial assets held for trading 46,974,516 - - - - - 46,974,516 Financial assets held for trading pledged as collaterals 3,496,141 - - - - - 3,496,141 Loans & receivables to banks 638,244 - - - - - 638,244 Loans & receivables to other customers ** 257,247,648 156,679 11,279 1,196,656 515,589 273,727 259,401,578 Other loans & receivables 12,150,588 - - - - - 12,150,588 Financial investments available for sale 139,088 - - 2,254,030 - - 2,393,118 Financial investments held to maturity 1,845,903 - - - - - 1,845,903 Other assets 1,742,099 - - 9,275 - - 1,751,374 Total 365,374,154 521,655 960,199 3,583,780 2,062,111 284,870 372,786,769
** Provincial breakdown for loans & receivables to other customers within Sri Lanka
Province Rs 000
Central 12,726,298 Eastern 6,296,590 North Central 7,824,376 North Western 12,449,626 Northern 7,423,214 Sabaragamuwa 6,412,026 Southern 13,901,359 Uva 4,442,236 Western 185,771,923 Total 257,247,648 Annual Report 2013 Sampath Bank PLC PLC Bank Sampath 2013 Annual Report
301 NOTES TO THE FINANCIAL STATEMENTS
47 RISK MANAGEMENT CONTD. 47.2.6.1 Country Risk - Geographical Analysis (b) Bank - as at 31st December 2012
Sri Lanka Europe America South Asia Asia Pacific Middle East Total & Africa Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000
Financial Assets Cash & cash equivalents 8,157,220 1,187,296 178,341 556,175 347,020 6,083 10,432,135 Balances with Central Bank of Sri Lanka 17,200,792 - - - - - 17,200,792 Placements with banks 25 924,034 2,142,763 1,163,751 4,557,554 - 8,788,127 Reverse repurchase agreements 3,300,817 - - - - - 3,300,817 Derivative financial instruments 200,732 253 77,511 - 526 - 279,022 Financial assets held for trading 35,181,084 - - - - - 35,181,084 Financial assets held for trading pledged as collaterals 2,856,321 - - - - - 2,856,321 Loans & receivables to banks 816,119 - - - - - 816,119 Loans & receivables to other customers ** 205,650,774 77,722 12,744 697,368 497,498 1,248,263 208,184,369 Other loans & receivables 10,515,756 - - - - - 10,515,756 Financial investments available for sale 202,285 - - 1,721,339 - - 1,923,624 Financial investments held to maturity ------Other assets 1,399,091 - - - - - 1,399,091 Total 285,481,016 2,189,305 2,411,359 4,138,633 5,402,598 1,254,346 300,877,257
** Provincial breakdown for loans & receivables to other customers within Sri Lanka
Province Rs 000
Central 9,719,171 Eastern 5,775,007 North Central 5,777,983 North Western 9,677,606 Northern 6,473,367 Sabaragamuwa 5,380,717 Southern 11,262,684 Uva 3,273,863 Western 148,310,376 Total 205,650,774
302 (c) Group - as at 31st December 2013
Sri Lanka Europe America South Asia Asia Pacific Middle East Total & Africa Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000
Financial Assets Cash & cash equivalents 7,140,285 361,929 489,052 123,819 214,610 11,143 8,340,838 Balances with Central Bank of Sri Lanka 15,766,967 - - - - - 15,766,967 Placements with banks - - 459,868 - 1,331,461 - 1,791,329 Reverse repurchase agreements 18,043,918 - - - - - 18,043,918 Derivative financial instruments 227,019 3,047 - - 451 - 230,517 Financial assets held for trading 46,974,516 - - - - - 46,974,516 Financial assets held for trading pledged as collaterals 3,496,141 - - - - - 3,496,141 Loans & receivables to banks 638,244 - - - - - 638,244 Loans & receivables to other customers ** 263,755,663 156,679 11,279 1,196,656 515,589 273,727 265,909,593 Other loans & receivables 12,150,588 - - - - - 12,150,588 Financial investments available for sale 139,144 - - 2,254,030 - - 2,393,174 Financial investments held to maturity 1,845,903 - - - - - 1,845,903 Other assets 2,212,741 - - 9,275 - - 2,222,016 Total 372,391,129 521,655 960,199 3,583,780 2,062,111 284,870 379,803,744
** Provincial breakdown for loans & receivables to other customers within Sri Lanka
Province Rs 000
Central 14,173,255 Eastern 7,093,562 North Central 8,096,752 North Western 13,290,704 Northern 7,439,369 Sabaragamuwa 6,581,796 Southern 14,369,503 Uva 4,442,236 Western 188,268,486 Total 263,755,663 Annual Report 2013 Sampath Bank PLC PLC Bank Sampath 2013 Annual Report
303 NOTES TO THE FINANCIAL STATEMENTS
47 RISK MANAGEMENT CONTD. 47.2.6.1 Country Risk - Geographical Analysis (d) Group - as at 31st December 2012
Sri Lanka Europe America South Asia Asia Pacific Middle East Total & Africa Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000
Financial Assets Cash & cash equivalents 8,167,344 1,187,296 178,341 556,175 347,020 6,083 10,442,259 Balances with Central Bank of Sri Lanka 17,200,792 - - - - - 17,200,792 Placements with banks 25 924,034 2,142,763 1,163,751 4,557,554 - 8,788,127 Reverse repurchase agreements 3,300,373 - - - - - 3,300,373 Derivative financial instruments 200,732 253 77,511 - 526 - 279,022 Financial assets held for trading 35,181,084 - - - - - 35,181,084 Financial assets held for trading pledged as collaterals 2,856,321 - - - - - 2,856,321 Loans & receivables to banks 816,119 - - - - - 816,119 Loans & receivables to other customers ** 209,946,446 77,722 12,744 697,368 497,498 1,248,263 212,480,041 Other loans & receivables 10,224,474 - - - - - 10,224,474 Financial investments available for sale 202,341 - - 1,721,339 - - 1,923,680 Financial investments held to maturity 9,765 - - - - - 9,765 Other assets 1,858,276 - - - - - 1,858,276 Total 289,964,092 2,189,305 2,411,359 4,138,633 5,402,598 1,254,346 305,360,333
** Provincial breakdown for loans & receivables to other customers within Sri Lanka
Province Rs 000
Central 11,159,908 Eastern 7,116,714 North Central 5,987,912 North Western 10,723,463 Northern 6,526,017 Sabaragamuwa 5,583,497 Southern 11,827,562 Uva 3,273,863 Western 147,747,510 Total 209,946,446
304 47.2.6.2 Industry Analysis The following tables show the risk concentration by industry for the components of the Statement of Financial Position
(a) Bank - as at 31st December 2013
Agriculture Manufacturing Tourism Transport Construction Traders Banks, Government Infrastructure Other Consumers Total & Fishing Financial & Services Business Services Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000
Financial Assets Cash & cash equivalents ------8,302,576 - - - - 8,302,576 Balances with Central Bank of Sri Lanka ------15,766,967 - - - 15,766,967 Placements with banks ------1,791,329 - - - - 1,791,329 Reverse repurchase agreements ------10,035,819 8,008,099 - - - 18,043,918 Derivative financial instruments - - - - - 13,194 217,323 - - - - 230,517 Financial assets held for trading Government debt securities ------45,962,143 - - - 45,962,143 Quoted equities - 40,879 - - - 221,159 750,335 - - - - 1,012,373 Financial assets held for trading pledged as collaterals ------3,496,141 - - - 3,496,141 Loans & receivables to banks ------12,377 625,867 - - - 638,244 Loans & receivables to other customers 34,447,250 35,648,616 13,476,931 3,924,506 26,401,964 59,381,313 17,851,608 201,229 8,291,865 7,343,645 52,432,651 259,401,578 Other loans & receivables ------3,095,878 9,054,710 - - - 12,150,588 Financial investments available for sale Government debt securities ------100,462 - - - 100,462 Other equity securities ------2,254,030 - - 38,626 - 2,292,656 Financial investments held to maturity ------1,845,903 - - - 1,845,903 Other assets ------1,751,374 - 1,751,374 Total 34,447,250 35,689,495 13,476,931 3,924,506 26,401,964 59,615,666 44,311,275 85,061,521 8,291,865 9,133,645 52,432,651 372,786,769
(b) Bank - as at 31st December 2012
Agriculture Manufacturing Tourism Transport Construction Traders Banks, Government Infrastructure Other Consumers Total & Fishing Financial & Services Business Services Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000
Financial Assets Cash & cash equivalents ------10,432,135 - - - - 10,432,135 Balances with Central Bank of Sri Lanka ------17,200,792 - - - 17,200,792 Placements with banks ------8,788,127 - - - - 8,788,127 Reverse repurchase agreements ------3,300,817 - - - - 3,300,817 Derivative financial instruments ------279,022 - - - - 279,022 Financial assets held for trading Government debt securities ------34,182,709 - - - 34,182,709 Quoted equities - 10,236 14,291 - 4,853 282,474 686,521 - - - - 998,375 Financial assets held for trading pledged as collaterals ------2,856,321 - - - - 2,856,321 Loans & receivables to banks ------1,943 814,176 - - - 816,119 Loans & receivables to other customers 23,211,855 28,146,897 7,132,717 2,617,179 20,710,856 40,352,210 11,271,223 47,061 6,613,877 6,474,852 61,605,642 208,184,369 Other loans & receivables 458,159 - - - - 726,016 2,173,931 7,157,650 - - - 10,515,756 Financial investments available for sale Government debt securities ------179,175 - - - 179,175 Other equity securities ------1,721,339 - - 23,110 - 1,744,449 Financial investments held to maturity ------Other assets ------1,399,091 - 1,399,091 Total 23,670,014 28,157,133 7,147,008 2,617,179 20,715,709 41,360,700 41,511,379 59,581,563 6,613,877 7,897,053 61,605,642 300,877,257 Annual Report 2013 Sampath Bank PLC PLC Bank Sampath 2013 Annual Report
305 NOTES TO THE FINANCIAL STATEMENTS
47 RISK MANAGEMENT CONTD. 47.2.6.2 Industry Analysis (c) Group - as at 31st December 2013
Agriculture Manufacturing Tourism Transport Construction Traders Banks, Government Infrastructure Other Consumers Total & Fishing Financial & Services Business Services Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000
Financial Assets Cash & cash equivalents ------8,340,838 - - - - 8,340,838 Balances with Central Bank of Sri Lanka ------15,766,967 - - - 15,766,967 Placements with banks ------1,791,329 - - - - 1,791,329 Reverse repurchase agreements ------10,035,819 8,008,099 - - - 18,043,918 Derivative financial instruments - - - - - 13,194 217,323 - - - - 230,517 Financial assets held for trading Government debt securities ------45,962,143 - - - 45,962,143 Quoted equities - 40,879 - - - 221,159 750,335 - - - 1,012,373 Financial assets held for trading pledged as collaterals ------3,496,141 - - - 3,496,141 Loans & receivables to banks ------12,377 625,867 - - - 638,244 Loans & receivables to other customers 35,042,331 35,648,616 13,476,931 4,140,536 26,608,580 62,158,426 16,175,023 201,229 8,291,865 11,288,506 52,877,550 265,909,593 Other loans & receivables ------3,095,878 9,054,710 - - - 12,150,588 Financial investments available for sale - Government debt securities ------100,462 - - - 100,462 Other equity securities ------2,254,030 - - 38,682 - 2,292,712 Financial investments held to maturity ------1,845,903 - - - 1,845,903 Other assets ------2,222,016 - 2,222,016 Total 35,042,331 35,689,495 13,476,931 4,140,536 26,608,580 62,392,779 42,672,952 85,061,521 8,291,865 13,549,204 52,877,550 379,803,744
(d) Group - as at 31st December 2012
Agriculture Manufacturing Tourism Transport Construction Traders Banks, Government Infrastructure Other Consumers Total & Fishing Financial & Services Business Services Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000
Financial Assets Cash & cash equivalents ------10,442,259 - - - - 10,442,259 Balances with Central Bank of Sri Lanka ------17,200,792 - - - 17,200,792 Placements with banks ------8,788,127 - - - - 8,788,127 Reverse repurchase agreements ------3,300,373 - - - - 3,300,373 Derivative financial instruments ------279,022 - - - - 279,022 Financial assets held for trading Government debt securities ------34,182,709 - - - 34,182,709 Quoted equities - 10,236 14,291 - 4,853 282,474 686,521 - - - - 998,375 Financial assets held for trading pledged as collaterals ------2,856,321 - - - - 2,856,321 Loans & receivables to banks ------1,943 814,176 - - - 816,119 Loans & receivables to other customers 23,756,525 28,146,897 7,132,717 2,752,208 20,888,013 42,325,045 11,271,223 47,061 6,613,877 9,045,289 60,501,186 212,480,041 Other loans & receivables 458,159 - - - - 726,016 1,882,649 7,157,650 - - - 10,224,474 Financial investments available for sale Government debt securities ------179,175 - - - 179,175 Other equity securities ------1,721,339 - - 23,166 - 1,744,505 Financial investments held to maturity ------9,765 - - - - 9,765 Other assets ------1,858,276 - 1,858,276 Total 24,214,684 28,157,133 7,147,008 2,752,208 20,892,866 43,333,535 41,239,542 59,581,563 6,613,877 10,926,731 60,501,186 305,360,333
306 47 RISK MANAGEMENT CONTD. 47.2.7 Commitments and Contingencies To meet the financial needs of customers, the Bank enters into various commitments and contingent liabilities. Even though these obligations may not be recognised on the Statement of Financial Position, they do contain credit risk and are, therefore, part of the overall risk of the Bank.
The table below shows the Bank’s maximum credit risk exposure for commitments and contingencies. The maximum exposure to credit risk relating to a financial guarantee is the maximum amount the Bank should have to pay if the guarantee is called upon. The maximum exposure to credit risk relating to a loan commitment is the full amount of the commitment. In both cases, the maximum risk exposure is significantly greater than the amount recognised as a liability in the Statement of Financial Position.
Bank Group 2013 2012 2013 2012 Rs 000 Rs 000 Rs 000 Rs 000
Commitments Commitment for unutilised facilities (direct advances) 37,346,053 27,340,066 37,464,520 27,543,720
Contingent Liabilities Acceptances 7,871,824 6,308,188 7,871,824 6,308,188 Documentary credit 12,014,404 11,310,366 12,014,404 11,310,366 Guarantees 28,333,570 21,993,951 28,333,570 21,993,951 Bills sent for collection 164,448 129,388 164,448 129,388 Others 14,791 352,396 14,791 352,396 Sub Total 48,399,037 40,094,289 48,399,037 40,094,289
Forward exchange contracts 37,093,136 28,684,448 37,093,136 28,684,448 Currency SWAPs 22,728,550 19,806,940 22,728,550 19,806,940 Sub Total 59,821,686 48,491,388 59,821,686 48,491,388 Total Commitments & Contingencies 145,566,776 115,925,743 145,685,243 116,129,397
47.3 Liquidity Risk and Funding Management Liquidity risk is the risk that the Bank will encounter difficulties in meeting its financial commitments that are settled by delivering cash or another financial asset. Hence the Bank may be unable to meet its payment obligations when they fall due under both normal and stress circumstances. To limit this risk, management has arranged diversified funding sources in addition to its core deposit base, and adopted a policy of continuously managing assets with liquidity in mind and of monitoring future cash flows and liquidity on a daily basis. The Bank has developed internal control processes and contingency plans for managing liquidity risk. This incorporates an assessment of expected cash flows and the availability of high grade collateral which could be used to secure additional funding if required.
The Bank maintains a portfolio of highly marketable and diverse assets assumed to be easily liquidated in the event of an unforeseen interruption of expected cash flow. The Bank also has committed lines of credit that could be utilized to meet liquidity needs. Further, the Bank maintains a statutory deposit with the Central Bank of Sri Lanka equal to 6% (2012: 8%) of rupee deposits. In accordance with the Bank’s policy, the liquidity position is assessed and managed under a variety of scenarios, giving due consideration to stress factors relating to both the market in general and specific to the Bank. The most important of these is to maintain the required ratio of liquid assets to liabilities, to meet the regulatory requirement. Liquid assets consist of cash, short–term bank deposits and liquid debt securities available for immediate sale. Further the Statutory Liquid Assets Ratio of the Bank for the month of December 2013 is as follows.
47.3.1 Statutory Liquid Assets Ratio For the month of December 2013: 27.62% (2012: 22.40%) Annual Report 2013 Sampath Bank PLC PLC Bank Sampath 2013 Annual Report
307 NOTES TO THE FINANCIAL STATEMENTS
47 RISK MANAGEMENT CONTD. 47.3.2 Due to Banks and Due to Other Customers (Deposits) to Loans and Receivables to Banks and Other Customers (Advances) Ratio The Bank is aware of the importance of due to banks and other customers as a source of funds for its lending operations.
This is monitored using the following ratio, which compares loans and receivables to customers as a percentage of due to banks and due to other customers (Deposits).
