Professional Documents
Culture Documents
TRANSFORMATIONAL CHANGE
At Sampath Bank we believe progress is impossible without change. As a bank that has
seen numerous ups and downs in the course of our colourful 30-year history, we know
that courage and resolution in times of adversity can keep us on the path of long-term
success. But it is our willingness to change and evolve that truly sets us apart.
People often resist change because they focus on what they have to give up. We
focus on what we have to gain. This report describes how we have chosen to disrupt
our business paradigms, to boldly go forward with new strategies and a business
process restructuring that will deliver increased value at many levels. Our vision for
your Bank’s future has always been an aggressive one and this year sees us launching
a transformational change in the fundamentals of our business process; one that will
see your Bank evolve to a new level of quality, opening up new avenues of value creation
that we will explore with our usual ingenuity, determination and flair.
2 SAMPATH BANK PLC ANNUAL REPORT 2017
CONTENTS
REPORT PROFILE
This report is the 4th chapter in Sampath Further, the report also includes a special sustainability indicators contained in this
Bank PLC’s integrated reporting journey, section on page 105 of this Annual report as well as certain information on
which began in 2014. As in the past, the Report summarizing the performance of sustainability hosted on the corporate
2017 integrated report has been prepared subsidiaries. website. (Please use the QR code in
for the benefit of our providers of financial page 2.)
capital as well as all other stakeholders FORWARD-LOOKING STATEMENTS
who share a common interest in our Certain statements in this document BANK’S RESPONSIBILITY
performance. As such, the report aims to may constitute forward-looking The Bank acknowledges its responsibility
provide our stakeholders with an insight on statements. Such statements involve for ensuring the integrity of this integrated
how we create value through our strategy, known and unknown risks, uncertainties report and confirms that the contents of
governance and performance, along and other important factors that could the report have been collectively reviewed
with an overview of our prospects, going cause the actual results, performance in conjunction with the assurance reports
forward. or achievements of the Bank to be obtained from our various internal and
materially different from the future external assurance providers, including
SCOPE AND BOUNDARY GRI 102-50, 52 results, performance or achievements assessments on risk and internal controls.
The report covers the period 01st January expressed or implied by such forward-
2017 to 31st December 2017 and provides looking statements. The Bank undertakes FEEDBACK GRI 102-53
a comprehensive view of all business no obligation to update publicly or Any feedback or comments regarding
activities of Sampath Bank PLC for this release any revisions to these forward- this report can be directed through the
period. Accordingly, the report includes looking statements to reflect events Stakeholder Feedback Form on page 371
among other matters: an analysis of or circumstances after the date of this of the Annual Report.
the operational results, a review of the document, or to reflect the occurrence of
financial performance and an overview anticipated events.
of the Bank’s corporate governance, risk
management and compliance frameworks. ASSURANCE GRI 102-56
The report has been prepared on the basis Internally, the Bank has adopted a
of materiality, where material matters combined assurance approach, where
are defined as the factors which will management assurance and compliance
substantially affect the Bank’s ability to to ensure the accuracy of the report.
create value for its stakeholders over time.
Hence, we have focused on aspects that Messrs Ernst & Young are the Bank’s
are deemed material to our core business external auditors, who provide an opinion
of Banking and their identified economic, on our consolidated financial statements.
environmental and social impact to our They have also provided an independent
stakeholders. Page 47 of this Annual assurance report (refer page 359 of the
Report outlines the processes used to Annual Report) covering key non-financial
determine what is material for the Bank.
Integrated Reporting International Integrated Reporting Council’s (IIRC) Integrated Reporting <IR> Framework, to show how
stakeholder value is created through the “Six Capitals”
Financial Reporting Sri Lanka Accounting Standards
Companies Act No. 07 of 2007
Corporate Governance 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
Banking Act Direction No. 11 of 2007 on Corporate Governance for Licensed Commercial Banks in Sri Lanka,
issued by the Central Bank of Sri Lanka
Listing rules of the Colombo Stock Exchange
Sustainability GRI Standards – “Comprehensive”
Reporting UN Sustainability Development Goals (SDGs)
4 SAMPATH BANK PLC ANNUAL REPORT 2017
Report Profile
FINANCIAL HIGHLIGHTS
GRI 102-7
Bank Group
2017 2016 Change % 2017 2016 Change %
Investor Information
Net asset value per share (Rs) 293.02 238.94 22.6 317.23 267.16 18.7
Market value per share at the year end (Rs) 315.70 260.40 21.2
Earnings per share - Basic / Diluted (Rs) 61.95 47.35 30.8 64.91 49.28 31.7
Dividend per share (Rs) 17.20 18.75 (8.3)
Dividend cover (Times) 2.63 2.71 (3.0)
Gross dividend (Rs Mn) 4,598 3,362 36.8
Market capitalisation (Rs Mn) 68,577 46,086 48.8
Other Ratios
Dividend yield (%) 5.45 7.20 (24.3)
Price earning ratio (Times) 5.10 5.50 (7.3)
Total impairment as a % of loans to & receivables
from other customers 1.52 1.67 (8.9) 1.56 1.70 (8.2)
Non-performing loan (NPL) (%) 1.64 1.61 2.0
Liquid assets ratio (%) 22.38 21.84 2.5
Financial Indicators
Return on average assets (after tax) (%) Over 1.00 1.67 1.55 1.28 1.23 0.98
Return on average equity (after tax) (%) Over 16.00 23.35 23.47 18.42 16.35 12.88
Growth in profit (%) Over 15.00 32.65 48.76 24.83 43.27 (34.43)
Growth in total assets (%) Over 15.00 20.74 25.36 21.58 13.08 23.47
Cost to income ratio (excluding VAT & NBT) (%) Below 50.00 42.32 47.83 52.75 54.82 51.20
Capital adequacy ratios BASEL III BASEL II
Common equity Tier I (%) Over 8.50 10.26 N/A N/A N/A N/A
Total Tier I (%) Over 10.00 10.26 8.31 7.90 8.83 10.08
Total capital (Tier I + Tier II) (%) Over 14.00 14.41 12.87 12.26 13.62 14.22
Comparative information for the year 2016 has been restated & reclassified wherever necessary to conform to the current year’s
presentation.
7
47.0
67.6
+32% 2016 : Rs 12.6 Bn
10 500 44.6 50
5 250 25
12.6
16.6
12.1
432
525
659
795
6.7
9.1
4.9
6.1
9.1
0 0 0
Rs 573.9 Bn
2017
2017
2014
2015
2016
2014
2015
1,000 100 50
750
91.1
94.3
90.7 91.0
90
40
30
Rs 630.4 Bn
500 80
20 Total
250 70
10 Deposits
21.4
32.3
25.3
40.0
311
386
469
574
342
409
516
630
2017
2014
2015
2016
2014
2015
2016
Rs 9.4 Bn
Composition of Composition of Total Taxes Paid to
Total Operating Income 2017 Total Expenses 2017
the Government
(%) (%)
8.7 8.5 60.7 +22% 2016 : Rs 7.7 Bn
14.6
20.4
16.2
70.9
Rs 315.70
Net Interest Income Operating Expenses Market Price
Net Fee & Commission Income Income Tax Expense
Trading, Investment & Other VAT & NBT on Financial Services Per Share
Operating Income Net Impairment Charge
+21% 2016 : Rs 260.40
8 SAMPATH BANK PLC ANNUAL REPORT 2017
NON-FINANCIAL HIGHLIGHTS
GRI 102-7
2017 2016
Human Capital
Total workforce 4,011 3,960
Male 2,611 2,586
Female 1,400 1,374
Intake - undergraduate development programme (Industrial placements) 251 173
Intake - school leavers’ development programme (Internships) 553 304
Local hiring 232 185
Employee retention (%) 97.7 96.5
Total training hours 154,579 136,271
Average training hours per employee 39 34
Training programmes 419 487
Skills development programmes 235 251
Transition assistance programmes 184 236
Investment in training & development (Rs Mn) 70.2 69.1
No. of industrial disputes Nil Nil
No. of incidents of child labour (below 18yrs) & forced labour Nil Nil
Employees who receive regular performance & career development review 100 100
(as a % of total employees)
Profit per employee (Rs Mn) 3.0 2.3
Intellectual Capital
Investment in IT development (Rs Mn) 783 105
Manufactured Capital
No. of ATMs 391 381
No. of Deposit kiosks 183 108
Natural Capital
Papers recycled (Kg) 42,492 44,863
Savings from paper recycling
No. of fully grown trees 722 763
Electricity (kWh) 169,968 179,452
Landfill (m3) 127 135
Oil (Litres) 74,573 78,735
Water (Litres) 1,350,396 1,425,746
Carbon footprint of the Bank (tCO2e) 12,398.7 11,613.5
9
HUMAN CAPITAL
3,993
3,960
4,011
2,631
2,595
2,586
2,611
1,369
1,398
1,374
1,400
2,000 0 0
2017
2017
2014
2015
2016
2014
2015
2016
NATURAL CAPITAL
INTRODUCTORY INFORMATION
Our Vision and Values .......................................... 12
About the Bank ...................................................... 13
Product Portfolio................................................... 14
Board of Directors ................................................ 16
Corporate Management ...................................... 22
Chief Managers ..................................................... 24
Senior Managers ................................................... 26
12 SAMPATH BANK PLC ANNUAL REPORT 2017
OUR VISION
“The Growing Force
in Sri Lankan
Financial Services”
OUR VALUES
y Create a learning culture that promotes individual
and organisational development as well as
promoting innovation and value for customers.
y Treat all internal and external customers the way
we would like to be treated.
y Encourage and promote teamwork in all aspects
of behaviour.
y Open to feedback and demonstrate an eagerness
for personal development.
y Monitor and demonstrate an impressive
commitment to results.
y Uncompromising ethical and professional
standards of behaviour.