Due to banks and due to other customers to loans and receivables to banks and other customers Ratio As at 31 December 2013 : 89.28% (2012 : 88.68%)
47.3.3 Analysis of Financial Assets and Liabilities by Remaining Contractual Maturities The tables below summarise the maturity profile of the undiscounted cash flows of the Bank’s financial assets and financial liabilities as at 31st December 2013. Repayments which are subject to notice are treated as if notice were to be given immediately. However, the Bank expects that many customers will not request repayment on the earliest date it could be required to pay and the table does not reflect the expected cash flows indicated by its deposit retention history.
Contractual Maturities of Undiscounted Cash Flows of Financial Assets and Financial Liabilities
(a) Bank - as at 31st December 2013 Up to 3 3 - 12 1 - 3 3 - 5 Over 5 Months Months Years Years Years Total Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000
Financial Assets Cash & cash equivalents 8,302,576 - - - - 8,302,576 Balances with Central Bank of Sri Lanka 10,794,345 4,747,900 89,843 134,134 745 15,766,967 Placements with banks 1,792,729 - - - - 1,792,729 Reverse repurchase agreements 18,068,169 - - - - 18,068,169 Derivative financial instruments 116,411 114,106 - - - 230,517 Financial assets held for trading 22,838,980 25,698,608 - - - 48,537,588 Financial assets held for trading pledged as collaterals 2,123,708 1,455,247 - - - 3,578,955 Loans & receivables to banks 69,450 184,447 438,535 91,448 - 783,880 Loans & receivables to other customers 160,989,565 39,856,325 54,699,890 25,492,354 20,050,799 301,088,933 Other loans & receivables 526,313 1,091,020 10,511,802 1,799,277 - 13,928,412 Financial investments available for sale 2,356,194 - - - 38,625 2,394,819 Financial investments held to maturity - 1,975,000 - - - 1,975,000 Other assets 68,570 16,688 31,218 28,547 1,606,351 1,751,374 Total Financial Assets 228,047,010 75,139,341 65,771,288 27,545,760 21,696,520 418,199,919
Financial Liabilities Due to banks 2,220,536 - - - - 2,220,536 Derivative financial instruments 594,231 44,493 - - - 638,724 Securities sold under re-purchase agreements 2,515,772 915,347 - - - 3,431,119 Due to other customers 206,346,742 96,812,366 1,969,163 3,859,509 40,826 309,028,606 Debt issued & other borrowed funds 18,022,769 1,897,396 5,587,306 14,689,848 6,457,849 46,655,168 Unclaimed dividend 54,981 - - - - 54,981 Other liabilities 37,205 3,335 6,239 5,705 12,217 64,701 Total Financial Liabilities 229,792,236 99,672,937 7,562,708 18,555,062 6,510,892 362,093,835
Total Net Financial Assets / (Liabilities) (1,745,226) (24,533,596) 58,208,580 8,990,698 15,185,628 56,106,084
308 (b) Bank - as at 31st December 2012
Up to 3 3 - 12 1 - 3 3 - 5 Over 5 Months Months Years Years Years Total Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000
Financial Assets Cash & cash equivalents 10,504,835 - - - - 10,504,835 Balances with Central Bank of Sri Lanka 12,805,701 4,205,300 121,924 67,030 837 17,200,792 Placements with banks 7,624,456 1,177,646 - - - 8,802,102 Reverse repurchase agreements 3,300,817 - - - - 3,300,817 Derivative financial instruments 154,690 124,332 - - - 279,022 Financial assets held for trading 35,181,084 - - - - 35,181,084 Financial assets held for trading pledged as collaterals 2,858,321 - - - - 2,858,321 Loans & receivables to banks 73,872 235,811 540,622 253,211 - 1,103,516 Loans & receivables to other customers 126,100,984 54,887,118 40,384,278 17,043,168 16,041,516 254,457,064 Other loans & receivables 2,329,352 3,598,266 5,598,952 - - 11,526,570 Financial investments available for sale 1,900,514 - - - 23,110 1,923,624 Financial investments held to maturity ------Other assets - - - - 1,399,091 1,399,091 Total Financial Assets 202,834,626 64,228,473 46,645,776 17,363,409 17,464,554 348,536,838
Financial Liabilities Due to banks 625,051 - - - - 625,051 Derivative financial instruments 360,835 21,003 - - - 381,838 Securities sold under re-purchase agreements 2,164,530 642,856 - - - 2,807,386 Due to other customers 184,844,334 66,808,610 2,586,230 1,490,651 310,693 256,040,518 Debt issued & other borrowed funds 9,336,177 7,406,830 1,621,902 9,754,206 5,695,072 33,814,187 Unclaimed dividend 49,185 - - - - 49,185 Other liabilities 41,084 3,683 6,889 6,300 13,492 71,448 Total Financial Liabilities 197,421,196 74,882,982 4,215,021 11,251,157 6,019,257 293,789,613
Total Net Financial Assets / (Liabilities) 5,413,430 (10,654,509) 42,430,755 6,112,252 11,445,297 54,747,225 Annual Report 2013 Sampath Bank PLC PLC Bank Sampath 2013 Annual Report
309 NOTES TO THE FINANCIAL STATEMENTS
47 RISK MANAGEMENT CONTD. 47.3.3 Analysis of Financial Assets and Liabilities by Remaining Contractual Maturities (c) Group - as at 31st December 2013
Up to 3 3 - 12 1 - 3 3 - 5 Over 5 Months Months Years Years Years Total Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000
Financial Assets Cash & cash equivalents 8,340,838 - - - - 8,340,838 Balances with Central Bank of Sri Lanka 10,794,345 4,747,900 89,843 134,134 745 15,766,967 Placements with banks 1,792,729 - - - - 1,792,729 Reverse repurchase agreements 18,068,169 - - - - 18,068,169 Derivative financial instruments 116,411 114,106 - - - 230,517 Financial assets held for trading 22,838,980 25,698,608 - - - 48,537,588 Financial assets held for trading pledged as collaterals 2,123,708 1,455,247 - - - 3,578,955 Loans & receivables to banks 69,450 184,447 438,535 91,448 - 783,880 Loans & receivables to other customers 162,456,165 42,319,707 58,690,249 26,446,860 20,064,406 309,977,387 Other loans & receivables 526,313 1,091,020 10,511,802 1,799,277 - 13,928,412 Financial investments available for sale 2,356,194 - - - 38,625 2,394,819 Financial investments held to maturity - 1,975,000 - - - 1,975,000 Other assets 326,634 185,829 113,141 32,693 1,563,719 2,222,016 Total Financial Assets 229,809,936 77,771,864 69,843,570 28,504,412 21,667,495 427,597,277
Financial Liabilities Due to banks 2,243,757 15,600 - - 65,754 2,325,111 Derivative financial instruments 594,231 44,493 - - - 638,724 Securities sold under re-purchase agreements 2,189,620 907,069 - - - 3,096,689 Due to other customers 206,346,742 96,812,366 1,969,163 3,859,509 40,826 309,028,606 Debt issued & other borrowed funds 19,828,748 3,106,340 7,592,396 15,528,955 6,489,356 52,545,795 Unclaimed dividend 54,981 - - - - 54,981 Other liabilities 37,205 3,335 6,239 5,705 12,217 64,701 Total Financial Liabilities 231,295,284 100,889,203 9,567,798 19,394,169 6,608,153 367,754,607
Total Net Financial Assets / (Liabilities) (1,485,348) (23,117,339) 60,275,772 9,110,243 15,059,342 59,842,670
310 (d) Group - as at 31st December 2012
Up to 3 3 - 12 1 - 3 3 - 5 Over 5 Months Months Years Years Years Total Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000
Financial Assets Cash & cash equivalents 10,514,958 - - - - 10,514,958 Balances with Central Bank of Sri Lanka 12,805,701 4,205,300 121,924 67,030 837 17,200,792 Placements with banks 7,624,456 1,177,646 - - - 8,802,102 Reverse repurchase agreements 3,300,373 - - - - 3,300,373 Derivative financial instruments 154,690 124,332 - - - 279,022 Financial assets held for trading 35,181,084 - - - - 35,181,084 Financial assets held for trading pledged as collaterals 2,858,321 - - - - 2,858,321 Loans & receivables to banks 73,872 235,811 540,622 253,211 - 1,103,516 Loans & receivables to other customers 127,288,537 55,024,254 42,834,308 17,878,723 16,050,410 259,076,232 Other loans & receivables 2,038,069 3,598,266 5,598,952 - - 11,235,287 Financial investments available for sale 1,900,514 - - - 23,166 1,923,680 Financial investments held to maturity 2,400 7,365 - - - 9,765 Other assets - - - - 1,858,276 1,858,276 Total Financial Assets 203,742,975 64,372,974 49,095,806 18,198,964 17,932,689 353,343,408
Financial Liabilities Due to banks 668,466 - - - - 668,466 Derivative financial instruments 360,835 21,003 - - - 381,838 Securities sold under re-purchase agreements 2,158,745 642,856 - - - 2,801,601 Due to other customers 184,601,578 66,808,610 2,586,230 1,490,651 310,693 255,797,762 Debt issued & other borrowed funds 10,409,607 8,299,300 2,897,110 9,906,081 5,695,072 37,207,170 Unclaimed dividend 49,185 - - - - 49,185 Other liabilities 41,084 3,683 6,889 6,300 13,492 71,448 Total Financial liabilities 198,289,500 75,775,452 5,490,229 11,403,032 6,019,257 296,977,470
Total Net Financial Assets / (Liabilities) 5,453,475 (11,402,478) 43,605,577 6,795,932 11,913,432 56,365,938 Annual Report 2013 Sampath Bank PLC PLC Bank Sampath 2013 Annual Report
311 NOTES TO THE FINANCIAL STATEMENTS
47 RISK MANAGEMENT CONTD. 47.3.4 Contractual Maturities of Commitments and Contingencies The table below shows the contractual expiry by maturity of the Bank’s contingent liabilities and commitments. Each undrawn loan commitment is included in the time band containing the earliest date it can be drawn down. For issued financial guarantee contracts, the maximum amount of the guarantee is allocated to the earliest period in which the guarantee could be called.
(a) Bank - as at 31st December 2013
On Less than 3 to 12 1 to 5 Over 5 Total Demand 3 Months Months Years Years Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000
Contingencies Financial guarantees 2,355,104 8,094,295 10,640,169 4,907,427 2,336,575 28,333,570 Acceptance 3,586 4,742,739 3,085,529 39,970 - 7,871,824 Bills sent for collection 164,448 - - - - 164,448 Forward contracts - 44,570,612 15,251,074 - - 59,821,686 Documentary credit 1,413,586 6,567,127 4,033,691 - - 12,014,404 Others 14,791 - - - - 14,791 Total Contingencies 3,951,515 63,974,773 33,010,463 4,947,397 2,336,575 108,220,723
Commitments Undrawn OD 23,162,860 - - - - 23,162,860 Undrawn loans 3,035,935 - - - - 3,035,935 Undisbursed cash loans 1,801 - - - - 1,801 Undrawn credit card limits 11,145,457 - - - - 11,145,457 Total Commitments 37,346,053 - - - - 37,346,053 Total Commitments & Contingencies 41,297,568 63,974,773 33,010,463 4,947,397 2,336,575 145,566,776
(b) Bank - as at 31st December 2012
On Less than 3 to 12 1 to 5 Over 5 Total Demand 3 Months Months Years Years Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000
Contingencies Financial guarantees 1,070,979 6,651,724 7,627,451 4,360,012 2,283,785 21,993,951 Acceptance 4,802,347 1,160,280 345,561 - - 6,308,188 Bills sent for collection 129,388 - - - - 129,388 Forward contracts - 44,553,202 3,938,186 - - 48,491,388 Documentary credit 1,147,619 6,940,144 3,222,603 - - 11,310,366 Others 352,396 - - - - 352,396 Total Contingencies 7,502,729 59,305,350 15,133,801 4,360,012 2,283,785 88,585,677
Commitments Undrawn OD 18,034,987 - - - - 18,034,987 Undrawn loans 1,489,301 - - - - 1,489,301 Undisbursed cash loans 3,981 - - - - 3,981 Undrawn credit card limits 7,811,797 - - - - 7,811,797 Total Commitments 27,340,066 - - - - 27,340,066 Total Commitments & Contingencies 34,842,795 59,305,350 15,133,801 4,360,012 2,283,785 115,925,743
312 (c) Group - as at 31st December 2013
On Less than 3 to 12 1 to 5 Over 5 Total Demand 3 Months Months Years Years Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000
Contingencies Financial guarantees 2,355,104 8,094,295 10,640,169 4,907,427 2,336,575 28,333,570 Acceptance 3,586 4,742,739 3,085,529 39,970 - 7,871,824 Bills sent for collection 164,448 - - - - 164,448 Forward contracts - 44,570,612 15,251,074 - - 59,821,686 Documentary credit 1,413,586 6,567,127 4,033,691 - - 12,014,404 Others 14,791 - - - - 14,791 Total Contingencies 3,951,515 63,974,773 33,010,463 4,947,397 2,336,575 108,220,723
Commitments Undrawn OD 23,162,860 - - - - 23,162,860 Undrawn loans 3,035,935 - - - - 3,035,935 Undisbursed cash loans 1,801 - - - - 1,801 Undrawn credit card limits 11,145,457 - - - - 11,145,457 Undrawn commitments factoring 118,467 - - - - 118,467 Total Commitments 37,464,520 - - - - 37,464,520 Total Commitments & Contingencies 41,416,035 63,974,773 33,010,463 4,947,397 2,336,575 145,685,243
(d) Group - as at 31st December 2012
On Less than 3 to 12 1 to 5 Over 5 Total Demand 3 Months Months Years Years Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000
Contingencies Financial guarantees 1,070,979 6,651,724 7,627,451 4,360,012 2,283,785 21,993,951 Acceptance 4,802,347 1,160,280 345,561 - - 6,308,188 Bills sent for collection 129,388 - - - - 129,388 Forward contracts - 44,553,202 3,938,186 - - 48,491,388 Documentary credit 1,147,619 6,940,144 3,222,603 - - 11,310,366 Others 352,396 - - - - 352,396 Total Contingencies 7,502,729 59,305,350 15,133,801 4,360,012 2,283,785 88,585,677
Commitments Undrawn OD 18,034,987 - - - - 18,034,987 Undrawn loans 1,489,301 - - - - 1,489,301 Undisbursed cash loans 3,981 - - - - 3,981 Undrawn credit card limits 7,811,797 - - - - 7,811,797 Undrawn commitments factoring 203,654 - - - - 203,654 Total Commitments 27,543,720 - - - - 27,543,720 Total Commitments & Contingencies 35,046,449 59,305,350 15,133,801 4,360,012 2,283,785 116,129,397 Annual Report 2013 Sampath Bank PLC PLC Bank Sampath 2013 Annual Report
313 NOTES TO THE FINANCIAL STATEMENTS
47 RISK MANAGEMENT CONTD. 47.4 Market Risk Market risk is the risk that the fair value or future cash flows of financial instruments will fluctuate due to changes in market variables such as interest rates, foreign exchange rates, commodity prices and equity prices. The Bank classifies exposures to market risk into either trading or non trading portfolios and manages each of those portfolios separately.
47.4.1 Interest Rate Risk Interest rate risk arises from the possibility that changes in interest rates will affect future cash flows or the fair values of financial instruments. The Bank’s policy is to continuously monitor positions on a daily basis and hedging strategies are used to ensure positions are maintained within prudential levels.
The following tables demonstrate the sensitivity of the Bank’s Income Statement as at 31st December 2013 and 31st December 2012 to a reasonable possible change in interest rates, with all other variables held constant.
Rate Sensitive Assets (RSA) & Rate Sensitive Liabilities (RSL) as at 31st December 2013 2012 Rs 000 Rs 000
Rate Sensitive Assets (RSA)* 319,727,891 262,645,830 Rate Sensitive Liabilities (RSL)* 318,306,901 253,343,129 GAP (RSA - RSL) 1,420,990 9,302,701
* Only the capital amounts
Impact on Income Statement due to Interest Rate Shocks as at 31st December 2013 2012 Rs 000 Rs 000
Interest Rate Shock 0.50% 401,629 310,267 1.00% 803,257 620,534 (0.50%) (401,629) (310,267) (1.00%) (803,257) (620,534)
314 Interest Rate Sensitivity Analysis The tables below analyse the Bank’s interest rate risk exposure on financial assets and financial liabilities. The Bank’s assets and liabilities are included at carrying amount and categorised by the earlier of contractual re–pricing or maturity dates.
(a) Bank - as at 31st December 2013
Up to 3 3 - 12 1 - 3 3 - 5 over 5 Non Total Months Months Years Years Years Interest Bearing Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000
Financial Assets Cash & cash equivalents - - - - - 8,302,576 8,302,576 Balances with Central Bank of Sri Lanka - - - - - 15,766,967 15,766,967 Placements with banks 1,791,329 - - - - - 1,791,329 Reverse repurchase agreements 18,043,918 - - - - - 18,043,918 Derivative financial instruments - - - - - 230,517 230,517 Financial assets held for trading 45,962,143 - - - - 1,012,373 46,974,516 Financial assets held for trading pledged as collaterals 2,105,489 1,390,652 - - - - 3,496,141 Loans & receivables to banks 48,862 136,745 366,850 85,787 - - 638,244 Loans & receivables to other customers 152,759,327 31,288,470 41,068,421 19,531,035 14,754,325 - 259,401,578 Other loans & receivables 1,890,417 8,555,405 903,271 801,495 - - 12,150,588 Financial investments available for sale 100,462 - - - - 2,292,656 2,393,118 Financial investments held to maturity - 1,845,903 - - - - 1,845,903 Other assets - - - - - 1,751,374 1,751,374 Total Financial Assets 222,701,947 43,217,175 42,338,542 20,418,317 14,754,325 29,356,463 372,786,769
Financial Liabilities Due to banks 1,879,072 - - - - 332,209 2,211,281 Derivative financial instruments - - - - - 638,724 638,724 Securities sold under re-purchase agreements 2,509,543 880,141 - - - - 3,389,684 Due to other customers 185,853,118 91,487,819 1,664,420 2,477,906 21,711 19,044,376 300,549,350 Debt issued & other borrowed funds 24,463,569 1,991,184 1,721,366 7,762,764 2,923,448 - 38,862,331 Unclaimed dividend - - - - - 54,981 54,981 Other liabilities - - - - - 64,701 64,701 Total Financial Liabilities 214,705,302 94,359,144 3,385,786 10,240,670 2,945,159 20,134,991 345,771,052
Interest Rate Sensitivity Gap 7,996,645 (51,141,969) 38,952,756 10,177,647 11,809,166 9,221,472 27,015,717 Annual Report 2013 Sampath Bank PLC PLC Bank Sampath 2013 Annual Report
315 NOTES TO THE FINANCIAL STATEMENTS
47 RISK MANAGEMENT CONTD. 47.4.1 Interest Rate Risk (b) Bank - as at 31st December 2012
Up to 3 3 - 12 1 - 3 3 - 5 over 5 Non Total Months Months Years Years Years Interest Bearing Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000
Financial Assets Cash & cash equivalents 3,012,734 7,419,401 10,432,135 Balances with Central Bank of Sri Lanka 17,200,792 17,200,792 Placements with banks 7,624,376 1,163,751 - - - 8,788,127 Reverse repurchase agreements 3,300,817 3,300,817 Derivative financial instruments - - - - - 279,022 279,022 Financial assets held for trading 34,182,709 - - - - 998,375 35,181,084 Financial assets held for trading pledged as collaterals 2,856,321 2,856,321 Loans & receivables to banks 41,299 150,120 400,320 224,380 - 816,119 Loans & receivables to other customers 133,645,410 38,282,470 19,193,251 8,294,387 8,768,851 - 208,184,369 Other loans & receivables 2,225,878 7,657,631 632,247 - - 10,515,756 Financial investments available for sale 179,175 1,744,449 1,923,624 Financial investments held to maturity - Other assets 1,399,091 1,399,091 Total Financial Assets 187,068,719 47,253,972 20,225,818 8,518,767 8,768,851 29,041,130 300,877,257
Financial Liabilities Due to banks 244,038 - 380,746 624,784 Derivative financial instruments - - - - - 381,838 381,838 Securities sold under re-purchase agreements 2,146,527 610,590 - - - - 2,757,117 Due to other customers 165,203,292 59,582,186 1,905,895 880,847 149,847 15,608,923 243,330,990 Debt issued & other borrowed funds 9,223,958 6,925,955 1,138,035 7,931,551 3,605,530 - 28,825,029 Unclaimed dividend 49,185 49,185 Other liabilities - - - - - 71,448 71,448 Total Financial Liabilities 176,817,815 67,118,731 3,043,930 8,812,398 3,755,377 16,492,140 276,040,391
Interest Rate Sensitivity Gap 10,250,904 (19,864,759) 17,181,888 (293,631) 5,013,474 12,548,990 24,836,866
316 (c) Group - as at 31st December 2013
Up to 3 3 - 12 1 - 3 3 - 5 over 5 Non Total Months Months Years Years Years Interest Bearing Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000
Financial Assets Cash & cash equivalents - - - - - 8,340,838 8,340,838 Balances with Central Bank of Sri Lanka - - - - - 15,766,967 15,766,967 Placements with banks 1,791,329 - - - - - 1,791,329 Reverse repurchase agreements 18,043,918 - - - - - 18,043,918 Derivative financial instruments - - - - - 230,517 230,517 Financial assets held for trading 45,962,143 - - - - 1,012,373 46,974,516 Financial assets held for trading pledged as collaterals 2,105,489 1,390,652 - - - - 3,496,141 Loans & receivables to banks 48,862 136,745 366,850 85,787 - - 638,244 Loans & receivables to other customers 153,892,732 32,933,853 43,975,252 20,336,465 14,771,291 - 265,909,593 Other loans & receivables 1,890,417 8,555,405 903,271 801,495 - - 12,150,588 Financial investments available for sale 100,462 - - - - 2,292,712 2,393,174 Financial investments held to maturity - 1,845,903 - - - - 1,845,903 Other assets - - - - - 2,222,016 2,222,016 Total Financial Assets 223,835,352 44,862,558 45,245,373 21,223,747 14,771,291 29,865,423 379,803,744
Financial Liabilities Due to banks 1,902,563 15,600 - - - 332,209 2,250,372 Derivative financial instruments - - - - - 638,724 638,724 Securities sold under re-purchase agreements 2,183,391 871,866 - - - - 3,055,257 Due to other customers 185,713,304 91,487,819 1,664,420 2,477,906 21,711 19,016,626 300,381,786 Debt issued & other borrowed funds 30,436,043 2,161,772 1,707,726 7,519,541 2,923,448 - 44,748,530 Unclaimed dividend - - - - - 54,981 54,981 Other liabilities - - - - - 64,701 64,701 Total Financial Liabilities 220,235,301 94,537,057 3,372,146 9,997,447 2,945,159 20,107,241 351,194,351
Interest Rate Sensitivity Gap 3,600,051 (49,674,499) 41,873,227 11,226,300 11,826,132 9,758,182 28,609,393 Annual Report 2013 Sampath Bank PLC PLC Bank Sampath 2013 Annual Report
317 NOTES TO THE FINANCIAL STATEMENTS
47 RISK MANAGEMENT CONTD. 47.4.1 Interest Rate Risk (d) Group - as at 31st December 2012
Up to 3 3 - 12 1 - 3 3 - 5 over 5 Non Total Months Months Years Years Years Interest Bearing Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000
Financial Assets Cash & cash equivalents 3,045,165 - - - - 7,397,094 10,442,259 Balances with Central Bank of Sri Lanka - - - - - 17,200,792 17,200,792 Placements with banks 7,624,376 1,163,751 - - - - 8,788,127 Reverse repurchase agreements 3,300,373 - - - - - 3,300,373 Derivative financial instruments - - - - - 279,022 279,022 Financial assets held for trading 34,182,709 - - - - 998,375 35,181,084 Financial assets held for trading pledged as collaterals 2,856,321 - - - - - 2,856,321 Loans & receivables to banks 41,299 150,120 400,320 224,380 - - 816,119 Loans & receivables to other customers 134,278,463 39,284,010 21,500,688 8,753,830 8,663,050 - 212,480,041 Other loans & receivables 1,934,596 7,657,631 632,247 - - - 10,224,474 Financial investments available for sale 179,175 - - - - 1,744,505 1,923,680 Financial investments held to maturity - 2,400 7,365 - - - 9,765 Other assets - - - - - 1,858,276 1,858,276 Total Financial Assets 187,442,477 48,257,912 22,540,620 8,978,210 8,663,050 29,478,064 305,360,333
Financial Liabilities Due to banks 287,451 - - - - 380,747 668,198 Derivative financial instruments - - - - - 381,838 381,838 Securities sold under re-purchase agreements 2,140,742 610,590 - - - - 2,751,332 Due to other customers 165,116,048 59,582,186 1,905,895 880,847 149,847 15,453,413 243,088,236 Debt issued & other borrowed funds 11,395,368 7,469,415 2,040,387 7,707,314 3,605,530 - 32,218,014 Unclaimed dividend - - - - - 49,185 49,185 Other liabilities - - - - - 71,448 71,448 Total Financial Liabilities 178,939,609 67,662,191 3,946,282 8,588,161 3,755,377 16,336,631 279,228,251
Interest Rate Sensitivity Gap 8,502,868 (19,404,279) 18,594,338 390,049 4,907,673 13,141,433 26,132,082
318 47.4.2 Currency Risk Currency risk arises as a result of fluctuations in the value of a financial instrument due to changes in foreign exchange rates. The Board has set limits on positions by currency. In accordance with the Bank’s policy, positions are monitored on a daily basis and hedging strategies are used to ensure positions are maintained within established limits.
The tables below indicate the currencies to which the Bank had significant exposures as at 31st December 2013 and 31st December 2012 and the effect to the Gains/Losses in case of a market exchange rates up/drop by 5 % and 10%. The analysis calculates the effect of a reasonably possible movement of the currency rate against the LKR, with all other variables held constant, on the Income Statement (due to the fair value of currency sensitive non trading monetary assets and liabilities) and equity (due to the change in fair value of currency swaps and forward foreign exchange contracts used as cash flow hedges). A negative amount in the “Impact on Income Statement “ Column of the table reflects a potential net reduction in Income Statement or Equity, while a positive amount reflects a net potential increase.
Foreign Exchange Position as at 31st December 2013 2012 Net Overall Net Overall Net Overall Net Overall Long Short Long Short Rs 000 Rs 000 Rs 000 Rs 000
Currency USD 317,016 - - (184,320) GBP 19,296 - 28,004 - EUR 129,358 - 173,023 - JPY 14,585 - 7,539 - AUD 47,094 - 47,334 - CAD 9,168 - 7,850 - CHF 11,160 - 27,827 - SGD 12,697 - 5,851 - HKD 5,675 - 5,293 - Sub Total 566,049 - 302,721 (184,320) Other Currencies 151,990 (6,956) 127,761 - Grand Total 718,039 (6,956) 430,482 (184,320) Higher of Long or Short 718,039 430,482
Impact on Income Statement due to 2013 2012 Exchange Rate Shocks Net Open Impact on Net Open Impact on Position Income Position Income (After Rate Statement (After Rate Statement Shocks) as at 31st Shocks) as at 31st December 2013 December 2012 Exchange Rate Shock Rs 000 Rs 000 Rs 000 Rs 000
5% 753,941 35,902 452,007 21,524 10% 789,843 71,804 473,531 43,048 -5% 682,137 (35,902) 408,959 (21,524) -10% 646,235 (71,804) 387,435 (43,048)
47.4.3 Equity Price Risk Equity price risk is the risk that the fair value of equities decreasing as a result of changes in the level of equity indices and individual stocks. Investment Committee reviews and approves all equity investment decisions. The market value of the Bank’s equity portfolio as of 31st December 2013 is Rs 1,012,373,000/- (2012: Rs 998,375,000/-). Annual Report 2013 Sampath Bank PLC PLC Bank Sampath 2013 Annual Report
319 NOTES TO THE FINANCIAL STATEMENTS
47 RISK MANAGEMENT CONTD. 47.5 Operational Risk Operational risk is the risk of losses arising from failed internal processes, systems failure, human error, fraud or external events. When controls fail to perform, operational risks can cause damage to reputation, have legal or regulatory implications, or lead to financial loss. Strategic and Reputational Risks are not covered in Operational Risk.
Operational Risks of the Bank are mitigated and managed through a Board approved Operational Risk Management Policy control framework which consists of monitoring and responding to potential risks such as segregation of duties, access, authorisation and reconciliation procedures, staff education and assessment processes, Business Continuity Planning etc. Operational Risk Management Unit reports to Group Chief Risk Officer and the Board Risk Management Committee maintains a high level overall supervision of managing Operational Risks of the Bank.
48 MATURITY ANALYSIS (a) Maturity Gap Analysis as at 31st December 2013
Bank Group Within 12 After 12 Total as at Within 12 After 12 Total as at Months Months 31.12.2013 Months Months 31.12.2013 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000
Assets Cash & cash equivalents 8,302,576 - 8,302,576 8,340,838 - 8,340,838 Balances with Central Bank of Sri Lanka 15,542,245 224,722 15,766,967 15,542,244 224,723 15,766,967 Placements with banks 1,791,329 - 1,791,329 1,791,329 - 1,791,329 Reverse repurchase agreements 18,043,918 - 18,043,918 18,043,918 - 18,043,918 Derivative financial instruments 230,517 - 230,517 230,517 - 230,517 Financial investments held for trading 46,974,516 - 46,974,516 46,974,516 - 46,974,516 Financial assets held for trading pledged as collaterals 3,496,141 - 3,496,141 3,496,141 - 3,496,141 Loans & receivables to banks 185,607 452,637 638,244 185,607 452,637 638,244 Loans & receivables to other customers 184,047,797 75,353,781 259,401,578 186,897,882 79,011,711 265,909,593 Other loans & receivables 1,079,510 11,071,078 12,150,588 1,079,510 11,071,078 12,150,588 Financial investments available for sale 2,354,493 38,625 2,393,118 2,354,493 38,681 2,393,174 Financial investments held to maturity 1,845,903 - 1,845,903 1,845,903 - 1,845,903 Investment in subsidiaries - 1,059,921 1,059,921 - - - Property, plant & equipment - 5,134,731 5,134,731 - 8,327,019 8,327,019 Intangible assets - 297,359 297,359 - 313,305 313,305 Deferred tax assets - 308,816 308,816 9,457 323,492 332,949 Other assets 449,012 3,756,430 4,205,442 949,039 3,799,874 4,748,913 Total Assets 284,343,564 97,698,100 382,041,664 287,741,394 103,562,520 391,303,914
Liabilities Due to banks 2,211,281 - 2,211,281 2,250,372 - 2,250,372 Derivative financial instruments 638,724 - 638,724 638,724 - 638,724 Securities sold under re-purchase agreements 3,389,684 - 3,389,684 3,055,257 - 3,055,257 Due to other customers 296,414,788 4,134,562 300,549,350 296,247,224 4,134,562 300,381,786 Debt issued & other borrowed funds 18,586,853 20,275,478 38,862,331 21,601,775 23,146,755 44,748,530 Unclaimed dividend 54,981 - 54,981 54,981 - 54,981 Current tax liabilities 575,398 2,116,467 2,691,865 636,871 2,116,467 2,753,338 Deferred tax liabilities - - - - 59,034 59,034 Other provisions - 441,209 441,209 - 457,100 457,100 Other liabilities 2,780,725 2,003,262 4,783,987 3,133,501 2,011,718 5,145,219 Total Liabilities 324,652,434 28,970,978 353,623,412 327,618,705 31,925,636 359,544,341
Maturity Gap (40,308,870) 68,727,122 28,418,252 (39,877,311) 71,636,884 31,759,573
Cumulative Gap (40,308,870) 28,418,252 - (39,877,311) 31,759,573 -
320 (b) Maturity Gap Analysis as at 31st December 2012
Bank Group Within 12 After 12 Total as at Within 12 After 12 Total as at Months Months 31.12.2012 Months Months 31.12.2012 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000
Assets Cash & cash equivalents 10,432,135 - 10,432,135 10,442,259 - 10,442,259 Balances with Central Bank of Sri Lanka 17,011,002 189,790 17,200,792 17,011,002 189,790 17,200,792 Placements with banks 8,788,127 - 8,788,127 8,788,127 - 8,788,127 Reverse repurchase agreements 3,300,817 - 3,300,817 3,300,373 - 3,300,373 Derivative financial instruments 279,022 - 279,022 279,022 - 279,022 Financial investments held for trading 35,181,084 - 35,181,084 35,181,084 - 35,181,084 Financial assets held for trading pledged as collaterals 2,856,321 - 2,856,321 2,856,321 - 2,856,321 Loans & receivables to banks 191,419 624,700 816,119 191,419 624,700 816,119 Loans & receivables to other customers 154,179,332 54,005,037 208,184,369 155,643,797 56,836,244 212,480,041 Other loans & receivables 5,415,759 5,099,997 10,515,756 5,124,476 5,099,998 10,224,474 Financial investments available for sale 1,900,513 23,111 1,923,624 1,900,513 23,167 1,923,680 Financial investments held to maturity - - - 9,765 - 9,765 Investment in subsidiaries - 1,059,921 1,059,921 - - - Property, plant & equipment - 4,559,806 4,559,806 3,551 6,760,821 6,764,372 Intangible assets - 311,758 311,758 - 316,412 316,412 Deferred tax assets - - - 3,778 8,550 12,328 Other assets 2,066,629 1,934,045 4,000,674 2,532,210 1,927,649 4,459,859 Total Assets 241,602,160 67,808,165 309,410,325 243,267,697 71,787,331 315,055,028
Liabilities Due to banks 624,784 - 624,784 668,198 - 668,198 Derivative financial instruments 381,838 - 381,838 381,838 - 381,838 Securities sold under re-purchase agreements 2,757,117 - 2,757,117 2,751,332 - 2,751,332 Due to other customers 240,394,402 2,936,588 243,330,990 240,151,645 2,936,591 243,088,236 Debt issued & other borrowed funds 16,149,912 12,675,117 28,825,029 18,115,813 14,102,201 32,218,014 Unclaimed dividend 49,185 - 49,185 49,185 - 49,185 Current tax liabilities 936,000 2,105,259 3,041,259 967,984 2,105,259 3,073,243 Deferred tax liabilities - 357,474 357,474 - 388,201 388,201 Other provisions - 342,636 342,636 - 355,358 355,358 Other liabilities 273,756 3,781,732 4,055,488 487,247 3,775,072 4,262,319 Total Liabilities 261,566,994 22,198,806 283,765,800 263,573,242 23,662,682 287,235,924
Maturity Gap (19,964,834) 45,609,359 25,644,525 (20,305,545) 48,124,649 27,819,104
Cumulative Gap (19,964,834) 25,644,525 - (20,305,545) 27,819,104 Annual Report 2013 Sampath Bank PLC PLC Bank Sampath 2013 Annual Report
321 INCOME STATEMENT IN US$
Bank Group For the year ended 31st December 2013 2012 2013 2012 Restated* Restated* (US$ 000) (US$ 000) (US$ 000) (US$ 000)
Gross Income 355,836 303,926 367,619 311,224
Interest income 312,975 249,761 323,673 256,263 Less : Interest expense 203,102 158,789 208,226 161,950 Net interest income 109,873 90,972 115,447 94,313
Fee & commission income 22,965 21,964 23,703 22,536 Less : Fee & commission expense 3,513 5,129 3,675 5,289 Net fee & commission income 19,452 16,835 20,029 17,247
Net trading income (533) 49 (533) 49 Other operating income 20,430 32,152 20,776 32,376 Total operating income 149,221 140,008 155,719 143,985
Impairment charge / (reversal) for loans & other losses 26,693 508 27,335 628 Net operating income 122,528 139,500 128,384 143,357
Less: Operating expenses Personnel expenses 33,783 31,409 35,734 32,753 Other operating expenses 47,546 41,043 48,901 41,436 Total operating expenses 81,328 72,451 84,635 74,189
Operating profit before Value Added Tax (VAT) 41,199 67,049 43,748 69,168
Less : Value Added Tax on Financial Services 6,848 9,073 7,121 9,214 Operating profit after Value Added Tax (VAT) 34,351 57,976 36,627 59,954
Less : Income tax expense 8,114 17,001 8,805 17,337 Profit for the year 26,237 40,975 27,822 42,617
Attributable to: Equity holders of the Bank 26,237 40,975 27,801 42,591 Non controlling interest - - 21 26 26,237 40,975 27,822 42,617
Earnings per share: Basic (US$) 0.17 0.26 Earnings per share: Diluted (US$) 0.17 0.25 Dividend per share: Gross (US$) 0.06 0.09 Dividend per share: Net (US$) 0.06 0.09
Exchange rate of US$ was Rs 130.75 as at 31st December 2013 (Rs 127.65 as at 31st December 2012 and Rs 113.90 as at 31st December 2011).