INTRODUCTORY INFORMATION | MANAGING OUR BUSINESS | MANAGEMENT DISCUSSION & ANALYSIS | RISK & GOVERNANCE | FINANCIAL INFORMATION | SUPPLEMENTARY INFORMATION 13
Sampath Bank PLC was incorporated in customers at each stage of their life.
229 1986 and listed on the main board of the
Colombo Stock Exchange in 1987. Since
Sampath Bank’s consumer banking
customer base has been growing steadily
Branches its inception Sampath Bank has continued year-on-year.
to grow, playing an increasingly important
role in the economic development of The corporate banking arm strives to build
Sri Lanka and its people. long-term partnerships with corporate
clients by facilitating their specific needs
The Bank has been responsible for many through the provision of customized
391 firsts – first to announce daily banking
hours until 3.00 pm, when competitors
solutions and expert advisory services.
Further, as a staunch supporter of the
ATMs were closing their doors by 1.30 pm each country’s SME sector, Sampath Bank offers
day; first to introduce the uni-banking purpose-built solutions geared to assist
concept, to facilitate seamless connectivity SMEs to accelerate their growth journey.
between branches, allowing the customers
to bank at any branch across the country Today, with countless banking
and first to launch an around-the-clock solutions, 229 branches, 391 ATMs, an
4,011 ATM network, all within the first two years
of operation.
unprecedented number of digital channels,
4,011 employees, a customer base in
Employees excess of 2.6 Mn and market capitalisation
To continue at the forefront of the industry, of Rs 68.6 Bn, Sampath Bank is ranked
the Bank leverages on the use of digital among the top three private banks in Sri
technology and innovation to reach a wider Lanka.
banking audience and create solutions
for a better tomorrow. Over the years, In testimony of its industry-leading
CONSUMER BANKING
y Sampath Sanhinda FD
y Personal Foreign Currency Accounts
Foreign Currency Accounts (PFCA)
y Business Foreign Currency Accounts
(BFCA)
y Capital Transactions Rupee Accounts
(CTRA)
y Inward Investment Accounts (IIA)
y Outward Investment Accounts (OIA)
y Diplomatic Foreign Currency Accounts
(DFA) and Diplomatic Rupee Accounts
(DRA)
y Resident Guest Scheme – Special
Accounts
y Senior Foreign Nationals’ – Special
Accounts
y Banking Robot
Clubs & Societies Account y Sampath Samaja y Sampath Cardless Cash
y Off-site ATMs
y Interbank ATM Network
Entrepreneur Development y Sampath Saviya y Cash Deposit ATMs
y Cheque Deposit ATMs
y Foreign Currency Exchange ATMs
y Cash Deposit Kiosk
INTRODUCTORY INFORMATION | MANAGING OUR BUSINESS | MANAGEMENT DISCUSSION & ANALYSIS | RISK & GOVERNANCE | FINANCIAL INFORMATION | SUPPLEMENTARY INFORMATION 15
NEW OFFERINGS
Sampath PAYAPP is a revolutionary mobile app The first ever Banking Robot in Sri Lanka was introduced by
introduced by Sampath Bank PLC for Sri Lankan Citizens. Sampath Bank. The Banking Robot is an automated teller
Sampath PayApp enables you to pay for anything at a which uses artificial intelligence to understand vocal requests
shop or on a website conveniently. It also enables you to and perform the relevant transactions in the form of a
send money to anyone who’s already a PayApp customer. humanoid robot. The Robot detects the presence of customers
With Sampath PayAPP, your phone becomes your wallet. and simply starts a conversation.
16 SAMPATH BANK PLC ANNUAL REPORT 2017
BOARD OF DIRECTORS
QUALIFICATIONS, SKILLS & EXPERIENCE: FORMER APPOINTMENTS: QUALIFICATIONS, SKILLS & EXPERIENCE:
Earned Masters of Business Administration Chairman of Style Kraft Sportsware (Pvt) Over 35 years of experience in banking
from The Open University of Malaysia Ltd, Deputy Chairman of National Livestock and finance, driving multiple aspects of
and counts over thirty years of extensive Development Board, Chairman of Orit banking business, Transactional Banking
experience in the apparel sector by Apparels Lanka (Pvt) Ltd, Chairman of in Retail and Corporate Banking, amongst
heading the Orit Group of companies and Orit Trading (Pvt) Ltd, Deputy Chairman of many other key growth areas. Is an
through continuous leadership given to Sampath Bank PLC, Director of Siyapatha Associate member and a Senior Fellow
other companies in the apparel industry. Finance PLC, Board Member of Sri Lanka member of The Institute of Bankers of Sri
Further, being a Board member of the Institute of Textile and Apparel, Chairman Lanka and holds a Masters of Business
Board of Investment of Sri Lanka for ten of Apparel Exporters’ Association 200gfp Administration degree specializing in
years, gained wide experience in public during 2006-2008, Chairman of CG Lanka Marketing from Sikkim Manipal University,
administration. He won the Asia Pacific Clothing (Pvt) Ltd till 2013 and Board India. He is also a qualified Four Bead
Outstanding Entrepreneurship Award in Member of Board of Investment of Sri Leader Trainer and functions as the Group
2013, the Silver Award of the National Lanka. Advisor to the Scouts Group Committee of
Chamber of Exporters of Sri Lanka for the S. Thomas’ College, Mount Lavinia.
Garment Extra Large category in 2004
and Sri Lankan Entrepreneur of the Year APPOINTED TO THE BOARD:
in 2002. 13th September 2016 as an Executive
Director.
APPOINTED TO THE BOARD:
1st January 2012 as a Non Independent MEMBERSHIP IN BOARD SUB COMMITTEES:
Non Executive Director. Appointed as Member of Board Integrated Risk
Deputy Chairman on 26th January 2012, Management Committee, Board Related
and held office as a Board member until Party Transactions Committee, Board
12th November 2015. Re appointed to the Credit Committee, Board Shareholder
Board on 28th April 2016 and appointed as Relations Committee, Board Strategic
Chairman on 1st August 2016. Planning Committee, Board Treasury
Committee, Board Capital Planning
MEMBERSHIP IN BOARD SUB COMMITTEES: Committee, Board IT Committee and Board
Chairman of Board Strategic Planning Marketing Committee.
Committee, Member of Board Human
Resources and Remuneration Committee, CURRENT APPOINTMENTS:
Board Nomination Committee, Board Managing Director of Sampath Bank
Credit Committee and Board Marketing PLC, Director of Lanka Financial Services
Committee. Bureau Ltd, a Governing Board Director of
the Institute of Bankers of Sri Lanka and a
CURRENT APPOINTMENTS: Director of Lanka Clear (Pvt) Ltd.
Chairman of Sampath Bank PLC, Director
of National Livestock Development FORMER APPOINTMENTS:
Board, Chairman of Siyapatha Finance Chairman of Bankers’ Technical Advisory
PLC, Director of Braybrooke Residential Committee which functions under the
Properties (Pvt) Ltd, Executive Committee purview of Sri Lanka Bankers’ Association,
Member of Joint Apparel Association Forum a past District Commissioner of the Sri
(JAAF), Executive Committee Member of Sri Lanka Scout Association and Director of
Lanka Apparel Exporters’ Association and SC Securities (Pvt) Ltd.
Executive Committee Member of Sri Lanka
Apparel Sourcing Association (SLASA).
INTRODUCTORY INFORMATION | MANAGING OUR BUSINESS | MANAGEMENT DISCUSSION & ANALYSIS | RISK & GOVERNANCE | FINANCIAL INFORMATION | SUPPLEMENTARY INFORMATION 19
QUALIFICATIONS, SKILLS & EXPERIENCE: CURRENT APPOINTMENTS: QUALIFICATIONS, SKILLS & EXPERIENCE:
Extensive governance experience as Deputy Chairman of Sampath Bank PLC, Extensive experience in the financial
a former Vice-Chancellor and a Non Senior Professor in Civil Engineering services sector locally and overseas and
Executive Director on Corporate Boards. at University of Moratuwa, Member having served in the senior management
A Fellow Member, Chartered Engineer of University Grants Commission, positions at premier financial institutions
and International Professional Engineer Independent Non Executive Director and as an independent consultant. Holds
of the Institution of Engineers, Sri Lanka, of Textured Jersey Lanka PLC, Access Master of Science and Bachelor of Science
Fellow of the National Academy of Engineering PLC, United Motors Lanka PLC Degrees in Engineering from University of
Sciences, Sri Lanka and the Institute of and Resus Energy PLC. London.
Project Managers of Sri Lanka, Graduate
Member, Sri Lanka Institute of Directors, FORMER APPOINTMENTS: APPOINTED TO THE BOARD:
PhD from The University of British Vice Chancellor of the University of 1st January 2012 as an Independent Non
Columbia, Vancouver, Canada in Civil Moratuwa, Chairman of the Committee Executive Director and appointed as Senior
Engineering Economics as a Canadian of Vice Chancellors and Directors of Sri Director on 26th January 2012.
Commonwealth Scholar; recipient of Lanka, Council Member of the Association
accolades and awards including the 1999 of Commonwealth Universities, Fellow MEMBERSHIP IN BOARD SUB COMMITTEES:
General Research Committee Award for of the National University of Singapore, Chairman of Board Integrated Risk
Outstanding Contribution to Sri Lankan Independent Non Executive Director of the Management Committee and Board
Science from the Sri Lanka Association for Colombo Stock Exchange, Lanka IOC PLC Treasury Committee. Member of Board
Advancement of Science, the Committee and Hemas Power PLC. Nomination Committee, Board Related
of Vice Chancellors and Directors (CVCD) Party Transactions Review Committee,
Excellence Award for 2012 for the Most Board Capital Planning Committee and
Outstanding Senior Researcher in Board IT Committee.
Technology and related Sciences, the
Award for Outstanding Contribution to CURRENT APPOINTMENTS:
Education 2012 at World Education
Senior Director of Sampath Bank
Congress and the Education Leadership
PLC, Non Executive Director of Asian
Award 2013 in Singapore.
Hotels and Properties PLC and Hemas
Pharmaceuticals (Pvt) Ltd.
APPOINTED TO THE BOARD:
30th August 2011 as an Independent Non FORMER APPOINTMENTS:
Executive Director. Appointed as Deputy
Group Resident Representative for Sri
Chairman on 1st August 2016.
Lanka and the Maldives in International
Finance Corporation (IFC) (The private
MEMBERSHIP IN BOARD SUB COMMITTEES:
sector investment arm of World Bank)
Chairman of Board Credit Committee, Senior Investment Officer - Global
Board Capital Planning Committee, Board Financial Markets (West Africa), Assistant
IT Committee and Board Shareholder General Manager (Treasury and Investment
Relations Committee. Member of Board Banking) of National Development Bank
Audit Committee, Board Related Party PLC, Consultant (Treasury and Business
Transactions Review Committee, Board Development) of Commercial Bank of
Strategic Planning Committee and Board Ceylon PLC: Senior Risk Manager - Citibank
Treasury Committee. Sydney, Australia, Head of Treasury and
Investment Banking Citibank Brunei,
various positions including Treasurer and
Head of Public Sector Business Citibank
Colombo.
20 SAMPATH BANK PLC ANNUAL REPORT 2017
Board of Directors
QUALIFICATIONS, SKILLS & EXPERIENCE: QUALIFICATIONS, SKILLS & EXPERIENCE: QUALIFICATIONS, SKILLS & EXPERIENCE:
Counts over 30 years’ experience in Sales, Attorney-at-Law, LLB (Cey), Retired from Bachelor of Arts in Management Studies
Advertising, Marketing, Human Resources the Public Service of Sri Lanka in August from the University of Nottingham. Heads
Development and Strategy with extensive 2015, after 41 years of service. The first Corporate Planning for the IWS Holdings
experience in the field of Insurance. Fellow lady in Sri Lanka to hold the post of the Group which is engaged in diversified
member of the Chartered Institute of Secretary to a Cabinet Ministry. business interests in telecommunication,
Marketing UK and a Chartered Marketer, shipping, media and broadcast,
Fellow Member of the Sri Lanka Institute APPOINTED TO THE BOARD: automobiles, aviation, warehousing, food
of Marketing. Holds a Masters of Business 30th August 2011 as an Independent Non and beverage processing and packaging.
Administration from the University of Sri Executive Director. Miss Senanayake is CNN’s official business
Jayawardanapura. Pioneer in disseminating representative for Sri Lanka.
Management knowledge in Sinhala. MEMBERSHIP IN BOARD SUB COMMITTEES:
A leading management development APPOINTED TO THE BOARD:
Chairperson of Board Related Party
consultant and author. Accredited Master Transactions Review Committee. Member 1st January 2012 as an Independent Non
Coach and Master Mentor. of Board Audit Committee, Board Executive Director.
Nomination Committee, Board Human
APPOINTED TO THE BOARD: MEMBERSHIP IN BOARD SUB COMMITTEES:
Resources and Remuneration Committee,
5th August 2010 as an Independent Non Board Strategic Planning Committee and Chairperson of the Board Nomination
Executive Director. Board Credit Committee. Committee, Member of Board Human
Resources & Remuneration Committee,
MEMBERSHIP IN BOARD SUB COMMITTEES: CURRENT APPOINTMENTS: Board Integrated Risk Management
Chairman of Board Human Resources Independent Non Executive Director of Committee, Board Strategic Planning
and Remuneration Committee and Board Sampath Bank PLC, Member of the Public Committee, Board Marketing Committee,
Marketing Committee. Member of Board Service Commission, Secretary General and Board Treasury Committee and Board IT
Audit Committee, Board Integrated Risk CEO of The Ceylon Chamber of Commerce, Committee.
Management Committee, Board Related Director of SLINTEC Academy and Member
Party Transactions Review Committee, of the Sri Lanka Law Commission. CURRENT APPOINTMENTS:
Board Shareholder Relations Committee Independent Non Executive Director
and Board IT Committee. FORMER APPOINTMENTS: of Sampath Bank PLC, Director of IWS
Secretary to the Ministry of Justice, Holdings (Pvt) Ltd, Director of APL Lanka
CURRENT APPOINTMENTS: (Pvt) Ltd, RAD Productions (Pvt) Ltd.
Secretary to the Ministry of Plan
Independent Non Executive Director of Implementation, Secretary to the Ministry Trustee - Youth Business Sri Lanka, Ceylon
Sampath Bank PLC, Independent Non of Technology and Research, Advisor to Chamber of Commerce, Trustee of the Ray
Executive Director of AIA Insurance Lanka Minister of Higher Education and Research. Wijewardene Charitable Trust in Sri Lanka.
PLC, Panasian Power PLC, Singer Sri Lanka
PLC and Hemas Manufacturing (Pvt) Ltd.
FORMER APPOINTMENTS:
Past President of Sri Lanka Institute of
Marketing, Managing Director Aviva NDB
Insurance PLC, Commissioner - Sri Lanka
Inventors’ Commission, Consulting Partner
- RBL Group USA.
INTRODUCTORY INFORMATION | MANAGING OUR BUSINESS | MANAGEMENT DISCUSSION & ANALYSIS | RISK & GOVERNANCE | FINANCIAL INFORMATION | SUPPLEMENTARY INFORMATION 21
QUALIFICATIONS, SKILLS & EXPERIENCE: QUALIFICATIONS, SKILLS & EXPERIENCE: QUALIFICATIONS, SKILLS & EXPERIENCE:
Extensive experience in finance and Counts over 30 years in active legal Dedicated professional with a solid
management in financial, apparel and practice in Civil Law, practicing in the background in Management Accounting,
energy sectors. Fellow member of the Original, Appellate & Supreme Courts as an Marketing and Sales. An Associate Member
Chartered Institute of Management Attorney-at-Law. Holds a Masters degree of the Chartered Institute of Management
Accountants, UK (FCMA) and holds a in Law from the University of Pennsylvania Accountants UK (ACMA). Strategic and
Bachelor of Commerce degree from the with particular emphasis on Insurance, creative thinker who has proven his ability
University of Sri Jayawardanapura. Privacy and Defamation Laws. Has to develop strong client relationships
experience in areas relating to Property, quickly and promote teamwork efficiently
APPOINTED TO THE BOARD: Testamentary, Condominium Disputes, and a leader with a rich mixture of
1st January 2012 as a Non Executive Trusts, Family Law, and Money Recovery. experience and successes in the business
Director. Became an Independent Non Also litigates on behalf of financial services world, having completed his secondary
Executive Director on 31st January 2015. sector clients and has specialised in local education at Trinity College, Kandy. Holds a
and international arbitrations. Masters of Business Administration from
MEMBERSHIP IN BOARD SUB COMMITTEES: University of Western Sydney, Australia.
Chairman of Board Audit Committee, APPOINTED TO THE BOARD:
Member of Board Strategic Planning 1st June 2012 as a Non Independent Non APPOINTED TO THE BOARD:
Committee and Board Capital Planning Executive Director. 1st September 2017 as a Non Independent
Committee. Non Executive Director.
MEMBERSHIP IN BOARD SUB COMMITTEES:
CURRENT APPOINTMENTS: Member of Board Nomination MEMBERSHIP IN BOARD SUB COMMITTEES:
Independent Non Executive Director Committee, Board Human Resources Member of Board Credit Committee, Board
of Sampath Bank PLC, Chairman of and Remuneration Committee, Board Strategic Planning Committee, Board
Renewgen (Pvt) Ltd, Managing Director of Integrated Risk Management Committee Marketing Committee, Board Shareholder
Hirdaramani International Exports (Pvt) and Board Marketing Committee. Relations Committee and Board IT
Ltd. Group Finance Director - Hirdaramani Committee.