* Certain amounts shown here do not correspond to the Financial Statements - 2012 and reflect adjustments made based on the newly adopted Sri Lanka Accounting Standards: refer Note 6.4
322 STATEMENT OF COMPREHENSIVE INCOME IN US$
Bank Group For the year ended 31st December 2013 2012 2013 2012 Restated* Restated* (US$ 000) (US$ 000) (US$ 000) (US$ 000)
Profit for the year 26,237 40,975 27,822 42,617
Other comprehensive income / (expenses) net of tax Gains & Losses arising on re-measuring available for sale financial assets 3,782 (2,733) 3,782 (2,733) Exchange difference in translation 51 126 51 126 3,833 (2,607) 3,833 (2,607)
Actuarial gains & losses on defined benefit plans (3,523) 96 (3,535) 96 Deferred tax effect on above 986 (27) 986 (27) (2,536) 69 (2,549) 69
Surplus from revaluation of Property, plant & equipment 3,177 (21) 10,548 (21) Deferred tax effect on above (195) - (195) - 2,982 (21) 10,353 (21)
Gains & losses arising from cash flow hedges (1,285) - (1,285) -
Other comprehensive income net of tax 2,995 (2,558) 10,352 (2,558) Total comprehensive income for the year net of tax 29,231 38,417 38,174 40,058
Attributable to: Equity holders of the Bank 29,231 38,417 37,943 40,032 Non controlling interest - - 231 26 29,231 38,417 38,174 40,058
Exchange rate of US$ was Rs 130.75 as at 31st December 2013 (Rs 127.65 as at 31st December 2012 and Rs 113.90 as at 31st December 2011).
* Certain amounts shown here do not correspond to the Financial Statements - 2012 and reflect adjustments made based on the newly adopted Sri Lanka Accounting Standards: refer Note 6.4 Annual Report 2013 Sampath Bank PLC PLC Bank Sampath 2013 Annual Report
323 STATEMENT OF FINANCIAL POSITION IN US$
Bank Group
As at 31st December 31st December 1st January 31st December 31st December 1st January 2013 2012 2012 2013 2012 2012 Restated* Restated* Restated* Restated* (US$ 000) (US$ 000) (US$ 000) (US$ 000) (US$ 000) (US$ 000)
ASSETS Cash & cash equivalents 63,500 81,725 94,262 63,792 81,804 94,352 Balances with Central Bank of Sri Lanka 120,589 134,750 116,173 120,589 134,750 116,173 Placements with banks 13,700 68,845 46,858 13,700 68,845 46,858 Reverse repurchase agreements 138,003 25,858 40,404 138,003 25,855 40,439 Derivative financial instruments 1,763 2,186 1,789 1,763 2,186 1,789 Financial assets held for trading 359,270 275,606 202,397 359,270 275,606 202,397 Financial assets held for trading pledged as collaterals 26,739 22,376 35,143 26,739 22,376 35,143 Loans & receivables to banks 4,881 6,393 3,880 4,881 6,393 3,880 Loans & receivables to other customers 1,983,951 1,630,900 1,489,740 2,033,725 1,664,552 1,509,894 Other loans &receivables 92,930 82,380 50,362 92,930 80,098 50,362 Financial investments available for sale 18,303 15,070 17,781 18,303 15,070 17,781 Financial investments held to maturity 14,118 - 90 14,118 76 170 Investment in Subsidiaries 8,106 8,303 9,262 - - - Property, plant & equipment 39,271 35,721 39,752 63,687 52,992 58,746 Intangible assets 2,274 2,442 591 2,396 2,479 644 Deferred tax asset 2,362 - - 2,546 97 21 Other assets 32,164 31,341 25,862 36,321 34,938 30,018 Total assets 2,921,925 2,423,896 2,174,345 2,992,764 2,468,116 2,208,668
LIABILITIES Due to banks 16,912 4,895 10,322 17,211 5,235 10,322 Derivative financial instruments 4,885 2,991 2,730 4,885 2,991 2,730 Securities sold under re-purchase agreements 25,925 21,599 36,004 23,367 21,554 36,004 Due to other customers 2,298,657 1,906,236 1,713,741 2,297,375 1,904,334 1,712,857 Debt issued and other borrowed funds 297,226 225,813 173,435 342,245 252,393 188,678 Unclaimed dividend 421 385 326 421 385 326 Current tax liabilities 20,588 23,825 16,258 21,058 24,076 16,516 Deferred tax liabilities - 2,800 2,899 452 3,041 3,037 Other provisions 3,374 2,684 2,667 3,496 2,784 2,782 Other liabilities 36,589 31,770 28,574 39,352 33,391 30,758 Total Liabilities 2,704,577 2,222,999 1,986,956 2,749,861 2,250,184 2,004,010
EQUITY Stated capital 34,113 27,921 24,089 34,113 27,921 24,089 Reserves Statutory Reserves 28,097 21,174 12,575 28,833 21,618 12,835 Other Reserves 136,014 131,748 131,637 154,030 142,868 144,099 Retained Profit 19,124 20,054 19,087 25,246 25,045 23,109 Total equity attributable to equity holders of the Bank 217,348 200,897 187,388 242,222 217,453 204,132 Non controlling interest - - - 681 480 526 Total Equity 217,348 200,897 187,388 242,903 217,933 204,658 Total liabilities and equity 2,921,925 2,423,896 2,174,345 2,992,764 2,468,116 2,208,668
Net asset value per share ( US $) 1.30 1.20 1.17 1.44 1.30 1.27 Commitments and contingencies 1,113,321 908,153 1,061,868 1,114,227 909,749 1,061,868
Exchange rate of US$ was Rs 130.75 as at 31st December 2013 (Rs 127.65 as at 31st December 2012 and Rs 113.90 as at 31st December 2011).
* Certain amounts shown here do not correspond to the Financial Statements - 2012 and reflect adjustments made based on the newly adopted Sri Lanka Accounting Standards: refer Note 6.4
324 TEN YEARS AT A GLANCE
Rs Mn SLAS SLFRS Year 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Profit Performance Income 6,953 8,704 12,340 17,400 22,243 25,213 24,333 27,577 38,796 46,526 Interest income 5,412 7,227 9,997 14,950 19,451 20,970 18,477 21,111 31,882 40,921 Interest expenses 2,859 3,913 5,890 9,947 12,801 13,165 9,953 12,168 20,269 26,556 Net interest income 2,553 3,314 4,107 5,003 6,650 7,805 8,525 8,943 11,613 14,366 Exchange income 617 192 646 505 647 774 498 964 2,154 520 Other income 924 1,284 1,697 1,944 2,144 3,469 5,357 4,351 4,104 2,671 Total operating income 4,094 4,790 6,450 7,452 9,441 12,048 14,380 14,572 17,872 19,511 Operating expenses & impairment losses 2,308 3,493 4,183 5,234 6,877 8,072 9,878 9,578 9,313 14,124 Profit before tax 965 1,297 2,268 2,218 2,564 3,976 4,502 4,994 7,401 4,491 Income tax expense 344 476 1,240 1,167 1,150 1,878 1,199 1,606 2,170 1,061 Profit after tax 621 821 1,028 1,052 1,414 2,098 3,303 3,387 5,230 3,430
SLAS SLFRS Year 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Assets Cash & cash equivalents including placements 4,813 5,848 8,814 9,108 6,923 5,868 6,048 16,073 19,220 10,094 Bills of exchange 2,424 2,748 2,572 2,947 2,827 2,985 - - - - Loans and advances 43,548 54,043 67,061 83,695 87,380 92,189 - - - - Lease rentals receivable 1,972 3,304 6,337 6,788 5,448 3,511 - - - - Loans and receivables to banks ------442 816 638 Loans and receivables to other customers ------124,067 169,681 208,184 259,402 Investment in associates & subsidiaries 452 862 1,096 970 970 992 992 1,055 1,060 1,060 Property, plant & equipment 1,183 1,435 1,823 3,080 3,289 3,420 4,278 4,528 4,560 5,135 Total assets 67,483 84,811 109,550 133,196 138,539 156,162 191,314 247,658 309,410 382,042
Liabilities Due to banks & other customers (Deposits Only) 53,305 65,900 81,432 99,419 107,380 126,091 153,310 195,900 243,575 302,429 Refinance borrowings 1,564 1,900 2,774 4,157 4,592 4,819 - - - - Other liabilities evidenced by paper 2,196 2,491 2,734 4,433 4,514 3,102 - - - - Borrowings from banks & debt issued and other borrowed funds ------8,702 20,225 29,206 39,194 Other liabilities including income & deffered tax liabilities 6,501 8,889 15,984 16,618 12,276 10,304 8,311 10,189 10,985 12,000 Total liabilities 63,566 79,180 102,924 124,627 128,762 144,316 170,323 226,314 283,766 353,623
Shareholders’ Fund Stated capital 517 689 1,582 1,582 1,582 1,582 1,786 2,744 3,564 4,460 Reserves 3,401 4,943 5,044 6,987 8,195 10,265 19,204 18,600 22,080 23,958
Investor Information Dividend paid/proposed 88.6 137.8 172.2 206.7 275.6 473.6 1,235.8 1,427.0 1,954.1 1,342.3 Dividend cover (times) 7.0 6.0 6.0 5.1 5.1 4.4 2.7 2.4 2.6 2.6 Net assets per share (Rs) 75.82 81.75 96.17 124.39 141.92 77.52 131.18* 129.00* 152.96* 169.37* Market price per share (Rs)-Max 105.00 114.00 117.25 135.00 120.00 205.00 550.00 307.00 216.00 242.00 Market price per share (Rs)-Min 60.25 61.00 75.25 100.00 65.00 65.00 201.00 191.00 148.50 161.60 Market price as at 31 December (Rs) 62.75 90.00 109.75 120.00 68.00 204.25 271.90 195.00 200.50 171.90
Other Information Exchange rate (US $) 104.60 102.10 107.52 108.65 113.00 114.47 110.95 113.90 127.65 130.75 Number of staff as at 31 December 1,702 1,875 2,039 2,213 2,364 2,388 2,688 3,230 3,455 3,688 Number of branches as at 31 December 71 83 96 105 112 131 171 206 209 212
Ratios Growth of income (%) 15.0 25.2 41.8 41.0 27.8 13.4 (3.5) 9.9 40.7* 19.9* Cost to income ratio (%) 60.1 60.0 58.0 56.8 59.6 57.0 55.8 61.5* 58.2* 59.1* Growth of deposits (%) 25.9 23.6 23.5 22.4 8.1 17.5 19.4 27.8* 24.3* 24.2* Growth of advances (%) 27.3 25.3 26.4 23.0 2.4 3.2 30.3 37.1* 22.9* 24.4* Dividend per share 2.00 2.00 2.50 3.00 4.00 6.25 8.09 9.00 12.00 8.00 Return on assets (after tax) (%) 1.02 1.08 1.06 0.87 1.04 1.42 1.94 1.55* 1.88* 0.99* Return on equity (after tax) (%) 17.02 17.20 16.78 13.84 15.41 19.41 24.59 16.17* 22.26* 12.69* Fixed assets to shareholders’ fund (%) 30.2 25.5 28.9 35.9 33.6 28.9 20.4 21.2 17.8 18.1 Total assets to shareholders’ fund (Times) 17.2 15.1 17.4 15.5 14.2 13.2 9.1 11.6 12.1 13.4
(As specified in Banking Act No. 30 of 1988) Liquid Assets Ratio (%) 23.6 25.3 31.3 29.0 29.5 30.5 26.3 25.0 22.4 27.6
Capital Adequacy Ratios (%) - TIER I 9.14 10.14 8.38 7.58 8.10 10.40 10.71 10.24 11.80* 10.08* - TIER I+II 13.30 13.53 10.82 11.58 11.95 13.45 12.91 11.45 13.61* 14.22* *Based on SLFRSs and LKASs Annual Report 2013 Sampath Bank PLC PLC Bank Sampath 2013 Annual Report
325 VALUE ADDITION
Economic Value Addition
2013 2012 Rs Mn Rs Mn
Shareholders’ funds 27,031 23,494 Provision for Impairment Losses 9,980 7,012 37,011 30,506
Profit attributable to shareholders 3,431 5,231 Impairment charge / (reversal) 3,490 65 Amounts written off (326) (105) 6,595 5,191
Economic cost % (12 months average Treasury Bill rate plus 2% risk premium) 12.6 14 Economic cost 4,675 4,277 Economic value addition 1,920 914
The economic value created by the Bank to its shareholders’ credit during the period is reflected in the above analysis.