Group of Companies, Non Executive CURRENT APPOINTMENTS:
Director of Windforce (Pvt) Ltd, Star Non-Independent Non Executive Director CURRENT APPOINTMENTS:
Packaging (Pvt) Ltd, Alumex PLC, Odel PLC, of Sampath Bank PLC, Legal practitioner, Non Independent Non Executive Director
Taprobane Holdings PLC and Ceylon Hotels Member of the Bar Association of Sri Lanka. of Sampath Bank PLC, Managing Director
Corporation Ltd. Director of Manson Investments (Pvt) of Indra Traders (Pvt) Ltd, Non Executive
Ltd, Ceylon Leisure Holdings (Pvt) Ltd and Director of Sampath Centre Limited, Non
FORMER APPOINTMENTS: Leisure Lines Lanka (Pvt) Ltd. Executive Director of Serendib Finance
Chief Executive Officer of Vanik Bangladesh Limited, Indra Motor Spares (Pvt) Ltd,
Securities; Assistant Vice President Indra Property Development (Pvt) Ltd,
of Vanik Incorporation, Director of Indra Holding (Pvt) Ltd and Braybrooke
Hayleys MGT Knitting PLC, Hayleys PLC, Residential Properties (Pvt) Ltd.
Nirmalapura Windpower (Pvt) Ltd and Esna
Power (Pvt) Ltd.
22 SAMPATH BANK PLC ANNUAL REPORT 2017
CORPORATE MANAGEMENT
MR NANDA FERNANDO MR THARAKA RANWALA MRS SHASHI KANDAMBI JASSIM MR AJANTHA DE VAS GUNASEKARA
Managing Director Senior Deputy General Manager - Senior Deputy General Manager - Group Chief Financial Officer
Consumer Banking Corporate Banking
MR DEEPAL DE SILVA
Assistant General Manager –
Branch Banking
24 SAMPATH BANK PLC ANNUAL REPORT 2017
CHIEF MANAGERS
SENIOR MANAGERS
Senior Managers
MRS CHRYSHANTHI LOKUHETTY MR NALIN TILLEKERATNE MRS SAJANI ABEYSEKERA MR SALINDA JAYAWARDENA
Senior Manager – Human Senior Manager – Central Senior Manager – Corporate Senior Manager - Consumer
Resources Processing Unit Finance Banking
MR ANTON DAVID MR ASANKA LIYANAGE MRS SACHITHRI FERNANDO MRS GAYANI JINADASA
Senior Regional Manager Senior Manager – Finance Senior Manager – Planning Senior Manager - Finance
30 SAMPATH BANK PLC ANNUAL REPORT 2017
CHAIRMAN’S MESSAGE
Rs 12.1 Bn
Profit
After Tax
+33% 2016 : Rs 9.1 Bn
Dear Stakeholders,
Reflecting on macroeconomic
developments in 2017, it is clear that
the global economy was on the rebound.
Ending three years of slow growth, global
GDP growth overtook mid-year projections
and edged closer to 3.0% in 2017. Both STEMMING FROM THIS, WE TOOK WHAT WE BELIEVE
advanced and emerging economies around IS A QUANTUM LEAP TO ENSURE THAT WE ARE WELL-
the world reported improved economic
performances, bolstered by a strong revival POSITIONED TO STAY ALIGNED IN A CHANGING WORLD.
in global trade and investment as well TERMED THE “PARADIGM SHIFT” PROGRAMME,
as an overall improvement in business
sentiments. THE MOVE ENTAILED A MASSIVE REVAMP OF OUR
OPERATIONAL ARCHITECTURE, IN WHAT IS PERHAPS
The Sri Lankan economy too expanded
by 3.7%, driven by services and THE SINGLE-LARGEST INTERNAL RESTRUCTURING
manufacturing, and a sustained increase EFFORT WE HAVE UNDERTAKEN TO-DATE.
in expenditure on large infrastructure
projects countrywide. However, for the third
consecutive year, growth in the agricultural Against this backdrop, we sharpened our
sector was hampered by unfavourable resolve to discover opportunities in the Gross Income
weather conditions. Inflation rose slightly face of every challenge and made steady
more than the usual mid-single digit level, progress on our strategy to deliver yet (Rs Bn)
ending the year above 7%. another stellar performance on all fronts.
100
In fact, I would say we are well on our way
GDP Growth - Sri Lanka to transforming into a world-class bank. 80
60
(%)
A FINANCIALLY STABLE BANK
A strong operating performance combined 40
6.0
with sustained cost efficiencies produced
4.9 20
4.8 record results for the year – Gross Income
67.6
44.6
47.0
92.6
4.5 4.4
reached Rs 92.6 Bn, 37.0% higher than the 0
2017
2014
2015
2016
2015
2016
Sep.
9.1
6.1
we have undertaken to-date. The purpose and popularity of social media usage have
0
of the exercise is threefold; firstly to fuel
2017
2014
2015
2016
2015
2016
Chairman’s Message
61.3
48.5
80.9
2015
2016
A WELL-MANAGED BANK
In line with the Banking Act Direction No.
Eager to comply with the new capital
11 of 2007 issued by the Central Bank of
requirements under the new
Sri Lanka, on Corporate Governance for Adding a Rs 6.0 Bn boost to the Bank’s
BASEL III regulations, we took swift action
Licensed Commercial Banks and the Code Tier II capital, Sampath Bank became
to strengthen the Bank’s Tier I and
of Best Practice for Corporate Governance the issuer of Sri Lanka’s first ever BASEL
Tier II capital. Under the aegis of the Board
jointly issued by the SEC and the CASL, III compliant Debenture. The Bank also
Capital Planning Committee, a new capital
we have made sure that our Corporate succeeded in securing a further USD
plan was formulated with actionable
Governance Framework is both forward 100 Million senior debt from China
objectives.
looking and ethical and places a heavy Development Bank in a landmark offshore
emphasis on compliance. deal with a five year tenure.
INTRODUCTORY INFORMATION MANAGING OUR BUSINESS MANAGEMENT DISCUSSION & ANALYSIS | RISK & GOVERNANCE | FINANCIAL INFORMATION | SUPPLEMENTARY INFORMATION 35
GRI 102-10
In December 2017, the Bank announced a qualitative aspects of the business. For APPRECIATIONS
second rights issue to raise a further Rs the 4th year running, Sampath Bank was In closing, I wish to thank my colleagues
12.5 Bn Tier I capital and also announced also recognised as the ‘Best Commercial on the Board for their steadfast support,
another BASEL III compliant Debenture Bank 2017’ and ‘Best Retail Bank 2017’ in commitment and conscientious
issue, with the provision to raise up to Sri Lanka by the UK based World Finance stewardship of the Bank.
Rs 7.5 Bn during the first half of 2018. Magazine, unprecedented achievements
that reinforce our position in the industry. At this juncture, I also wish to thank
A SUSTAINABLE BANK Mr. Nanda Fernando, our energetic
Sustainability has always been at the FUTURE OUTLOOK AND PROSPECTS Managing Director for the tenacity with
core of our purpose-driven DNA. We We expect economic conditions in Sri which he has driven the Bank to a new
recognise that not all returns can be Lanka to improve steadily in 2018 and level of excellence and dynamism. My
found in financial statements and that beyond. Moving forward, we want to be appreciation also goes to Team Sampath -
our commitment to transform the lives of a big part of our country’s growth and the engine that powers our operations.
our customers, employees and the wider development. This means we would need to I thank you for the dedication and passion
community, is equally important. be positively positioned to meet any future for this business, which has become a
challenges and commitments. In short great source of competitive advantage.
We recognise that our lending practices - be responsive and keep pace with our
play an influential role in shaping the customers and their changing needs and A special word of thanks also goes to the
behaviours of our customers towards expectations. We would need to adapt our Central Bank of Sri Lanka, the Securities &
sustainable development. This has business model accordingly. Our greatest Exchange Commission, the Colombo Stock
prompted the commitment towards differentiator will be the quality of the value Exchange and the Ministry of Finance for
responsible lending. proposition we offer our customers, where their continuous support.
a combination of innovative products,
At the same time, we are working to create competitive pricing and unbeatable To our loyal customers, the Bank is
a highly motivated and engaged workforce, customer experience will set us apart from infinitely grateful for the trust and
for we believe Team Sampath to be the our competitors. confidence you have placed in the
true source of the Bank’s long-term Sampath brand for the past three decades.
sustainability. Hence, our vision in the next phase of You remain the reason we are driven to
growth is to act like a start-up, and be able innovate, succeed and grow.
Investing in the community, we focus to respond and innovate quickly to deliver
on addressing systematic issues, simple, fast and contextual banking in the Many thanks also to our suppliers and
which are national priorities, such as digital age. service providers for understanding our
education, health, financial inclusion and vision and working with us towards this
entrepreneurship. These efforts testify BOARD CHANGES common purpose.
to our purpose which is to first change Mr Deshal De Mel who served the Board
our people’s social standing by dignifying since 01st January 2012 as a Non My sincere gratitude also to our
their lives through access to basic human Executive, Non Independent Director shareholders - your patronage over the
needs and then secondly, empower them resigned from the Board on 01st July years has been a source of immense
economically so that they can break away 2017 to accept a position in the Finance strength for the Bank and I look forward to
from a detrimental poverty cycle. Ministry. Mr Ranjith Samaranayake who your continued support to enable the Bank
served the Board as an Executive Director to move forward in its journey of excellence
A WINNING BANK since 01st January 2009, also retired in the years ahead.
The year 2017 proved to be another w.e.f. 09th August 2017 upon reaching the
rewarding year for Sampath Bank. We mandatory retirement age of 70 years. On
were honoured as “Sri Lanka’s Best Bank” behalf of all my colleagues in the Board I
at the prestigious Euromoney Awards take this opportunity to thank them both CHANNA PALANSURIYA
for Excellence 2017. This is the 4th time for the yeomen service provided to the Chairman
Sampath Bank has been the recipient Bank and wish them good luck in their
of this award, itself a phenomenal future endeavours. Colombo, Sri Lanka
accomplishment. The award recognises
15th February 2018
the top performing financial institutions I am also pleased to welcome Mr Rushanka
in the world, based on stringent selection Silva who joined the Board on 01st
criteria to evaluate both quantitative and September 2017 as a Non Executive, Non
Independent Director.
36 SAMPATH BANK PLC ANNUAL REPORT 2017
Rs 92.6 Bn
Gross
Income
+37% 2016 : Rs 67.6 Bn
45
47.8
52.7
42.3
2015
2016
30
FINANCIAL HIGHLIGHTS 24
22.8
17.4
28.4
2015
2016
GRI 102-10
516
409
630
ago. Strategic re-pricing skewed towards
(%) 0
mobilising larger volumes of low-cost
2017
2014
2015
2016
25 deposits enabled the Bank to retain the
21.1 CASA ratio above 34% and mitigate the
20
17.5 impact on low-cost deposits in a high-
15 interest rate environment. STRATEGIC DEVELOPMENTS
16.1
13.7 While our performance has continued to
10
CASA - improve year-on-year, to truly live up to our
5 Industry vs Bank role as a world-class bank in the future, we
14.6
24.0
21.3
22.5
2015
2016
50
47.3
Bank 45.9 Seeking to create a scalable platform from
Industry 45
which to grow the business sustainably,
40.3 in 2017 we rolled out what we call the
40
NPL - 38.4 “Paradigm Shift”, to reorient the business
39.3
Industry vs Bank 37.1 34.9 and put customers at the centre of our
35
(%) 34.2 focus. Opening ourselves up for easy
30 access by the customer, meeting their
5
2017
2014
2015
2016
1.64
1.61
1.64
2015
2016
Bank
Industry
38 SAMPATH BANK PLC ANNUAL REPORT 2017
IN 2017 WE INVESTED
RS 70 MN IN TRAINING,
Investment in Training 42.3%
WHERE THE FOCUS (Rs Mn) Cost to
WAS ON IMPROVING 80 Income
SOFT SKILLS THROUGH 60 -12% 2016 : 47.8%
LOCAL AND OVERSEAS 40
OFFSHORE INVESTMENTS
TRAINING.
20 With our funding base firmly in place, we
felt it was time to explore offshore lending
42
47
70
70
0 opportunities, an area in which we had not
2017
2014
2015
2016
been aggressive in the past. Having revived
our offshore lending programme in 2017, I
A new board-approved structure was also am proud to announce that we reached a
introduced to ensure that the Bank has historical milestone by performing our first
a robust continuity plan to move forward official lending transaction to Myanmar
Page 78 in our growth journey. This programme through the Bank’s offshore banking unit.
Social and Relationship Capital exposes our employees to leadership
development programmes through cross- Meanwhile, more focused efforts to pursue
Our investments in Community Capital
stem from two material aspects: namely, functional roles that allow interaction offshore lending opportunities in other
Community Development and the
Promotion of Financial Inclusion. in different parts of the business, while regions saw the Bank venture into project
re-skilling and upskilling tactics are used financing activities in a number of East
to redeploy capable people in line with African countries, a hitherto untapped
changes in the business environment and market for the Bank.
One such initiative was the launch of the our business needs.
“MD’s blog” which provides the opportunity CORPORATE SOCIAL RESPONSIBILITY (CSR)
for any staff member to contribute with NEW REGULATORY REQUIREMENTS As a national bank serving the masses of
their ideas, suggestions and opinions. The BASEL III implementation, which the country for the past thirty years, we
commenced on 1st July 2017, was another have always been committed to sharing
I am happy to say these efforts were major challenge, especially given the need our success with the communities in which
100% successful. To give you an example, to progressively increase Tier I & Tier II we operate. It is our vision to empower
in the Paradigm Shift programme alone capital over a short period of one and a these communities through meaningful
we managed all 307 staff reassignments half years. Taking the first step towards socio-economic development which would
without a single incident or complaint compliance, Sampath Bank raised Rs 7.6 allow them to uplift their living standards.
being reported. Bn by way of a rights issue in November We proactively identify opportunities
2017 to boost Tier I Capital and a further arising from key social, developmental
Further we continued to invest in building Rs 6 Bn worth of Tier II Capital was raised and business issues when formulating our
the capacity of our team. In 2017 we by issuing Sri Lanka’s first BASEL III CSR programs, rather than just reacting
invested Rs 70 Mn in training, where compliant debenture in December 2017. to requests from charitable causes. Our
the focus was on improving soft skills CSR initiatives are anchored on four
through local and overseas training. In In parallel, the Bank also continued pillars: Education for All, Community
a world where all banks largely have the its SLFRS 9 journey, focusing mainly Capacity, Entrepreneur Development and
same products and the same access to on learning the applicability of the Environmental Protection & Conservation.
similar technology, I firmly believe that new Accounting Standard, developing
our investment to build staff capacity will mathematical models, educating staff In 2017, we invested in targeted
differentiate us from our competitors. and investing in the necessary control programmes under each pillar. Sampath
processes to facilitate full compliance by Pasala, the “Pahe Shishyathwa” – grade
the end of the next financial year. 5 scholarship support programme,
40 SAMPATH BANK PLC ANNUAL REPORT 2017
AS MARKET COMPETITION
INTENSIFIES, WE WILL
SEEK TO TRANSFORM
INTO A FULLY-DIGITAL
BANK, THAT WE EXPECT
TO BECOME THE KEY
DIFFERENTIATOR WHICH
SETS US APART FROM
PEERS.
MD’s Business Club - Corporate Journal of Mr Nanda Fernando
Sustainability is an integral part of the The framework is based on three key RESPONSIBLE BANKING
Bank’s ethos. We have put in place a pillars: Maintain the highest standards of business
sustainability framework to articulate our conduct by effectively managing the social
commitment to contribute to economic, SHARED GROWTH and environmental impacts of our business
environmental and social progress in Invest in real solutions that enrich the decisions.
line with the United Nations’ Sustainable lives of our customers, shareholders,
Development Goals (SDGs). An integrated employees, suppliers, business partners SOCIO-ECONOMIC DEVELOPMENT
3600 approach underpins our sustainability and the broader community. Work towards sustainable, nation-wide
framework and ensures our business
development in order to raise Sri Lanka’s
strategies reflect our aim to fully support
socio-economic status for the benefit of
the growth and development of our nation.
future generations.
360 0 Responsible
Banking
line with new BASEL III requirements
y Ongoing development and re-skilling of human
APPROACH TO
SUSTAINABILITY capital to support the Bank’s growth strategies
Challenges
y Tightening monetary policy measures
y BASEL III regulatory changes
y Internal change management
y Cyber security threats
y Stiff competition from peers
y Declining demand for private sector credit
42 SAMPATH BANK PLC ANNUAL REPORT 2017
CSR AND SUSTAINABILITY GOVERNANCE STRUCTURE GRI 103-2 In an effort to further streamline the Bank’s sustainability
strategy and strengthen stakeholder relationships, a dedicated
Senior DGM – Consumer Banking Corporate Sustainability Unit was set up in 2017. The CSR
& Corporate Sustainability Committee, which is led by the
Sustainability Unit
Managing Director
Board of Directors
Corporate
Group Chief Human Resource Officer under the Bank’s CSR framework. Development of strategies,
policies and goals related to sustainability are also part of their
DGM – Branch Banking
responsibilities. The Corporate Sustainability Unit is responsible
AGM – Human Resources for the evaluation, resource allocation, implementation, successful
completion, monitoring and review of these projects. In carrying
AGM – Recoveries
out its mandate, the Corporate Sustainability Unit uses a highly
transparent project management process.
Assigning a Unit Level CSR Committee, comprising Sampath team members, community leaders
Step 1 and customers / social (non-political) interested parties representing the area
Step 2 Preparation of a priority list based on our study findings / observations and community members' views
Assigning project objectives, key actions, resource requirements, time frame and
Step 3
involvement of Sampath team members
Step 4 Implementing the project in line with a detailed action plan and timeline
YES
At Sampath Bank, we work in the belief that our capacity to generate shared value. In Our Triple Bottom Line approach to
stakeholder relationships are critical for addition, we believe that cultivating mutual stakeholder engagement therefore aims
the Bank to be able to play a positive role in trust and respect with stakeholders paves to build and maintain ongoing business
society. Engagement with our stakeholders the way for sustainable performance. relationships with all material stakeholders
enables us to gain insight, to sharpen our of our business.