Financial Value Addition
2013 % 2012 % Rs Mn Rs Mn
Value Added Income earned by providing Banking services 46,325 38,649 Cost of services 32,464 25,371 Value added by banking services 13,861 13,278 Non-banking income 200 147 Provision for Impairment Losses (3,490) (65) 10,571 13,361
Value allocated To employees 4,417 41.8 4,009 30.0 Salaries, wages and other benefits 4,417 41.8 4,009 30.0
To providers of capital 1,643 15.5 2,164 16.2 Dividend to shareholders 1,342 12.7 1,954 14.6 Interest to Debenture holders 301 2.8 210 1.6
To government 2,519 23.8 3,304 24.7 Income Tax 1,624 15.4 2,146 16.1 Value Added Tax 895 8.5 1,158 8.6
To expansion and growth 1,992 18.8 3,883 29.1 Retained income 2,088 19.8 3,276 24.5 Depreciation 570 5.4 579 4.3 Deferred taxation (666) (6.3) 27 0.3 10,571 100.0 13,361 100.0
326 SOURCES & DISTRIBUTION OF INCOME
For the year ended 31st December 2013 2012 Rs Mn Rs Mn
Sources of Income Interest Income 40,921 31,882 Net Fee & Commission Income 3,003 2,804 Net Trading Income (70) 6 Other Operating Income 2,671 4,104 46,526 38,796
Distribution of Income To Depositors/ Borrowers/Debenture Holders 27,015 20,924 Interest Paid 26,556 20,269 Fee & Commission Paid 459 655
To Employees 4,417 4,009 Personnel Expenses 4,417 4,009
To Suppliers / Depreciation set aside 9,707 5,304
Depreciation & Amortisation 570 579 Impairment Provision 3,490 65 Other Expenses 5,647 4,660
To Government 1,956 3,328 Value Added Tax on Financial Services 895 1,158 Income Tax Expense (including deferred tax) 1,061 2,170
To Shareholders 3,430 5,230 Dividend 1,342 1,954 Retained Profit 2,088 3,276 46,526 38,796 Annual Report 2013 Sampath Bank PLC PLC Bank Sampath 2013 Annual Report
327 INVESTOR RELATIONS
Value Creation for Shareholders
2013 2012 Change % Net Assets per Share (Rs) 169.37 152.96 10.72 Earnings per Share - Group (Rs) 21.67 32.57 (33.46) Dividend per Share (Rs) 8.00 12.00 (33.33) Market Price per Share - Year End (Rs) 171.90 200.50 (14.26)
Sampath Bank Market Dividend Per Share - Earnings and Highest Capitalisation Rank DPS Market Price per Share Rs Rs Rs 550 12 32.6
8 15 9
8 23.0 22.3 16 13 16 21.7
307 216 242 2011 2011 2011 2012 2012 2013 2013 2013 2012 2010 2010 2010 Earnings Per Share (EPS) Group Highest Market Price Per Share (HMPS)
Bank’s Market Capitalisation in Comparison to CSE - As at December 31
2013 2012 2011 2010 2009 Sampath Bank Market Capitalisation (Rs Mn) 28,843 32,628 30,587 41,548 14,070 Increase/ Decrease % in Market Capitalisation (12%) 7% (26%) 195% 200% CSE Market Capitalisation (Rs Mn) 2,459,900 2,167,581 2,213,873 2,210,452 1,092,137 As a % of CSE Market Capitalisation 1.17 % 1.50% 1.38% 1.88% 1.29% Market Capitalisation Rank 16 13 16 15 19
Shareholders' Fund Composition of Share Sampath Bank Return Ownership - 2013 on Equity & Market Rs Mn (No of shareholders) Interest Rates % % 24.6 22.3 28,418 5 25,64 5 5 21,34 4
20,990 12.7 50 16.2 40 13.1 11.1 12.0 2 10.6 5 9. 8.6 8.2 7. 2011 Shares 500 & Less 2011 2012 2012 2013 2013 2010 2010 Shares 501 - 5,000 Average 12 T.B. Rate Shares 5,001 - 10,000 AWFDR More than 10,000 Shares ROE
328 Composition of Share Ownership Resident /Non-Resident of ShareholdersAnalysis Individuals /Institutions Capitalisation Sampath Rs Mn Shares 5,001-10,000 Shares More 10,000 than Shares 501-5,000 Shares 500& Less Individuals /Public Non-Resident Shareholders Resident Shareholders
Institutions
2010 41,548
2011 30,587 BankMark
2012 32,628 et Shareholders 2013 28,843
No of Shareholders Shareholders 790100 177765100 758 0.0 6,3,6 100.00 162,736,665 100.00 17,518 100.00 167,787,605 100.00 17,900 1,007 5.62 148,865,135 88.72 88.72 148,865,135 5.62 1,007 8,916 49.81 1,738,236 1.04 1.04 1,738,236 49.81 8,916 No of 864 4.83 6,197,624 3.69 3.69 6,197,624 4.83 864 7,113 31st December31st 2013 No of 1,0 6,8,0 100.00 167,787,605 17,900 1,3 93266 35.40 59,392,666 17,331 31st December31st 2013 1,0 6,8,0 0.0 1,1 127665 100.00 162,736,665 17,518 100.00 167,787,605 17,900 59 0,9,3 64.60 108,394,939 569 1,9 126955 85.02 142,649,505 17,595 39.74 39.74 31st December31st 2013 35 2,3,0 14.98 25,138,100 305 % (No Owne Composition Mo Shares 5,001 -10,000 Shares 501-5,000 Shar Shares No of 096606.55 10,986,610 Shares re of Shares No of No of es 500&Less th rship -2013 shares) an 10,000Sh 89 1 6 of Share % % ares 4 % Shareholders Shareholders No of Shareholders No of 7,359 No of 8,813 50.31 1,711,831 1,711,831 50.31 8,813 690 3.94 145,537,465 89.43 89.43 145,537,465 3.94 690 66 37 ,6,3 2.75 4,467,234 3.74 656 31st December31st 2012 847 110859 92.79 151,008,529 8,437 1,1 6,3,6 100.00 162,736,665 17,518 901 1,2,3 7.21 11,728,136 9,081 31st December31st 2012 31st December31st 2012 1,1 5,1,0 94.39 153,613,404 17,216 32 91321 5.61 9,123,261 302 42.01 11,020,135 6.77 6.77 11,020,135 42.01 Sampath Share Tr Tr No of % aded Mn 19 Shares
2009 Shares No of Shares No of 68 Shares No of
2010 ading - BankPLC
2011 27
2012 29 % % 1.05 % 329 2013 48
Annual Report 2013 Sampath Bank PLC INVESTOR RELATIONS
Share Trading Market
2013 2012 2011 2010 2009 No of Transactions 1,421,303 1,857,384 4,579,352 3,355,126 1,266,299 No of Shares Traded 9,054,193,822 9,691,236,634 24,543,700,782 18,489,195,424 4,928,999,666 Value of Shares Traded 200,468 213,827 546,255 570,326 142,463 (Rs Mn)
Bank
2013 2012 2011 2010 2009 No of Transactions 19,212 13,473 15,335 20,154 8,578 Number of Shares Traded 47,891,453 28,871,254 26,951,903 67,672,164 19,077,355 As a % of Total Shares in Issue 28.54 17.74 17.18 44.20 27.69 Average Daily Turnover (Rs Mn) 39.75 22.55 30.23 90.78 10.41 Value of Shares Traded (Rs Mn) 9,620.18 5,457.94 7,225.70 20,427.00 2,457.52
Sampath Share Price Fluctuation
2013 2012 2011 2010 2009 Minimum Market Price (Rs) 161.60 148.50 191.00 201.00 65.00 Maximum Price (Rs) 242.00 216.00 307.00 550.00 205.00 Price as at 31st December 171.90 200.50 195.00 271.90 204.25 (Closing Price) (Rs)
Gross Dividend Shareholding of Individuals & Rs Mn Institutions as at 31st December % 1,954.1 8.3 92.8 8 64.6 90.8 1,427.0 1,342.3 1,235.9
35.4
11.7 9.2 7.2 2011 2011 2012 2012 2013 2013 2010 2010
Individuals / Public Institutions
330 Frequency Distribution of Shareholders asat31December 2013 Sampath Bank PLC -Ordinary Shares oal Tota Share Range 0,0-,0,0 80.38 68 100,001-1,000,000 50,001-100,000 ,0,0-vr1 00 8,1,9 178 5 51.7988 86,911,998 0.06 11 1,000,001-Over 30,001-40,000 0015,0 9 .6 1,286,903 0.16 29 40,001-50,000 0013,0 6 09 40832238 6 2.3889 4,008,342 0.92 164 20,001-30,000 10,001-20,000 ,0-00085 .2 ,7,6 .221 01 120,058 0.11 19 3.6222 6,077,566 4.72 845 5,001-10,000 2,001-5,000 ,0-,0 ,1 1.7 ,5,3 .734 .5 60,806 0.25 44 1.8783 3,151,635 12.37 2,214 1,001-2,000 0-,0 ,9 1.5 ,3,5 .165 .8 35,459 0.28 50 1.2136 2,036,354 16.75 2,999 501-1,000 Fluctuation Sampath 100 200 300 400 500 600 Rs 5-0 ,9 2.1 ,6,4 .104 .4 14,853 0.24 43 0.8140 1,365,843 24.01 4,298 251-500 0 1-250
Price December asat31st Minimum Mark Maximum Price 2009
2010 Share Price 17,595 ,1 52 32170.2099 352,137 25.24 4,518 1,762 563 No of 67 57 Shareholders 2011 et 83 1269558.1935 .0 518101.811,0 0.0 6,8,0 100.0000 167,787,605 100.00 17,900 14.9821 25,138,100 1.70 305 85.0179 142,649,505 98.30 Price 98 55295339 402 149,441 0.25 44 3.3095 5,552,915 9.84 03 39361238 2 2.3385 3,923,641 0.32 03 23915134 5 1.3941 2,339,115 0.37 31 78191465 17 4.6559 7,811,941 3.15 2012 % RESIDENT 2013 17,831,115 No of Shares 067 12 10.6272 0.7670 %
57 No of 1 Shareholders 0.09 0.09 0.01 0.01 0.01 0.01 0.03 0.03 0.03 0.03 0.03 0.03 0.07 0.07 .2 5,403 0.32 % NON RESIDENT 905231.291 00 15972163.1258 105,917,211 0.09 16 11.3269 19,005,213 ,1,2 .828 04 2,4,3 13.6134 22,841,637 0.45 80 2.9862 5,010,522 3,6 0.0814 136,662 2,5 .3450 .4 ,3,9 4.7913 8,039,194 3.24 580 0.1354 227,253 147,492 8,0 0.1084 181,803 43,135 No of Shares Sampa Share Tr 10,000 15,000 20,000 25,000 30,000 5,000 0 0.0089 0.0032 .89170 0.0879 0.0362 0.0257 0.0891 0.0716 0.0211 Dec-09 % th Turno Volume Tr ading - BankPLC Dec-10 ,4 1.3 ,7,1 1.2348 2,071,813 17.03 3,049 ve ,5 1.1 ,1,4 1.9146 3,212,441 12.61 2,258 ,7 2.6 5,4 0.2131 357,540 25.56 4,575 ,0 1.9 ,0,5 3.3986 5,702,356 10.09 1,806 ,4 2.5 ,8,9 0.8229 1,380,696 24.25 4,341
6 48 6,197,624 4.83 864 No of r (Rs'000) 0 .7 1,330,038 0.17 30 59 72 Shareholders aded (No'000) Dec-11 04 250981.5024 2,520,918 0.40 09 415842.4768 4,155,834 0.95 03 400332.4199 4,060,303 0.33 % Dec-12 TOTAL %
Dec-13 No of Shares 3.6937 0.7927
331 %
Annual Report 2013 Sampath Bank PLC INVESTOR RELATIONS
SAMPATH BANK PLC (ORDINARY SHARES) Top 20 Shareholders as at 31st December 2013
No Shareholder Name Shareholding Ratio 1 VALLIBEL ONE PLC 25,107,454 14.96 2 EMPLOYEES PROVIDENT FUND 16,745,012 9.98 3 MR Y S H I SILVA 16,738,207 9.98 4 ROSEWOOD (PVT) LIMITED-ACCOUNT NO 3 11,496,342 6.85 HSBC INTL NOM LTD-BBH-MATTHEWS INTERNATIONAL FUNDS- 5 7,050,493 4.20 MATTHEWS ASIA GROWTH FUND 6 NORTHERN TRUST CO S/A CARAVEL FUND ( INTERNATIONAL ) LTD. 4,706,155 2.80 7 EMPLOYEES TRUST FUND BOARD 4,468,022 2.66 HSBC INTL NOM LTD-STATE STREET LUXEMBOURG C/O SSBT -ABN 8 4,375,557 2.61 AMRO MULTI -MANAGER FUNDS 9 VARNERS INTERNATIONAL (PRIVATE) LIMITED 4,067,943 2.42 10 SAMPATH BANK PLC ACCOUNT NO 04 (SAMPATH BANK PENSION FUND) 2,735,145 1.63 11 MR B A MAHIPALA 1,663,598 0.99 NORTHERN TRUST CO S/A-NORTHERN TRUST FIDUCIARY SERVICES 12 1,513,159 0.90 (IRELAND) LTD AS TRUSTEE TO BARING ASEAN FRONTIERS FUND 13 AIA INSURANCE LANKA PLC A/C NO 07 1,437,278 0.86 14 KEYSTONE (PRIVATE) LIMITED 1,388,010 0.83 15 MELLON BANK N.A.-UPS GROUP TRUST 1,359,849 0.81 16 CEYLON GUARDIAN INVESTMENT TRUST PLC A/C NO 01 1,064,987 0.63 17 CEYLON INVESTMENT PLC A/C NO 01 979,243 0.58 18 BNY-CF RUFFER INVESTMENT FUNDS : CF RUFFER PACIFIC FUND 950,000 0.57 19 HSBC INTL NOM LTD-BBH-MATTHEWS EMERGING ASIA FUND 816,155 0.49 20 THE CEYLON GUARDIAN INVESTMENT TRUST PLC A/C NO 02 750,000 0.45 109,412,609 65.21
Total No. of Shares Registered 167,787,605 100.00 Total No. of Shares Unregistered - - Total No. of Shares Issued 167,787,605 100.00
Shares held by Directors 99,568* 0.06 Shares held by Institutions 108,394,939 64.60 Balance held by Public 59,293,098 35.34 Total No. of Shares Issued 167,787,605 100.00
% Shares held by Public - 84.98% % Shares held by Directors and Related Parties - 15.02%
* Mr. Dhammika Perera is the Chairman of Vallibel One PLC as well as Sampath Bank PLC, total shares held by Vallibel One PLC is categorised under institutions.