decision-making process and improve
Classify
Determine impact on the
Identify key stakeholders Bank from each stakeholder Prioritize
category
Respond
Establish most effective Allocate necessary resources Use relevant engagement
engagement strategy for each to operationalise chosen mechanism to create
stakeholder group engagement methodologies ongoing dialogue
Assess
Identify key issues and Determine material aspects Obtain continuous feedback
concerns raised by and integrate into business to determine stakeholder
stakeholders processes satisfaction
Stakeholder Engagement
Employees
Management Philosophy: Commitment to create a conducive environment for the employees to develop and reach their potential, both
professionally and personally
Engagement Mechanism Frequency Matters Relevant to the Stakeholders Our Strategic Response
Open-door policy R yEthical employment practices yCompetitive rewards and benefits
Employee forums P to attract best talent in the market
yCareer development opportunities
Employee suggestions schemes R
yPromote greater diversity and
Grievance-handling procedure R yEmployee communications &
inclusion
Employee social committees R feedback
Feedback forms A yDevelop from within through
yRewards / recognition
Business unit level meetings R training & development
Intranet 24/7 yEmployee wellbeing
yEncourage greater engagement
Memorandums / Directives R yWork-life balance
Newsletters Q yPerformance–based incentives
Training R yEffective handling of grievances
Get-togethers / Events R
Sampath Employee Notification System 24/7 yMaintain high standards of
(SENS) occupational health & safety
CSR projects R yEnsure employees’ welfare
Online groups 24/7
yFoster a sense of belonging
A – Annually P – Periodically Q – Quarterly R – Regularly 24/7 – 24 hours 7 days
Customers
Management Philosophy: Uphold the customers’ right to demand a stable and progressive banking environment which provides a
superior service platform and promotes customer choice / convenience
Engagement Mechanism Frequency Matters Relevant to the Stakeholders Our Strategic Response
One-on-one feedback from customers R yCustomer service yEffective complaint resolution
who visit the Bank
ySatisfaction on existing products yMaintain service excellence
Customer surveys conducted via P
traditional or non-traditional research yBrand perception and reputation yDeliver technology-driven banking
techniques solutions
yCustomer convenience
Social media interactions 24/7
yContinuous introduction of
Customer complaint handling 24/7 yNeed for innovations and
innovative products which promote
mechanism customized solutions
greater customer convenience
ATL, BTL & digital communications R yCommunication methods
Correspondence R yEffective marketing and
SMS alerts 24/7 ySpecial promotions communication
Corporate Website 24/7 yTimely and relevant information on yMaintaining data security and
Sampath Vishwa (Internet banking) 24/7 products and services customer privacy
portal
Customer Care Centre 24/7 yCustomer touch-points yPromoting island-wide customer
CSR projects R inclusiveness
yCustomer benefits and rewards
Feedback forms - paper based / R yBetter market share
yLoyalty recognition
electronic mediums
Stakeholder Engagement
Community
Management Philosophy: Working in tandem with global and local mandates which safeguard the environment and promote
community empowerment
Engagement Mechanism Frequency Matters Relevant to the Stakeholders Our Strategic Response
Ground-level interactions with R yCommunity capacity building ySocially-responsive transformative
community leaders by staff CSR model
yCommunity empowerment
Interactions with social groups and R
yTransparency and governance
volunteer organisations ySocial welfare of communities
Feedback forms / environment grievance R yCommunity engagement
yEnvironmental degradation
handling mechanism
yEmployee volunteerism
Discussions with local government R yPreservation of local culture
representatives yBecome a catalyst for change
Discussion with other organisations, R
community and opinion leaders on
community development efforts
Media-based forums R
CSR projects R
A – Annually P – Periodically Q – Quarterly R – Regularly 24/7 – 24 hours 7 days
GRI 102-49
In 2017, we conducted a comprehensive stakeholder study covering all Sampath Bank’s key stakeholder groups, namely: Investors,
Customers, Employees and the Broader Community. Our main purpose in commissioning the survey was to ascertain stakeholder
perceptions regarding the level of transparency and the importance they attribute to information contained in the Bank’s Integrated
Annual Report.
While the results of the survey show a high level of stakeholder satisfaction regarding the data and information published in the
Bank’s Annual Report, the outcome also reveals stakeholder preference for more information on certain areas. The table below
indicates these areas along with a summary of the Bank’s response to these concerns.
Public Relations (PR) information Due to large volumes, all PR information is shown on the
Corporate Website – www.sampath.lk/en/news
Future plans Comprehensively captured in Chairman’s Message, MD’s Review and all relevant Business
Reviews.
Employees’ perceptions about the Please refer Employee Relations and Employee Engagement under Human Capital
Bank (pages 70 to 77 of this Annual Report)
Corporate culture We are working towards improving disclosures in this regard and are currently in the process of
ascertaining relevant information that can be published
Brand reputation Brand Equity Study was conducted in 2017 (refer page 68 of the Annual Report)
INTRODUCTORY INFORMATION MANAGING OUR BUSINESS MANAGEMENT DISCUSSION & ANALYSIS | RISK & GOVERNANCE | FINANCIAL INFORMATION | SUPPLEMENTARY INFORMATION 47
At Sampath Bank, what we consider in which we operate. To address each business context. The Bank has adopted
material is any topic that is perceived material topic and its topic boundary, we these as the material topics relevant for
as significantly more pertinent to our have formulated a management approach the business for the next three years.
operations, our social relevance and to guide the way we use our resources in
our relationships with our stakeholders. creating value through our day-to-day All material topics covered in this report
To determine what is material to our operations. along with the sustainability reporting
business, we start by understanding were reviewed and approved by the AGM
the expectations and concerns of our The stakeholder survey conducted in 2017 – Human Resources, who is heading the
has helped to identify the key material Corporate Sustainability Unit.
stakeholders, in cognizance with the social,
economic and environmental context topics that are relevant in our current
Material Topics
GRI 405
10 Training and Provide employees with the relevant knowledge and skills which GRI 404 High Medium
Development encourage them to innovate and lead change in the industry
11 Employee Create a work environment where employees feel recognised N/A High Medium
Engagement for their talents and valued for their commitment to the Bank’s
strategic vision
12 Customer Ongoing refinement of the product development process to N/A High High
Convenience reflect the needs of specific customer segments and offer
customers the best-in-class banking convenience through
solutions that meet the needs of the customer at every stage
of their lives
13 Customer Health Anti-money-laundering policy and anti-fraud policy to enforce GRI 416 High High
and Safety controls and prevent our products and services from being
used to facilitate fraudulent or money-laundering activities
14 Marketing and Render fair, honest and equitable service to customers and in GRI 417 High High
Labelling doing so, ensure that their interests are protected throughout
their relationship with the Bank
15 Customer Privacy Ongoing investments in enhanced security systems and GRI 418 High High
verification protocols across all available channels of service
16 Complaint Reduce complaints by addressing the underlying causes GRI 418 High High
Management
17 Promoting Financial Ensure all Sri Lankans have access to financial services N/A High Medium
Inclusion regardless of where they live or socio-economic status, in turn
reducing poverty and increasing prosperity
18 Community Respond to Sri Lanka’s emerging socio-economic needs in a GRI 413 High Medium
Development manner that would trigger meaningful societal change in the
longer term
19 Environmental Find solutions to such global challenges as climate change, GRI 302 High Medium
Management resource scarcity and natural capital loss GRI 305
GRI 306
Note: Comprehensive management approaches of all above material topics have been published in a supplementary report for the
Annual Report 2017 available on the Sampath Bank’s corporate website (Please use the QR code in page 2).
INTRODUCTORY INFORMATION MANAGING OUR BUSINESS MANAGEMENT DISCUSSION & ANALYSIS | RISK & GOVERNANCE | FINANCIAL INFORMATION | SUPPLEMENTARY INFORMATION 49
2 8 9 10 11 1 3 4 5 6 7
17 18 19 12 13 14 15 16
High
Impact on the organisation
Medium
Low
01 Profitability and Financial Stability 07 Cheaper-Better-Faster delivery to the 13 Customer Health and Safety
02 Anti-Corruption Practices customer 14 Marketing and Labelling
03 Business Continuity Planning 08 Employee Relations 15 Customer Privacy
04 Brand Equity 09 Talent Acquisition and Management 16 Complaint Management
05 Research and Development 10 Training and Development 17 Promoting Financial Inclusion
06 Customer Access 11 Employee Engagement 18 Community Development
12 Customer Convenience 19 Environmental Management
50 SAMPATH BANK PLC ANNUAL REPORT 2017
Vision
(Page 12)
Manufactured Capital (Page 64)
y Opened FCBU Extension Office in the Katunayake Export
Processing Zone
y Introduced Recycler ATMs: 7
y New Deposit Kiosks: 75
y Introduced Banking Robot
Values
y Finacle 10 migration (Page 12)
Outcome
For Shareholders
Return on Equity: 23.35%
Earning per Share: Rs 61.95
Dividend per Share: Rs 17.20
YoY increase in Share Price: 21.24%
Key Business Pillars: Market Capitalisation: Rs 68.57 Bn
Direct Economic Value Distributed: Rs 4.6 Bn
y Consumer Banking (Page 93)
y Corporate Banking (Page 96)
y Global Banking (Page 100)
For Customers
y Treasury (Page 103) Access to the possible range of banking channels (multi delivery)
Increased convenience to Bank on the go
Best-in-class customer service
Supporting Services:
Efficient complaint management
y Administration, Logistics &
Engineering Improved network security to ensure customer privacy and prevent
y Central Cash Department fraud
y Central Processing Units
For Employees
Value Created for our Stakeholders
yCompliance
yCorporate Sustainability Unit For Community
y Finance Entrepreneurs developed: 459
y Human Resources & Training Schools facilitated: 37
y Internal Audit Beneficiaries from Capacity Building Initiatives: 143,251
y IT Systems Development
y IT Electronic Data Processing
For Environment
y Legal
Carbon footprint indicator: 12,398.66(tCO2e)
y Marketing
Saving due to paper recycling
y Network Services Centre
y Number of trees: 722
y Operations
y Oil (litres): 74,573
y Recoveries
y Risk Management y Electricity (KWh): 169,968
Subsidiaries
(Page 105)
Impact Assessment
MANAGEMENT DISCUSSION
AND ANALYSIS
Operating Environment ....................................... 54
Capital Management Reports ............................ 59
Business Reports .................................................. 91
54 SAMPATH BANK PLC ANNUAL REPORT 2017
OPERATING ENVIRONMENT
2017*
2014
2015
2016
responsible for the acceleration in global
AND DEVELOPING GDP growth from 2016 to 2017. Favourable
* Estimated
financing costs, rising profits, and
ECONOMIES. improved business sentiment across both
advanced economies and emerging market
In contrast, in the Euro area, growth
and developing economies (EMDEs) were
gained substantial momentum in 2017,
the other supportive elements which
reaching an estimated 2.4%. Broad-based
fuelled growth in 2017.