332 Employee Share OptionPlan 2010 Rec Record of ScripIssues Dividend Details Payment er su Basis 2%of Issued Shares ESOP 2011 Issue Year Subdivision 2010 Issue 2010 Year 1for 120.74 ScripDividend 2010 Year 2005 (Interim) 2004 (Fina 2000/2001 Year 03EO 2% of Issued Shares 2% of Issued Shares ESOP ESOP 2013 2012 1for 33.12 1for 43.06 ScripDividend ScripDividend 1for 43.39 ScripDividend 2012 2011 2010 (Proposed) 2013/2014 2012/2013 2011/2012 2010/2011 2009/2010 2008/2009 2007/2008 2006/2007 2005 (Final) 2004 (Interim) 2003 (Final) 2003 (Interim) 2002/2003 2001/2002 ord of Subdivisions Subdivision Consolidation and l) Issue To tal Dividend Paid
Rs Mn RsMn 1 for 1 11 for 10 1,426.98 1,235.86 1,954.10 1,342.30 206.66 256.65 436.19 155.47 34.30 65.98 58.70 88.57 59.78 59.78 21.99 52.14 32.21 87.14 Basis Basis
Dividend per Share New Noof Shares New Noof New Noof 2,200,436 Shares Shares Rs 76,403,986 3,682,039 4,916,007 524,924 3,521,294 6,888,762 134,933
627,596 12.00 4.00 9.00 8.00 3.00 2.00 2.00 2.00 2.00 8.09 2.50 6.25 1.75 1.75 Stated Capital
Stated Capital Net Pr Stated Capital (Rs Mn) (Rs Mn) (Rs Mn) ,6.4Benefitfor Staff Members 4,460.34 ,4.8Benefitfor Staff Members 2,743.78 ,6.7Benefitfor Staff Members 3,564.17 Rs Mn RsMn ofit after Tax ,5.9Increase Stated Capital 4,457.89 ,2.7Increase Stated Capital 3,523.87 2,701.79 ,8.5Increase Stated Capital 1,786.25 1,786.25 ,8.5Increase inLiquidity 1,581.65 2,098 3,303 5,230 3,430 1,028 3,819 1,052 1,414 402 322 441 621 561 821 Increase Stated Capital Shareholders Gift Benefitto
Reason for Issue Dividend OutRatio Pay Reason for Issue Reason for Issue
20.08% 20.79% 14.60% 37.42% 37.36% 19.64% 14.54% 37.37% 14.58% 39 16.19% 16.15% 18.15% 15.12% 333 .13%
Annual Report 2013 Sampath Bank PLC INVESTOR RELATIONS
DEBENTURE INFORMATION
(a) Market Values
Highest Lowest Period End Debentures - 2007/2012 * 2013 2012 2013 2012 2013 2012 Fixed - 17.5% N/A N/T N/A N/T N/A N/T Fixed - 15.5% N/A N/T N/A N/T N/A N/T Floating rate N/A N/T N/A N/T N/A N/T
N/A - Not Applicable and N/T - Not Traded *Debentures were redeemed on 29th August 2012
Highest Lowest Period End Debentures - 2012/2017 2013 2012 2013 2012 2013 2012 Fixed - 16.5% 107.00 100.00 95.00 100.00 107.00 100.00 Fixed - 15.0% 103.00 100.00 90.00 100.00 100.00 100.00 Floating rate N/T N/T N/T N/T N/T N/T
N/T - Not Traded
Highest Lowest Period End Debentures - 2013/2018 2013 2012 2013 2012 2013 2012 Fixed - 13.4% 101.21 N/A 101.21 N/A 101.21 N/A Fixed - 13.0% N/T N/A N/T N/A N/T N/A
N/A - Not Applicable and N/T - Not Traded
(b) Interest Rates
2013 2012 Debentures - 2007/2012 Coupon Rate Effective Rate Coupon Rate Effective Rate Fixed - 17.5% N/A N/A 17.50% 17.50% Fixed - 15.5% N/A N/A 15.50% 16.65% Floating rate N/A N/A - -
N/A - Not Applicable
2013 2012 Debentures - 2012/2017 Coupon Rate Effective Rate Coupon Rate Effective Rate
Fixed - 16.5% 16.50% 16.50% 16.50% 16.50% Fixed - 15.0% 15.00% 16.08% 15.00% 16.08% Floating rate - - - -
334 (e) N/A -Not Applicable and N/T-Not Traded N/A -Not Applicable and N/T-Not Traded N/A -Not Applicable and N/T-Not Traded (d) Interest Rate of Government Comparable Securities-Gross Rates (c ) N/A -Not Applicable Floating rate to the isequivalent sixmonth Treasury Bill rate (Gross) yearly. half plus 2.0% papayable Debentures -2012/2017 debentures were redeemed on29th 2012. August Floating rate to the isequivalent 3month Treasury Bill rate (Gross) quarterly. plus 1.5%papayable These Debentures -2007/2012 6 Month Treasury Bill 3 Month Treasury Bill Yield to maturityof trade last Quick Asset Ratio(%) Interest Cover (Times) Debt to EquityRatio(%) Current yield Debentures -2013/2018 Current yield Debentures -2012/2017 Debentures -2007/2012 Fixed -13.0% Fixed -13.4% Debentures -2013/2018 Yield to maturityof trade last Current yield Yield to maturityof trade last Ratios Current Yield and Yield to maturity opnRt fetv aeCuo aeEffective Rate Coupon Rate Effective Rate Coupon Rate 1.0 ‘50% ‘15.00% ‘16.50% 0321 0321 032012 2013 2012 2013 2012 2013 0321 0321 032012 2013 2012 2013 2012 2013 1.0 ‘15.00% ‘16.50% N/A N/A 13.98% 15.42% 13.00% 13.40% Fixed Fixed 2013 N/T N/T N/A N/A 13.04% 13.24% 0321 032012 2013 2012 2013 13.40% 13.42% N/A N/A 15.00% 16.01% 13.40% Fixed Fixed Fixed / / N/A N/A N/A / / N/A N/A N/A N/T N/T N/A N/A 9.59% N/A N/A 9.21% 2013 2012 N/A N/A N/A N/T 56 104.7% 95.6% 81 12.4% 28.1% 032012 2013 8934.9 18.9 13.00% Floating Floating Fixed
N/T N/T N/A N/A 12.58% 11.11% 2012 335 N/A N/A
Annual Report 2013 Sampath Bank PLC CAPITAL ADEQUACY
Capital adequacy is the key financial indicator At present, the calculations with regard to capital which illustrates the soundness and the stability of adequacy are prepared as per the “BASEL Accord” a bank by measuring the adequacy of its capital to which is an universally accepted framework meet unexpected losses arising from various risks, put forward by the “Basel Committee on Bank associated with the business of banking, such as Supervision” of the Bank for International Settlements credit risk, market risk, operational risk etc. Hence (BIS). the capital of a bank acts as a “cushion” or “buffer” to the extent of its size, in absorbing potential losses The Basel Committee on Banking Supervision arising from these risks, thereby safeguarding the (BCBS) depositors’ funds, at least to that extent. Hence, The Basel Committee on Banking Supervision is the capital adequacy is an essential requisite for banks to International body for Central Bankers, set up by maintain over and above the stipulated requirements the Central Banks of the Group of Ten (G10), the 10 under the integrated risk management system. wealthiest nations of the world and located in the City of “Basel”, Switzerland. Capital Adequacy Ratios (CARs) are a measure of the amount of a bank’s capital expressed as a percentage The Basel Committee is the primary global standard- of its Risk-Weighted Assets. setter for the prudential regulation of banks and provides a forum for cooperation on banking CAR is defined as: supervisory matters. Its mandate is to strengthen the regulation, supervision and practices of banks worldwide with the purpose of enhancing financial Tier I capital + Tier II capital stability. CAR = Risk Weighted Assets Basel I In 1988, the Basel Committee on Banking Supervision Tier 1 Capital (BCBS) published a set of minimum capital The Tier 1 Capital mainly consists of Stated Capital, requirements for banks. This is also known as the non redeemable and non cumulative preference 1988 Basel Accord, and was enforced by law in the shares and other capital and revenue reserves Group of Ten (G-10) countries in 1992. The Basel after deducting the total value of intangible assets Accord well known as “Basel I“ was followed by Sri and 50% of the investments made in shares and Lankan Banks to compute the Capital Adequacy debentures of banks and financial companies and ratios up to 31st December 2007. unconsolidated banking and financial subsidiary companies. A new set of rules known as Basel II was later developed to replace the Basel I accords by the Basel Tier 11 Capital Committee. Tier 11 Capital includes Revaluation Reserves approved by CBSL, General Loan Loss Provision and Basel II subordinated term debts approved by CBSL after The Basel Committee on Banking Supervision (BCBS) deducting totals of intangible assets, 50% of the published the International Convergence of Capital investments made in shares and debentures of banks Measurement and Capital Standards: a Revised and financial companies and unconsolidated banking Framework (Basel II) in June 2004 and as amended and financial subsidiary companies. in June 2006. This is the basis currently used by Sri Lankan Banks for the computation of the Capital Risk Weighted Assets (RWA) Adequacy Ratio effective from 1st January 2008. Risk weighted assets is a measure of the amount of the bank’s assets, adjusted for risk. RWAs are Bank’s Basel II comprises three mutually reinforcing pillars, assets and off-balance sheet exposures, weighted Pillar 1 - Minimum capital requirements according to the risk. Different classes of assets have Pillar 2 - Supervisory review different risk weights associated with them. Pillar 3 - Market discipline
336 sense, including risksnot captured and accounted by (ICAAP). Pillar IIconcerns bank’s risksinawider Internal Capital Adequacy Assessment Process Review Process (SREP)and the framework for bank’s Pillar 2sets forth the framework for the Supervisory Pillar 2–Supervisory Review Process for Operational Riskin2014. Approach for credit riskand standarised Approach Plans are underway to migrate to Advanced IRB operational risk. as well asBasicIndicator Approach for calculating Approach for calculating credit and market risk the country, adopted the Bank has the Standardized accordance with the current regulatory framework in (Internal Rating-Based),Advanced IRBApproach. In standardizednamely approach, Foundation IRB different ways of varying degrees of sophistication, The credit riskcomponent can becalculated inthree this stage. market risk.Other risksare not considered at fully abank faces:that credit risk,operational risk,and capital calculated for components of three risk major The pillar 1deals with maintenance of regulatory Pillar 1–MinimumCapital Requirement Liquidity Requirements
Minimum Capital and measurement Liquidity internal approach standard and/or Risk through and Operational Cr Calculation of edit, Market Pillar 1 Basel III – Financial StabilityBasel III–Financial
Supervisory Review Management) and Risk banks (ICAAP compliance) and review of internal systems (evaluation of fr Supervisory fr Regulatory amework for amework Pillar 2 implementation. time targets set by CBSLwith regard to ICAAP sofarSampath successfully met Bank has the scenarios. adverseon possible movements indifferent market Stress Tests whichare usedto measure the impact business and strategic risketc). covers Italso the Pillar 1.(e.g.: Credit concentration risk,Liquidity testing and market liquidityrisk. regulatory standard onbank capital adequacy, stress Committee voluntary in2010 whichisaglobal, Basel IIIisthe Third BaselAccord issued by Basel Basel III determining their capital needs. determining risk,givingthem greater discretion in allowed tomore rely oninternal heavily methods for the advanced approaches of Basel11,banks are importantis seenasparticularly becauseunder calculations and the procedures involved. This Pillar a better understanding of bank’s capital adequacy market discipline by givingexternal stakeholders requirements. The objective isto raise the level of Pillar 3presents anumber of disclosure Pillar 3–Market Discipline
Market Discipline participants) banks for market comparability of risk positionand (transparency of of bank r Disclosure equirements Pillar 3 337
Annual Report 2013 Sampath Bank PLC CAPITAL ADEQUACY
Basel III is supposed to strengthen bank capital Net Stable Funding Ratio (NSFR) requirements by increasing bank liquidity and The NSFR is defined as the amount of available decreasing bank leverage. It also demands banks stable funding relative to the amount of required to maintain much higher capital buffers compared stable funding. This ratio should be equal to at least to traditional capital adequacy levels. The main 100% on an on-going basis. “Available stable funding” objective of BASEL III is to minimize the possibility is defined as the portion of capital and liabilities and severity of occurrence of financial crisis. expected to be reliable over the time horizon considered by the NSFR, which extends to one year. To achieve these objectives BASEL III has introduced new stringent rules covering key areas such as Global Systematically Important Financial Capital, liquidity and risk weighted assets of the Bank. Institutions (G-SIFIs) One of the key elements of Basel III is the requirement for “Global Systematically Important Increasing the Quantity and the Quality of Financial Institutions” (G-SIFIs) to have a higher loss “Capital” absorbing capacity to prevent the risks that pose Basel III has tightened the definition of “capital”, to the financial systems as a whole. The additional thus increasing the quality of capital buffers held buffer for G-SIFIs would be met with a progressive by banks. In terms of “quantity”, Basel III greatly common equity Tier I capital requirement, ranging focuses on common equity and the minimum to be from 1% to 2.5%, depending on the systemic raised up to 4.5% of risk weighted assets (RWA) after importance of each bank. deductions. Capital Conversion Buffer comprising of common equity of 2.5% of RWA expects to bring the The Central Bank of Sri Lanka is expecting to issue total common equity to 7% from the present level of directions for Liquidity / Capital Standards under 2%. Basel 111 from 1st quarter 2014.
Increase in Risk Coverage At present, the Core Capital Ratio as well as the Base Basel III framework targets at capturing the types Capital Ratio maintained by the Bank comfortably of risk that were not properly covered by Basel II. It exceeds the regulatory requirements set by CBSL. extends the risk coverage to capture counterparty exposures as well.
Controlling the leverage of assets through “Leverage Ratio” The expectation is that the capital of the bank should at least be 3% of the total assets including on and off balance sheet assets, before risk weighting.
Improving Liquidity Standards The excessive Liquidity risk arising from tenor mismatches between assets and liabilities may ultimately lead to a financial crisis unless it has been properly addressed. Basel III intends addressing this area by introducing two liquidity ratios.
Liquidity Coverage Ratio (LCR) The Liquidity Coverage Ratio (LCR) requires the Bank to have sufficient high quality liquid assets to withstand a 30 day stressed potential liquidity crisis. The banks may need to hold low yielding assets such as government securities to meet the LCR.
338 Other Assets Original Maturity-less than oneyear than Maturity-less Original Foreign Exchange Contracts Undrawn Term Loans Other Commitments with an Original Credit Card Lines Undrawn Overdraft Facilities/Unused atany cancelled time upto oneyear or whichcan beunconditionally Other Commitments with maturityof an Original Trade Related Acceptances Documentary Letters of Credit Shipping Guarantees Contingencies Short-Term Self-LiquidatingTrade-Related Others Performance Bonds, Bid Bonds &Warranties Transaction-related Contingencies General Guarantees of Indebtedness Direct Credit Substitutes Cash /Gold Against Loans DueResidential MortgageLoansPast Risk DueLoansPast Claims Secured by Residential Property Assets Retail claims Risk Claims onCorporates Claims Institutions onFinancial Assets Claims onBanks Exposures Claims Sector onPublic Entitie Risk Central Bank of SriLanka Claims onCentral Government & Assets Risk Assets Risk Weighted Assets For Credit Risk Computation of Capital Adequacy Ratios-Basel11 Off-balance sheet Items
Maturity of over oneyear
s 3849 ,3. 8096 ,1. 1,3. 6843 ,5. 4,639.4 7,058.6 6,844.3 12,238.8 5,610.4 8,029.6 7,637.4 13,824.9
6. 245 2. 267 6. 245 2. 206.7 222.1 254.5 269.3 206.7 222.1 254.5 269.3 00 ,1. 3065 ,2. 2413 ,1. 3065 ,2. 2,461.3 4,922.7 3,006.5 6,013.0 2,461.3 4,922.7 3,006.5 6,013.0 50.0 Conversion Factor (%) 5,8. 20039 8,6. 14334 6,7. 21403 9,8. 160,976.3 295,685.5 211,400.3 363,174.9 154,363.4 289,062.4 200,043.9 352,286.6 4,7. 13360 0,0. 11073 5,9. 19506 0,0. 105,367.4 107,103.4 149,590.6 153,696.4 101,067.3 102,803.2 143,366.0 147,471.8 57. 2362 ,5. 2263 ,2. 2362 ,5. 2263 1,628.6 2,246.3 1,752.1 2,336.2 1,628.6 2,246.3 1,752.1 2,336.2 75/72.5 7157 7868 9278 9408 7157 7868 9278 29,420.8 39,227.8 27,866.8 37,155.7 29,420.8 39,227.8 27,866.8 37,155.7 1659 05 0142 38 1661 05 0144 33.8 80,184.4 50.5 81,626.1 33.8 80,184.2 50.5 81,625.9 4042 ,5. 9341 ,7. 1,7. 9015 ,5. 6,572.4 9,354.1 9,051.5 14,074.2 6,572.4 9,354.1 9,051.5 14,074.2 4183 2,1. - 4529 2,2. - 27,224.8 - 44,502.9 - 27,215.1 - 44,178.3 ,4. 1601 4467 ,4. 3874 ,2. 1,5. 3,948.7 14,457.0 1,620.1 3,847.4 3,948.6 14,456.7 1,620.1 3,847.3 ,5. 7062 ,7. 6027 2751 2751 ,3. 9,336.0 9,336.0 12,725.1 12,725.1 6,072.7 6,072.7 7,056.2 7,056.2 ,7. 2884 5. 1321 ,3. 3144 7. 1,342.5 972.9 3,124.4 2,330.7 1,322.1 952.5 2,868.4 2,074.7 Credit 0. 1,5. 1,5. 1,1. 1,1. 1,5. 1,5. 1,1. 11,818.1 11,818.1 14,655.2 14,655.2 11,818.1 11,818.1 14,655.2 14,655.2 100.0 sM R n sM R n sM R n sM RsMn RsMn RsMn RsMn RsMn RsMn RsMn Rs Mn 0. 225 4. 186 0. 225 4. 108.6 544.4 272.5 708.3 108.6 544.4 272.5 708.3 00 ,7. 353 ,0. 205 ,7. 353 ,0. 200.5 1,002.3 355.3 1,776.6 200.5 1,002.3 355.3 1,776.6 20.0 00 ,3. 1566 ,9. 766 ,3. 1566 ,9. 848.5 1,696.9 1,516.6 3,033.3 746.6 1,493.3 1,516.6 3,033.3 50.0 00 2044 ,0. 1,1. 2221 2044 ,0. 1,1. 2,262.1 11,310.4 2,402.9 12,014.4 2,262.1 11,310.4 2,402.9 12,014.4 20.0 00 ,7. 1544 ,0. 1216 ,7. 1544 ,0. 1,261.6 6,308.2 1,574.4 7,871.8 1,261.6 6,308.2 1,574.4 7,871.8 20.0 . 34,787.8 0.0 . 6,1. 1242 7760 5. 6,1. 1242 7760 955.7 47,786.0 1,224.2 61,211.6 955.7 47,786.0 1,224.2 61,211.6 2.0 34,787.8 ,3. 1566 ,9. 766 ,3. 1566 ,9. 848.5 1,696.9 1,516.6 3,033.3 746.6 1,493.3 1,516.6 3,033.3 ,4. 4786 ,6. 4099 ,4. 4786 ,6. 4,089.9 7,169.0 4,758.6 8,349.2 4,089.9 7,169.0 4,758.6 8,349.2 1628 ,3. 1,2. 3742 1628 ,3. 1,2. 3,724.2 18,620.9 4,332.6 21,662.8 3,724.2 18,620.9 4,332.6 21,662.8 1216 ,2. 4,8. 957 1216 ,2. 4,8. 955.7 47,786.0 1,224.2 61,211.6 955.7 47,786.0 1,224.2 61,211.6 4652 4652 1881 1881 4652 4652 1881 11,818.1 11,818.1 14,655.2 14,655.2 11,818.1 11,818.1 14,655.2 14,655.2
4,9. 2,8. 12741 1345 4,9. 2,8. 12977 21,436.4 112,937.7 26,487.2 143,699.9 21,334.5 112,734.1 26,487.2 143,699.9 Off-balance Assets Weighted 2013 sheet items amount of Principal Rs Mn
2013 sheet items Bank equivalent equivalent Bank balance of Off- Credit Rs Mn 25,846.8 - 25,846.8 - sheet items Principal balance amount Weighted of Off- Rs Mn Assets 2012 2012 sheet items equivalent balance of Off- Credit Rs Mn 34,787.8 - 34,787.8 - sheet items Principal balance amount of Off- Rs Mn Weighted 2013 Assets sheet items equivalent 2013 balance of Off- Credit Rs Mn Group Group 25,846.8 - 25,846.8 - sheet items Principal balance amount of Off- Rs Mn Weighted 2012 sheet items equivalent Assets balance 339 of Off- Credit Rs Mn 2012 - -
Annual Report 2013 Sampath Bank PLC CAPITAL ADEQUACY
Bank Group Risk-weighted amount for Market Risk 2013 2012 2013 2012 Rs Mn Rs Mn Rs Mn Rs Mn
Interest Rate Risk 61.88 194.95 61.88 194.95 General Risk 61.88 194.95 61.88 194.95 Specific Risk - - - - Equity Risk 43.06 56.42 43.06 56.42 General Risk 26.20 32.53 26.20 32.53 Specific Risk 16.86 23.89 16.86 23.89 Foreign Exchange and Gold Risk 71.88 43.05 71.88 43.05 Total Capital Charge for Market Risk 176.82 294.42 176.82 294.42 Total Risk-weighted amount for Market Risk (Total Capital Charge X 10) 1,768.23 2,944.13 1,768.23 2,944.13
Bank Group Risk-weighted Amount for Operational Risk 2013 2012 2013 2012 Rs Mn Rs Mn Rs Mn Rs Mn
Average net Income for last three financial years 17,317.3 15,607.1 17,955.2 16,095.0 Deductions: - - - - Realised profits from the sale of securities (average of last three financial years) 286.8 937.3 926.8 926.8 Extraordinary / irregular item of income (average of last three financial years) 8.3 10.0 19.9 19.9 Gross Income 17,022.2 14,659.8 17,008.5 15,148.3 Total Capital Charge for Operational Risk (Gross Income X 15%) 2,553.3 2,199.0 2,551.3 2,272.2 Total Risk-weighted amount for Operational risk (Total Capital Charge for Operational Risk X 10) 25,533.3 21,989.8 25,512.6 22,722.3
Computation of Total Risk weighted amount Risk-weighted assets for credit risk 200,043.9 154,363.4 211,400.3 160,976.3 Risk-weighted amounts for market risk 1,768.2 2,944.1 1,768.2 2,944.1 Risk-weighted amounts for operational risk 25,533.3 21,989.8 25,512.6 22,722.3 Total Risk-Weighted Amount 227,345.4 179,297.3 238,681.1 186,642.7
340 Computation of Capital Base
Total Capital Ratio(%) Core Capital (Tier 1)Ratio(%) Total Risk-weighted Assets Capital Base x100 Total Capital Ratio(Minimum-10%) Total Risk-weighted Assets Core Capital (Tier 1)x100 Core Capital Ratio(Minimum-5%) Non controlling interest General and Other Reserves RetainedPublished Profits Statutory Reserve Fund Stated Capital Core Capital (Tier 1) General Provision should not exceed 1.25%of RiskWeighted Assets. (iii) The total of Tier should 11Supplementary Elements not exceed amaximum of 100%of Tier 1Elements. (ii) Approved subordinated Term Debtislimited to 50%of Total Tier 1Capital. (i) LIMITS : Base Capital (Tier I+Tier II) TierEligible IICapital institutions financial 50% investments inthe capital of other banks and subsidiarycompanies financial 50% of investments inunconsolidated banking and Deductions-Tier II Approved Subordinated Term Debt General Provisions Revaluation Reserves (asapproved by CBSL) Supplementary Capital (Tier II) Total Core Capital institutions financial 50% investments inthe capital of other banks and subsidiarycompanies financial 50% of investments inunconsolidated banking and Other Assets Intangible Net Deferred Tax Assets Goodwill Deductions/Adjustments-Tier 1 2307x10 4415x10 3737x10 25,671.7x100 33,743.7x100 24,401.5x100 32,320.7 x100 22,158.6x100 24,070.3x100 21,150.9x100 22,909.8 x100 2,4. 19273 3,8. 186,642.7 238,681.1 186,642.7 179,297.3 238,681.1 227,345.4 179,297.3 227,345.4 14.22 10.08 2013 3910 3858 3910 13,895.8 13,971.0 13,895.8 13,971.0 2307 4415 3737 25,671.7 33,743.7 24,401.5 32,320.7 22,158.6 24,070.3 21,150.9 22,909.8 ,8. 2062 ,3. 2,653.4 2,759.6 3,564.2 2,937.5 3,769.9 4,460.3 2,016.2 2,702.9 3,564.2 2,184.8 3,673.6 4,460.3 ,1. 3206 ,7. 3,513.1 9,673.4 3,250.6 2,868.7 9,410.9 7,694.0 2,868.7 7,694.0 2,064.0 Rs Mn 511.2 262.5 426.6 511.2 262.5 297.4 308.8 2013 Bank - - Bank 13.61 11.80 2012 Rs Mn 454.7 694.0 262.5 2,064.0 694.0 405.1 454.7 262.5 311.0 2012 - - - 14.14 10.08 2013 sM RsMn Rs Mn 1. 454.7 511.2 405.1 426.6 454.7 511.2 315.6 313.3 332.9 2013 89.0 Group - - - Group 13.75 11.87 2012 2012 61.2 341 5.3 - - -
Annual Report 2013 Sampath Bank PLC GLOSSARY OF FINANCIAL AND BANKING TERMS
A Available For Sale (AFS) Financial Assets Acceptances Non derivative financial assets that are designated The signature on a Bill of Exchange indicates that the as available for sale or are not classified as (a) loans person on whom it is drawn accepts the conditions and receivables, (b) held-to-maturity investments or of the bill. In other words a bill of exchange that has (c) financial assets at fair value through profit or loss. been accepted.
Accounting Policies B The specific principles, bases, conventions, rules Bills of Collection and practices adopted by an entity in preparing and A bill of exchange drawn by an exporter usually at presenting Financial Statements. a term, on an importer overseas and brought by the exporter to his Bank with a request to collect the Accrual Basis proceeds. Recognition of the effects of transactions and other events when they occur without waiting for receipt or BIS Surplus payment of cash or its equivalents. The total Capital Adequacy in excess of the minimum stipulated by Basel International Standards and as Amortisation modified to suit local requirements by the Central The systematic allocation of the depreciable amount Bank of Sri Lanka. of an intangible asset over its useful life.
Amortised Cost C The amount at which the financial asset of financial Capital Adequacy Ratio liability is measured at initial recognition minus The percentage of risk-adjusted assets supported principal repayments, plus or minus the cumulative by capital as defined under the framework of risk- amortisation using the effective interest rate method based capital standards developed by the Bank for of any difference between that initial amount and the International Settlement (BIS) and as modified to suit maturity amount, and minus any reduction (directly local requirements by the Central Bank of Sri Lanka. or through the use of an allowance account) for impairment or uncollectability. Capital Gain (Capital Profit) The gain on the disposal of an asset calculated by Associate Company deducting the cost of the asset from the proceeds An associate is an entity in which the investor has received on its disposal. significant influence and which is neither a subsidiary nor an interest in a joint venture. Capital Reserves Capital Reserves consist of revaluation reserves Asset and Liability Committee (ALCO) arising from revaluation of properties owned by A risk-management committee in a bank that the Bank and Reserve Fund set aside for specific generally comprises the senior-management levels purposes defined under the Banking Act, No 30 of of the institution. The ALCO’s primary goal is to 1988 and shall not be reduced or impaired without evaluate, monitor and approve practices relating to the approval of the Monetary Board. risk due to imbalances in the capital structure. Among the factors considered are liquidity risk, interest rate Cash Equivalents risk, operational risk and external events that may Short-term highly liquid investments that are readily affect the bank’s forecast and strategic balance-sheet convertible to known amounts of cash and which allocations. subject to an insignificant risk of changes in value.
342 country. facilities to the customers of abank inanother A bank inaforeign country offers that banking Correspondent Bank actions and accountability to owners and others. direction of entity, the supervision of executive power isexercised over and the management governed. Itisconcerned with the inwhich way The process by whichcorporate entitiesare Corporate Governance uncertain future events. occurrence or non-occurrence of oneor more which, gainor loss, will onthe beconfirmed only A condition or situation,the ultimate outcome of Contingencies clients asatthe Reporting date. Credit facilities approved butnot yet utilized by the Commitments reflecting prevailing market interest rates. issued atadiscount,liabilities. The debt isusually receivable, inventories and meeting short-term a corporation, for the typically financing of accounts An unsecured, short-term debt instrument issued by Commercial Paper (‘CP’) assessment. yet beenidentified onloans subjectto individual losses which have beenincurred buthave not considered significant and to cover individually for homogeneous groups of are loans that not Impairment assessment on acollectivebasis Assessed Impairment Collectively portfolio basis. personal, loans etc) vehicle are assessed ona within the Consumer Banking business (Housing, identified atthe reporting date. Typically assets beenincurred not yet has losses buthas that been considered significant and to cover individually for homogeneous groups of are loans that not Impairment assessment on acollectivebasis Also known asportfolio impairmentprovisions. Assessed Loan ImpairmentProvisionsCollectively transaction and (ii)could affect profit or loss. rate forecaston variable probable debt) or ahighly liability (such or asall somefuture interest payments particular riskassociated with arecognised asset or variability incashflows (i)isattributable that to a A cashflow hedgeisaof the exposure to the Cash Flow Hedge recorded asliabilities. depositedMoney by account holders. Suchfunds are Customer Deposits settlement. same amount of the samecurrency for forward currency for spot settlement of and the the sale The simultaneous of purchase an amount of a Currency SWAPs inforeignchanges exchange rates. of instrument afinancial will fluctuate becauseof The the riskthat fair value or future cash flows Currency Risk such ascollateral, guarantee and credit protection. an exposure by application of credit riskmitigants A technique to reduce the credit riskassociated with Credit RiskMitigation securities. to customers and other banks and investment debt from the loansand and arisesprincipally advances instrument fails to meet itscontractual obligations, if acustomer or counter partyto afinancial Credit riskisthe riskof loss financial to the Bank Credit Risk by an independent rating agency. obligations or likelihood of not defaulting carriedout An evaluation of acorporate ability to repay its Credit Rating for other reasons risk). (political debtors, either for reasons financial (transfer risk)or obligations or obstructs the remittance of funds by The aforeign riskthat government will not fulfill its Country Risk Operating expenses asapercentage of net income. toCost Income Ratio an increase inproduction costs. A continuous increase inaverage price levels dueto Inflation Cost-Push date of acquisition. net profits of the investee arisingsubsequentto the the investor receives distributions from accumulated income from to the the investment extent only that is recorded atcost.The Income Statement reflects A method of accounting whereby the investment MethodCost 343
Annual Report 2013 Sampath Bank PLC GLOSSARY OF FINANCIAL AND BANKING TERMS
D Documentary Letters of Credit (LCs) Dealing Securities Written undertakings by a bank on behalf of its These are marketable securities acquired and held customers, authorising a third party to draw on the with the intention to resale over a short period of Bank up to a stipulated amount under specific terms time. and conditions. Such undertakings are established for the purpose of facilitating international trade. Deferred Tax Sum set aside in the Financial Statements that may become payable/ receivable in a financial year other E than the current financial year. It arises because Earnings Per Share (EPS) of temporary differences between tax rules and The profit attributable to each ordinary share in the accounting conventions. Bank, based on the profit for the period after tax and after deducting minority interest and preference Delinquency share Dividend. A debt or other financial obligation is considered to be in a state of delinquency when payments are Economic Value Added (EVA) overdue. Loans and advances are considered to be A measure of productivity which takes into delinquent when consecutive payments are missed. consideration cost of total invested equity. Also known as ‘Arrears’. Effective Interest Rate (EIR) Depreciation Rate that exactly discounts estimated future cash The systematic allocation of the depreciable amount payments or receipts through the expected life of the of an asset over its useful life. financial instruments or when appropriate a shorter period to the net carrying amount of the financial Derecognition asset or financial liability. Removal of a previously recognised financial asset or financial liability from an entity’s statement of Effective Tax Rate (ETR) financial position. Provision for taxation excluding deferred tax divided by the profit before taxation. Derivatives A derivative is a financial instrument or other ESOP (Employee Share Ownership Plan) contract, the value of which changes in response to A method of giving employees shares in the business some underlying variable (e.g., an interest rate), that for which they work. has an initial net investment smaller than would be required for other instruments that have a similar Equity Instrument response to the variable, and that will be settled at a An equity instrument is any contract that evidences future date. a residual interest in the assets of an entity after deducting all of its liabilities. Discount Rate A rate used to place a current value on future cash Equity Method flows. It is needed to reflect the fact that money has The equity method is a method of accounting a time value. whereby the investment is initially recognised at cost and adjusted thereafter for the post-acquisition Dividend Cover changes in the investor’s share of net assets of the Profit after tax divided by gross Dividend. This ratio investee. The profit or loss of the investor includes the measures the number of times dividend is covered by investor’s share of the profit or loss of the investee. the current year’s distributable profits. Equity Risk Dividend Yield The risk arising from positions, either long or short, Dividend earned per share as a percentage of its in equities or equity-based instruments, which create market value. exposure to a change in the market price of the equities or equity instruments.
344 debt instrument. accordance with the original or modifiedterms of a specified debtor fails to whenduein make payment reimburse the holder for aloss itincursbecausea requires the issuer to make to specified payments GuaranteeA Financial Contract isacontract that GuaranteeFinancial Contract entity as‘at fair value through profit or loss’. trading or recognition uponinitial designated by the assetFinancial or liability isheldfor financial that through Profit or Loss AssetFinancial or Liability Financial atFair Value or another asset financial from another entity. another entityor acontractual rightto receive cash Any asset iscash,an equityinstrument that of AssetFinancial whatever inbeingleased. benefits and risksattaching to ownership of acquires inwhichthe lessee theA lease all financial Finance Lease valuation model. areparticipant that not incorporated within the factors would that beconsidered by amarket technique (level 2and level 3)to include additional instrument whichisdetermined usingavaluation toAn adjustment the fair value of afinancial Fair Value Adjustment transaction. and aknowledgeable, willing inan arm’s seller length exchanged between aknowledgeable, willing buyer Fair Value isthe amount for whichan asset could be Fair Value F risk of loss. financial A claim,contingent claimor positionwhichcarriesa Exposure Given Default (apercentage). by the Exposure atDefault (an amount) and Loss themultiplying Probability of Default (apercentage) and downturn loss estimates. ELiscalculated by onan exposurebe lost usinga12month timehorizon A regulatory calculation of the amount expected to Expected Loss (EL) which give riseto contingencies and commitments. liabilities inthe Statements of Position, Financial but Transactions are that not recognised asassets or Events after the Reporting Period specified price onaspecified future date or dates. exchange of aspecified quantity of resources ata A FirmCommitment isabinding agreement for the Firm Commitment foreign currencies. Foreign exchange income arisesfrom also trading in force atinception or onthe previous reporting date. prevailing rates whichdiffer from those rates in into SriLankan Rupees onthe reporting date at denominated inforeign currencies are translated The realised gainrecorded whenassets or liabilities Foreign Exchange Income agreed upontoday. currency for another atafuture date atarate Agreement between two partiesto exchange one Foreign Exchange Contract assetfinancial to another entity. A contractual obligationto deliver cashor another LiabilityFinancial or equityinstrument of another entity. asseta financial of oneentityand liability afinancial InstrumentFinancial isany contract gives that riseto InstrumentFinancial Foreign exchange rate, commodity prices, etc) of unfavourable price movements (Interest Rate, with the aimof providing cover the risk against A strategy under whichtransactions are effected Hedging H fulfil the contractual obligations. the guarantor will ifthe guarantee beliable fails to is not apartyto acontract between two others, that A promise made by athird party(Guarantor), who Guarantees A group isaparent and itssubsidiaries. all Group including the tax withheld. The portion of profits distributed to the shareholders Gross Dividend determined onan individual facility basis. exposures where credit losses cannot yet be advances for anticipated losses onaggregate General provisions are established for loans and General Provisions G 345
Annual Report 2013 Sampath Bank PLC GLOSSARY OF FINANCIAL AND BANKING TERMS
Held To Maturity (HTM) Financial Assets Interest Spread Held-to-maturity investments are non-derivative This represents the difference between the average financial assets with fixed or determinable payments interest rate earned and the average interest rate and a fixed maturity that an entity has the positive paid on funds. intention and ability to hold to maturity. Investment Properties Investment property is property (land or a building - I or part of a building – or both) held (by the owner or Impairment by the lessee under a finance lease) to earn rentals or This occurs when recoverable amount of an asset is for capital appreciation or both, rather than for use or less than its carrying amount. sale.
Impaired Loans Investment Securities Loans where the Group does not expect to collect all Securities acquired and held for yield or capital the contractual cash flows or expects to collect them growth purposes and are usually held to maturity. later than they are contractually due.
Impairment Allowances J Management’s best estimate of losses incurred in the Joint Control loan portfolios at the reporting date. Joint control is the contractually agreed sharing of the control over an economic activity, and exists only Individually Assessed Impairment when the strategic financial and operating decisions Exposure to loss is assessed on all individually relating to the activity require the unanimous consent significant accounts and all other accounts that do of the parties sharing control. not qualify for collective assessment. Joint Venture Intangible Asset A joint venture is a contractual arrangement whereby An identifiable non-monetary asset without physical two or more parties undertake an economic activity substance held for use in the production / supply that is subject to joint control. of goods / services or for rental to others or for administrative purposes. K Interest Cover Key Management Personnel A ratio showing the number of times interest charges Key Management Personnel are those persons having is covered by earnings before interest and tax. authority and responsibility for planning, directing and controlling the activities of the entity, directly or Interest in Suspense indirectly, including any Director (whether Executive Interest suspended on non-performing loans and or otherwise) of that entity. advances.