improvements were recorded across
all member countries, supported by
3.0% Global trade growth is estimated to have
reached a stronger-than-expected 4.3%, policy stimulus and strengthening global
demand. In particular, private sector credit
thanks to a parallel recovery in import
Global GDP demand from both advanced economies continued to respond to the simulative
and EMDEs. On the export front, although stance of the European Central Bank as
Growth exports grew in many EMDE regions, a both domestic demand and import growth
+25% 2016 : 2.4% deceleration was observed in the Middle remained robust.
East and North Africa, partly reflecting cuts
East Asia
in oil production agreed by OPEC members.
Despite reporting falling growth rates
United States for the past few years, the region is still
Growth picked up in 2017 to an estimated expected to have grown by 7.0% in 2017,
2.3%, supported by strengthening private twice as high as the expected EMDE
investment, rising profits, a weakening average. This is believed to be the result
dollar, and robust external demand. of China’s robust economic performance,
where growth is estimated to have reached
UK and the Euro Area 6.8% in 2017, reflecting continued fiscal
support and the effects of reforms, as well
Stifled by the pressures arising from Brexit,
as a stronger-than-expected recovery of
the UK economy stumbled in 2017, with the
exports and a positive contribution from
growth rate falling below expected levels.
net trade. China’s trade flows recovered
The weaker Pound Sterling resulted in a
markedly in 2017, partly reflecting rising
rise in import costs and inflation, weighing
commodity imports amid tightly enforced
on domestic demand, while business
production cuts as well as strengthening
investment suffered from uncertainty
foreign demand.
surrounding the future framework
governing economic relations between the
Meanwhile in Japan, growth picked
United Kingdom and the European Union
up in 2017 to an estimated 1.7% as
(EU).
domestic demand firmed, supported
INTRODUCTORY INFORMATION | MANAGING OUR BUSINESS MANAGEMENT DISCUSSION & ANALYSIS RISK & GOVERNANCE | FINANCIAL INFORMATION | SUPPLEMENTARY INFORMATION 55
6.6%
Inflation
by a gradual recovery in consumer the second half of 2017, while security Inflation (Based on CCPI) -
spending and investment, as well as concerns continued to weigh on activity Annual Average
the implementation of a fiscal stimulus in Afghanistan, with the number of civilian
(%)
package. Exports accelerated in response casualties and displaced people reaching
to strengthening global demand, but the record levels in 2017. 8
net trade contribution to growth remained 6.6
In South Asia, economic growth slowed the year, with the annual GDP for 2017 2
2.2
to an estimated 6.5% in 2017, marginally projected to reach just above 4.0%.
below the June 2017 forecast, owing mainly 0
2017
2014
2015
2016
to temporary disruptions from adverse Growth was fuelled mainly by the services
weather conditions across the region. sector, in particular, financial services,
telecommunication and insurance
In India, growth slowed for the fifth activities, which expanded by 19.6%, 19.5% EXTERNAL SECTOR DEVELOPMENTS
consecutive quarter to 5.7% (YoY) in the and 10.9% respectively in the first nine
On the external front, the benefit of low
first quarter of FY2017/18 (April-June months of 2017. The industry sector grew
oil prices was offset by greater imports of
2017), as businesses began preparing for marginally, driven by construction and
food and petroleum due to the drought,
the impending Goods and Services Tax manufacturing, which reported growth of
while the impact on agricultural exports
(GST) which came into effect in July 2017. 2.6% and 2.4% respectively for the same
was eased by higher global tea prices.
nine-month period in 2017. The country’s
In Pakistan, growth continued to core agricultural sector, however, once The country’s cumulative export earnings
accelerate in FY2016/17 (July-June) to again faltered in the face of both severe increased by 9.4% to USD 10,341 Mn
5.3%, somewhat below the government’s drought and intermittent flood conditions, during the first eleven months of 2017,
target of 5.7%, on the back of slower-than- in turn leading to a rapid deceleration in fuelled by higher earnings from tea, spices
expected industrial sector growth. agricultural output in 2017. and the apparel sector, which benefited
from the reinstatement of the European
Elsewhere in the region, activity in 2017 Consumer price inflation overshot the
Union’s GSP+ trade arrangement earlier in
was underpinned by strong construction, customary mid-single-digit target,
the year.
especially in Bhutan and the Maldives, mainly due to high food prices associated
where large-scale infrastructure projects with weather-related domestic supply At the same time, cumulative import
were implemented. In Nepal, floods in more disruptions, revisions to indirect taxes and expenditure increased by 9.0% to USD
than one-third of the country disrupted increased prices of imported commodities. 18,931 Mn during the first eleven months
the strong post-earthquake recovery in
of 2017, leading to an increase in the
56 SAMPATH BANK PLC ANNUAL REPORT 2017
Operating Environment
20
2,000
7,018
7,242
6,980
6,080
15
THE BANKING SECTOR 0
2017
2014
2015
2016
Nov.
REPORTED AN INCREASE 10
18.9
19.4
18.9
11.1
10.5
10.3
0 10.3
Dollar during the year 2017.
THE PREVIOUS YEAR.
2014
2015
2016
2017
Nov.
Interest Rates
(%)
12
10
4
Dec 14
Dec 15
Dec 16
Dec 17
Jun 14
Jun 15
Jun 16
Jun 17
Standing Deposit Facility Rate (SDFR) Average Weighted Prime Lending Rate (AWPLR)
Standing Lending Facility Rate (SLFR) Average Weighted Fixed Deposit Rate (AWFDR)
INTRODUCTORY INFORMATION | MANAGING OUR BUSINESS MANAGEMENT DISCUSSION & ANALYSIS RISK & GOVERNANCE | FINANCIAL INFORMATION | SUPPLEMENTARY INFORMATION 57
from 15.3% recorded in the same period by the fourth tranche of USD 251.4 Mn in 17.5 16.1
15
of 2016, driven by a 19.9% increase in December 2017. 13.7
interest payments during the first ten 10
2015
2016
2017
during the first ten months of 2017 by banks increased in 2017, albeit at a
increased only marginally to 4.5% slower pace than that seen in previous Credit Growth
of estimated GDP, from 4.4% in the years. The cumulative expansion in NPL
corresponding period of 2016. credit during the year was Rs 890 Bn or
16.1% compared to Rs 826 Bn or 17.5% Borrowings
As part of the Government’s efforts to reign reported in 2016. Credit to the Industry Following the CBSL’s decision to raise
in excess monetary growth and support and Agriculture sectors grew, while credit policy rates by 25 bps in March 2017,
external sector stability, the CBSL raised under the Personal Loans and Advances borrowings by the banking sector dropped
policy rates in March 2017 by 25 bps, category also increased, fuelled by a sharply and continued to decline steadily
with the Standing Deposit Facility Rate growth in Pawning Advances. Meanwhile, thereafter. The cumulative industry-wide
(SDFR) and Standing Lending Facility Rate credit extended to the Services sector borrowings reached only Rs 1,607 Bn for
(SLFR) increasing to 7.25% and 8.75% in particular slowed, largely due to the the year 2017, compared to Rs. 1,696 Bn
respectively. decline in credit flows to the Financial and in 2016.
Business Services sub-sector.
Significant progress was also made
Due to relatively high interest rates offered
towards introducing much-needed fiscal Despite the credit expansion slowing down by term deposit products, the industry
reforms, with Parliamentary approval being in 2017, the banking industry recorded an experienced difficulty maintaining CASA
granted for two major pieces of legislation.
ratios at 2016 levels. This resulted in the
58 SAMPATH BANK PLC ANNUAL REPORT 2017
Operating Environment
2015
2016
Sep.