Interest Margin L Net interest income expressed as a percentage of Level 1 – Quoted Market Price interest earning assets. Financial instruments with quoted prices for identical instruments in active markets. Interest Rate Risk The risk that the fair value or future cash flows of a Level 2 – Valuation Technique Using Observable financial instrument will fluctuate because of changes Inputs in market interest rates. Financial instruments with quoted prices for similar instruments in active markets or quoted prices for Interest Rate SWAP identical or similar instruments in inactive markets Arrangement whereby one party exchanges one set and financial instruments valued using models where of interest payments for another. all significant inputs are observable.
346 Statements. could influence the decisions of users of Financial event, the omission or misstatement of which The relative significance of atransaction or an Materiality of instruments. financial affect the Bank’s income or the value of itsholdings inthe obligor’s/issuer’schanges credit standing) will exchange rates and credit spreads (not relating to prices, suchasinterest rates, equityprices, foreign Market inmarket riskisthechanges riskthat Market Risk date. number of issued shares by itsmarket value asata The value of acompany obtained by the multiplying Market Capitalisation M upon default of counterparty. exposure to the amount outstanding atdefault (EAD) The estimated ratio (percentage) of the loss onan Loss Given Default (‘LGD’) short term trade onnormal credit payables terms. areLoans liabilities, financial payable other than Loans Payable recognition.initial fair value through profit or on loss or available sale or intheimmediately nearterm and designated as an active market other those than intends to sell determinable are that not payments quoted in Non derivative assets financial with fixed or Loans and Receivables uncollectible. result of or suchfacilities wholly becoming partly loans, advances and other credit facilities asa Amounts losses on set possible aside against Loan Losses and Provisions liabilities in meeting obligationsassociated with financial The an entitywill riskthat encounter difficulty Liquidity Risk Bonds. other banks, Bills of Exchange and Treasury Bills and be converted to cashreadily, suchasdeposits with Assets are that heldincashor inaform can that Liquid Assets unobservable. techniques where oneor more significant inputsare instrumentsFinancial valued usingvaluation Unobservable Inputs Level 3–Valuation Technique With Significant not attributable, or directly indirectly to aparent. Non controlling interest isthe equityinasubsidiary Non Controlling Interest Interest inSuspense). Suspense) divided by total advances portfolio (net of Total non-performing advances (net of Interest in NPA Ratio Suspense). total Non-Performing Advances (net of Interest in Cumulative loan loss provision asapercentage of Non-Performing Advances Cover (NPA Cover) inarrears. is90days payment All loans are classified asnonperforming whena Non-Performing Advances (NPA) bank borrowings. liabilities suchasdeposits refinance funds and inter- such asloans and on itpays securitiesand what The difference between abank earnsonassets what Net-Interest Income (NII) ordinary shares inissue. Shareholders’ Funds divided by the number of Net Asset Value Per Share N subsidiaries. A parent oneor more has isan entitythat Parent P the market. similaraffecting all instruments financial traded in individual instrument financial or itsissuer, or factors arethose changes causedby factors specific to the from interest rate riskor currency risk),whether inmarketchanges prices (other those than arising of instrument afinancial will fluctuate becauseof The the riskthat fair value or future cash flows Other Price Risk errors, system failures, external events, etc. fraud, negligence, oversight, human error, process Operational riskrefers to the losses arisingfrom Operational Risk base. expressed asapercentage of regulatory capital Total net non-performing loans and advances Open Credit Exposure Ratio O 347
Annual Report 2013 Sampath Bank PLC GLOSSARY OF FINANCIAL AND BANKING TERMS
Past Due Return On Average Equity (ROE) A financial asset is past due when a counterparty has Net income, less preferred share Dividend if any, failed to make a payment when contractually due. expressed as a percentage of average ordinary shareholders’ equity. Price Earnings Ratio (P/E Ratio) The current market price of the share is divided by Revaluation Reserve the earnings per share of the Bank. Part of the shareholders’ equity that arises from changes in the current value of property, plant and Probability of Default (‘PD’) equipment. The probability that an obligor will default within a one-year time horizon. Revenue Reserves Reserves set aside for future distribution and Provision for Bad and Doubtful Debts investment. A charge to income statement which is added to the allowance for loan losses. Specific provisions Reverse Repurchase Agreement are established to reduce the book value of specific Transaction involving the purchase of government assets (primarily loans) to estimated realisable securities by a bank or dealer and resale back to the values. seller at a given price on a specific future date.
Provision Cover Rights Issue Total provisions for loan losses expressed as a Issue of shares to the existing shareholders at an percentage of net non-performing loans and agreed price, generally lower than market price. advances before discounting for provisions on non- performing loans and advances. Risk Weighted Assets Used in the calculation of risk-based capital ratios. Prudence The face amount of lower risk assets is discounted Inclusion of a degree of caution in the exercise of using risk weighting factors in order to reflect a judgment needed in making the estimates required comparable risk per rupee among all types of assets. under conditions of uncertainty, such that assets or The risk inherent in Committment & Contingencies income are not overstated and liabilities or expenses is also recognised, first by adjusting notional are not understated. values to Statement of Financial Position (or credit) equivalents and then by applying appropriate risk weighting factors. R Related Parties Parties where one party has ability to control the S other party or exercise significant influence over Segmental Analysis the other party in making financial and operating Analysis of financial information by segments of an decisions, directly or indirectly. enterprise specifically, the different industries and the different geographical areas in which it operates. Repurchase Agreement This is a contract to sell and subsequently repurchase Shareholders’ Funds government securities at a given price on a specified Total of issued and fully paid share capital and capital future date. and revenue reserves.
Return On Average Assets (ROA) Single Borrower Limit Net income expressed as a percentage of average 30% of Tier II Capital. total assets, used along with ROE, as a measure of profitability and as a basis of intra-industry Statutory Reserve Fund performance comparison. A capital reserve created as per the provisions of the Banking Act No. 30 of 1988.
348 and retained for expansion and growth. providers of capital, to government by of way taxes value added isallocated amongthe employees, the services the costof less providing such services. The Wealth created by providing banking and other Value Added V the terms of atrust deed. An undertaking formed to invest insecuritiesunder Unit Trust U ofdisposal asset afinancial or liability financial attributabledirectly to the acquisition, issue or Transaction costsare incremental are coststhat Transaction Costs and the supplementary capital (Tier II). Capital baseissummationof the core capital (Tier I) Total Capital subordinated term debts. (debt/equity) capital items and approved revaluation reserves, general provisions, hybrid Supplementary Capital includes, approved Tier IICapital (Supplementary Capital) offrom fixed the sale and long-term investments. general reserves, surpluses/losses after tax arising premium, statutory reserve funds, retained profits, core capitalMajor items are share capital, share Core Capital includes items selected of capital funds. Tier ICapital (Core Capital) T and forward of purchase acurrency. settlement. Alternatively asimultaneous spot sale same amount of the samecurrency for forward currency for spot settlement of and the the sale The simultaneous of purchase an amount of a SWAPS (Currency) form. legal substance and reality financial and not merely by transactions and events should begoverned by their and the presentation Statements inFinancial of The consideration the that accounting treatment Substance Over Form another enterprise (known asthe parent). A subsidiaryisan enterprise iscontrolled that by Subsidiary Company payments wouldpayments the equal security’s current price. Discount rate atwhichthe present value of future Yield to Maturity Y 349
Annual Report 2013 Sampath Bank PLC NOTICE OF ANNUAL GENERAL MEETING
Notice is hereby given that the 28th Annual General 8. To re-appoint M/s Ernst & Young, Chartered Meeting of Sampath Bank PLC will be held at the Accountants as Auditors of the Company for the “Balmoral” Hall, The Kingsbury, No 48, Janadhipathi ensuing year and to authorize the Directors to Mawatha, Colombo 01, on 31st March 2014 at 9.30 determine their remuneration. a.m. for the following purposes. By Order of the Board 1. To receive and consider the Annual Report of the Board of Directors on the affairs of the Company and the Statement of Audited Accounts for the year ended 31st December 2013 with the Report of the Auditors thereon.
2. To declare the recommended Cash Dividend of S Sudarshan Rs 8.00 per share for the Financial Year 2013. Group Company Secretary
3. To re-elect Mr Channa Palansuriya who retires 18th February 2014 at the Annual General Meeting as a Director in terms of Article No 87 of the Articles of Note:- Association of the Company. A member is entitled to appoint a Proxy to attend and vote on his/her behalf and a Proxy need not be a 4. To re-elect Mr Deshal De Mel who retires at the member of the Company. A Form of Proxy is attached Annual General Meeting as a Director in terms of for the purpose. The instrument appointing a Proxy Article No 87 of the Articles of Association of the must be deposited at the Registered Office of the Company. Bank at No 110, Sir James Peiris Mawatha, Colombo 02, not less than forty eight (48) hours before the 5. To re-elect Miss Annika Senanayake who retires time fixed for holding of the Meeting. at the Annual General Meeting as a Director in terms of Article No 87 of the Articles of You are kindly requested to bring with you, your Association of the Company. National Identity Card or any valid source of identification (eg Driving license, Passport). 6. To re-elect Mr Ranil Pathirana who retires at the Annual General Meeting as a Director in terms of Article No 87 of the Articles of Association of the Company.
7. To approve the Donations and Contributions made by the Directors during the year under Review.
350 8. 2. 1. Colombo March 01, on31st 2014 at9.30a.m. and atany adjournment thereof. General Meeting of the Company to beheldon“Balmoral”, The Kingsbury, Mawatha, No48,Janadhipathi Place, Colombo 07. asmy/our proxy to attend and vote for me/us onmy/our atthe Twenty behalf Eighth Annual Miss Annika Senanayake of Alfred 18/1, Place, Colombo 03, failing her MrsSaumya Amarasekera of 03, Sravasti failing himMr. Ranil Pathirana of 243/5, Lake failing Gardens, him SriJayawardenapura Mawatha, Rajagiriya, Wijayatilake of 78/1,OldRoad, Nawala, failing DeMelof her 103/1, Rosemead MrDeshal Place, Colombo 07, Nugegoda,failingMirihana, himProf Ranasinghe of Malik 18,Layards Road, Colombo 05,failing himMrsDharani Laxapathiya, Moratuwa, failing Sooriyaarachchi himMrDeepal of Birnamwood, 28/10 Wijesekera Mawatha, Averihena, Hokandara (South), failing himMrRanjith Samaranayake of 51A,Weerapuranappu Mawatha, Senanayake of 164/16, Nawala Road, Nugegoda,failing himMrAravinda Perera of 370 F/2, Lake Road, 01, failing Palansuriya of himMrChanna 110/1 DrNMPerera Mawatha, Colombo 08,failing himMrSanjiva Failing Perera him/her MrDhammika of 27th Floor, Tower, East World Trade Centre, Echelon Square, Colombo of…………………………………………………………………………………………………………………………………………………………………………………...... being amember/members of Sampath Bank PLC hereby appointMr/Mrs/Miss/Ven/Rev ...... I/We, ...... of ...... Colombo 02 Peiris Mawatha 110, SirJames Sampath Bank PLC Twenty Eighth General Annual Meeting FORM OFPROXY Note: Signature ...... Signed onthis ...... Day of ...... 2014 Mark your preference with “X” 7. 6. 5. 4. 3.
review. remuneration. Company for the ensuingyear and authorise the Directors to determine their To r To appr Association of the Company. To r of AssociationArticles of the Company. To r Association of the Company. To r of AssociationArticles of the Company. To r Year 2013. To d f To receive the Audited Statements Financial and the Report Annual of the Board
or the year ended December 31st 2013. 2. 1. e-appoint M/s &Young, Ernst Chartered Accountants asAuditors of the MrRanil Pathiranae-elect asaDirector under No87 of of Article The Articles Miss Annika Senanayakee-elect asaDirector under No87 of Article The DeMelasaDirector MrDeshal undere-elect No87 of of Article The Articles Palansuriya asaDirector MrChanna e-elect under No87 of Article The eclare the recommended CashDividend of Rs8.00 per share for the Financial
Pro Inst ove donations/contributions made by the Directors duringthe year under xy neednot beamember of the Company ructions regarding completion of Proxy are given innext page FOR
AGAINS T 351
Annual Report 2013 Sampath Bank PLC FORM OF PROXY
INSTRUCTIONS AS TO COMPLETION
1. Kindly perfect the form of proxy, after filling in legibly your full name and address, and by signing on the space provided.
2. The completed form of proxy should be deposited at the Registered Office of the Company at No 110, Sir James Peiris Mawatha, Colombo 02, not less than 48 hours before, the appointed time for the holding of the meeting.
3. If you wish to appoint a person other than Chairman, Deputy Chairman or a Director of the Company as your proxy, please insert the relevant details in the space provided [above names of the Board of Directors] on the Proxy Form.
4. Article No 73 of the Articles of Association of Company provides that: “Any corporation which is a member of the Company may by resolution of its directors or other governing body, authorise such person as it thinks fit to act as its representative at any meeting of the Company or of any class of members of the Company, and the person so authorised shall be entitled to exercise the same powers on behalf of such corporation as the corporation could exercise if it were an individual member of the Company”.
5. Please indicate with an ‘X’ in the space provided how your Proxy is to vote on each resolution, if no indication is given, the Proxy, at his discretion, will vote as he thinks fit.
6. In the case of a Company/Corporation, the Proxy must be under its Common Seal which should be affixed and attested in the manner prescribed by its Articles of Association.
7. In the case of a Proxy signed by an Attorney, the Power of Attorney must be deposited at the Registered Office of the Company for registration.
Name of Shareholder :......
N I C No of Shareholder :......
Share Certificate No / Membership No :......
CDS A/C No [if applicable] :......
No of shares :......
Name of Proxyholder :......
N I C No of Proxyholder :......
352 CORPORATE INFORMATION
Name of Company VAT Registration Number Sampath Bank PLC 134001194 – 7000
Legal Form Credit Rating A Public Limited Liability Company incorporated in Fitch Rating: Fitch Rating Lanka Limited has affirmed Sri Lanka on 10th March 1986 under the Companies National Long Term Rating of AA-(lka) stable to Act No 17 of 1982 and listed in the Colombo Stock Sampath Bank. Exchange. A licensed Commercial Bank under the Banking Act No 30 of 1988. Re-registered on 28th April Ram Rating: AA (stable) 2008 under the Companies Act No 7 of 2007. Board of Directors Registration Number Mr Dhammika Perera - Chairman PQ 144 Mr Channa Palansuriya - Deputy Chairman Mr Sanjiva Senanayake - Senior Director Head Office & Registered Office Mr Deepal Sooriyaarachchi - Non Executive Director 110, Sir James Peiris Mawatha, Colombo 02, Sri Lanka. Prof Malik Ranasinghe - Non Executive Director Mrs Dhara Wijayatilake - Non Executive Director Telephone Miss Annika Senanayake - Non Executive Director +94 (011) 2300260, +94 (011) 2358358, Mr Deshal De Mel - Non Executive Director +94 (011) 4730630, +94 (011) 5331441, Mr Ranil Pathirana - Non Executive Director +94 (011) 5600600 Mrs Saumya Amarasekera - Non Executive Director Mr Aravinda Perera - Managing Director Fax Mr Ranjith Samaranayake - Group Chief Financial +94 (011) 2303085 Officer /Executive Director
SWIFT Code Subsidiary Companies BSAMLKLX Name of the Holding Nature of Business E-mail Company % Sampath Renting of Commercial [email protected] 97.14 [email protected] Centre Ltd Property SC Securities 100.00 Stock Broking Web Page (Pvt) Ltd Leasing, Factoring www.sampath.lk Siyapatha 100.00 and Accepting Fixed & Finance Ltd Auditors Savings Deposits Ernst & Young Sampath Developing Software Information Solutions and Chartered Accountants 100.00 Technology Maintenance of Lawyers Solutions Ltd Hardware Nithya Partners Attorneys- at-Law For Investor Relations and Clarifications on the Report, Please Contact Group Company Secretary Group Company Secretary S Sudarshan Sampath Bank PLC ACIS (UK), MBA (Lincoln-UK) No 110, Sir James Peiris Mawatha, Colombo 02, Sri Lanka Stock Exchange Listings E-mail: [email protected] 167,787,605 Ordinary Shares Tel: +94 (011) 4730418/420/548
15,000,000 Listed Unsecured Subordinated Help the environment and minimize wastage by informing Redeemable Debentures of Rs 100/- each - 2012/2017 the Group Company Secretary, Sampath Bank PLC, to update the mailing list if you received more than one 50,000,000 Listed Unsecured Subordinated Annual Report. Redeemable Debentures of Rs 100/- each - 2013/2018