FINANCIAL CAPITAL
asset & the liability portfolios to overcome the year ended 31st December 2017, led
the pressure on net interest margins. The mainly by an increase in realized exchange
removal of the ceiling imposed by the income. Consequently, other operating
CBSL on certain products also helped to income for the year 2017 increased to Rs
improve the Interest Income. Meanwhile, 3.0 Bn, from Rs 2.6 Bn reported for the
despite stiff price competition, the Bank year 2016.
managed to improve its NIM to 3.91% in
Scan this QR code for a more comprehensive 2017 from 3.87% in 2016. The CASA ratio Impairment Losses
view of our Management Approach on Impairment losses increased by 62.7%
however declined from 38.4% in 2016 to
Financial Capital
34.9% in 2017 as customers were found partly due to increase in the portfolio size
www.sampath.lk moving from savings to high yielding term and partly due to a few newly-impaired
deposits amidst a widening of the interest individual customers. The latter triggered
difference between the two, on the back of an increase of Rs 427.5 Mn in individually
an upward revision in interest rates by the significant impairment provision for the
year. The collective impairment provision
INCOME STATEMENT ANALYSIS CBSL in March 2017.
too showed an increase of 90.9%, on par
Gross Income with the increase in portfolio size and
The Gross income of the Bank improved Demand & Saving Deposits due to improvements done to the models
by Rs 25.0 Bn or 37.0% to Rs 92.6 Bn, during the last quarter of 2016.
helped by a strong 86.0% contribution (Rs Bn)
from Fund Based Income (FBI) where Operating Expenses
200
a robust increase in business volumes Total operating expenses recorded
were reported in 2017. The FBI to Total 150 a growth of 9.4% in 2017, being the
Operating Income (TOI) ratio, which consequence of higher personnel expenses
stood at 70.9% for 2017, showed a slight 100 resulting from salary increments, increase
increase over the previous year’s ratio of in other expenses due to higher VAT rate
32.8
34.9
35.6
160.7
163.3
184.4
recorded a strong growth of 21.1% from Rs owing to system upgrades etc. However,
9.6 Bn in 2016 to Rs 11.6 Bn in 2017. 0 it is noteworthy to mention that growth in
2017
2014
2015
2016
2015
2016
13.3
15.5
16.9
for the year 2016, recorded a growth of Rs also grew by 12.1%, bolstered by an 0 0
2014
2015
2016
2017
5.6 Bn (24.7%) to touch Rs 28.4 Bn in the increase in dividend income earned from
current year, supported by growth in loans financial assets. Other operating income
and advances and timely re-pricing of the Operating Expenses
too recorded a YoY increase of 12.6% for
Cost to Income (RHS)
INTRODUCTORY INFORMATION | MANAGING OUR BUSINESS MANAGEMENT DISCUSSION & ANALYSIS RISK & GOVERNANCE | FINANCIAL INFORMATION | SUPPLEMENTARY INFORMATION 61
6.1
9.1
2015
2016
13
in 2016 to 23.35% in 2017, mainly due to 10.8
219.4
the infusion of Rs 7.6 Bn to the equity base 600
188.9
9.1
10 by way of a rights issue in November 2017.
138.8
9.2
2017
2014
2015
2016
400
120.4
458.8
377.4
562.9
2015
2016
2015
2016
Financial Capital
342
409
516
630
HONOUR OF BEING 10 0 0
2017
2014
2015
2016
PROBABLY THE ONLY
18 Total Deposits
BANK IN SRI LANKA TO Term loans Pawning Liquid Asset Ratio (RHS)
Overdraft Credit cards
SURPASS RS 12 BN PAT Import loans Money market loans
Housing loans Capital
MARK IN JUST 30 YEARS. Export loans
Staff loans
Refinance loans As discussed earlier, the CBSL introduced
Leasing Others
BASEL III to the Sri Lankan Banking
industry with effect from 1st July 2017. The
Liabilities
full implementation would take place in
Sampath Bank’s deposit base expanded three phases over a period of 18 months,
Rs 392.5 Bn by more than Rs 100 Bn for the second
consecutive year to surpass Rs 0.6 Tn mark
targeting to be complete by 1st January
2019, at which point Sampath Bank would
for the first time in its history. Growing at
need to maintain its Tier I Capital Adequacy
Total Term 22.1%, the Bank’s deposit growth for the
Ratio (CAR) at 10% and its Total CAR at
year surpassed the industry growth rate
Deposits of 17.5% for the same period. As a direct
14%. In order to fall in line with these new
regulatory requirements, the Bank raised
result, an improvement in the Bank’s
+30% 2016 : Rs 301.0 Bn market share was seen, rising from 8.2% Rs 7.6 Bn worth of Tier I Capital by way of a
in 2016 to 8.5% in 2017. The above- rights issue in November 2017 and
mentioned growth was driven by a robust Rs 6 Bn worth Tier II Capital by way
increase in term deposits and, to a lesser of a BASEL III compliant Debenture in
extent, by CASA products. Consequently, December 2017. Moreover, the Bank has
the Bank’s CASA ratio decreased slightly already made an announcement to raise
from 38.4% in 2016 to 34.9% in 2017. a further Rs 5 Bn by way of a BASEL III
Rs 63.6 Bn Deposit Growth -
compliant Debenture with an option to
go up to Rs 7.5 Bn to strengthen its Tier II
Industry Vs Bank Capital further. Simultaneously, in order to
Shareholders’ (%) strengthen the Tier I Capital requirements,
Fund 30
a second rights issue was announced in
December last year, to raise a further sum
+43% 2016 : Rs 44.5 Bn 26.1
of Rs 12.5 Bn.
25
19.7 22.1
20
16.5
13.1 17.5
15
15.3
12.4
10
2017
2014
2015
2016
Bank
Industry
INTRODUCTORY INFORMATION | MANAGING OUR BUSINESS MANAGEMENT DISCUSSION & ANALYSIS RISK & GOVERNANCE | FINANCIAL INFORMATION | SUPPLEMENTARY INFORMATION 63
(Rs)
80
(Rs) 40
34.66
400 28.52 18.75
20
17.20
315.70 11.00 13.00
325
0
2017
2014
2015
2016
248.00 260.40
250
236.30
Earnings per Share
175 Dividend per Share
30,912
35,125
63,650
100
2017
2014
2015
2016
Dividend
Given the need to increase its capital base
Group Performance to comply with BASEL III requirements, the
Sampath Bank group consists of four fully Sampath Bank Board of Directors decided
owned subsidiaries, viz. Siyapatha Finance to declare a dividend of Rs 17.20 per share
PLC, SC Securities (Pvt) Ltd, Sampath for the year ended 31st December 2017, to
Centre Ltd and Sampath Information be satisfied in the form of scrip dividend.
Technology Solutions Ltd. However,
given the scale of operations of the core Net Asset Value per Share
business, the results of these four entities
are not material to the Bank and hence a (Rs)
brief review of their operations are given in
400
the section on Subsidiaries on Page 105 of
the Annual Report.
325
293.02
2015
2016
Kilinochchi District
BRANCH NETWORK
1 1 391
Mullaitivu ATMs
District
The branch network has been the 1 1
cornerstone of our success over the past
thirty years. Having invested heavily over 2 2
1 1
the years to build the island-wide branch Mannar Vavuniya
District District
footprint, Sampath Bank now lays claim
to the 3rd-largest branch network among Trincomalee
District
private banks in Sri Lanka. Our network of
229 fully-fledged branches is equipped to 6 7 4 4
offer the entire gamut of financial products Anuradhapura
District
services to all customer segments across
the country, while our 12 super branches
8 10 Polonnaruwa
in key strategic locations offer 365-day Puttalam
District
District 3 3
banking services and extended banking
Batticaloa
hours for customers who demand more. District
13 19 6 7
Kurunegala
Geographical Distribution District 3 4
Matale
of the Branch Network District
Kandy District
9 Kegalle 15 22
District 7 7
9 27 56 5 8 Ampara
13 Gampaha District
District Nuwara Eliya
14
100 District 5 7
17 Badulla
63 Colombo
148 District
District 4 5 4 5
21
Kalutara Ratnapura Monaragala
District District District
22
10 21 9 10
24
Western Northern
Southern North Central
Central Uva 12 15
Hambantota
District
North Western Galle
8 13 4 5
Eastern District
Sabaragamuwa Matara
District
INTRODUCTORY INFORMATION | MANAGING OUR BUSINESS MANAGEMENT DISCUSSION & ANALYSIS RISK & GOVERNANCE | FINANCIAL INFORMATION | SUPPLEMENTARY INFORMATION 65
ATM NETWORK
A strong ATM presence is a vital component
of our business as it remains one of the
most visited customer touch points among
consumer banking customers. Given the
immense popularity of the ATM, ongoing
investments to expand the network
continued in 2017 as well, with 11 new
ATMs being commissioned during the year,
bringing the total network to 391 as at
31st December 2017. While strengthening
our geographical footprint, more recently
we kicked off a programme to upgrade
all ATM units and bring the network on
Relocation of Gangodawila Branch par with international standards. The
programme made good progress in 2017,
With our geographical footprint Activity 2017 2016 2015 with 49 units being replaced with new
firmly in place, the current branch upgraded ATMs at a cost of USD 381,000.
Relocations 04 05 05
investment programme focuses mainly
(No. of branches)
on consolidating branch operations A pilot project to install cash re-cycler
New branch openings 01* 04 05
and strengthening service delivery hardware also commenced in November
Deposit Kiosk installation 51 66 38
mechanisms. Accordingly, with the 2017. The project is aimed at optimizing
completed (No. of
exception of the dedicated FCBU extension cash availability and streamlining the ATMs’
branches)
office in the Katunayake Export Processing cash accepting and dispensing process.
Banking Robot 1 _ _
Zone, no new branches were commissioned
installation completed The other major development for the year
in 2017. However, a number of branches
(No. of branches) was the launch of the “Drive-through” ATM
were relocated, in tandem with the
Branch refurbishment 16 12 12 in December 2017. Located securely within
strategic decision to strengthen visibility
programme completed the Dharmapala Mawatha Super branch
and enhance customer convenience
(No. of branches) premises, it provides an added layer of
through better accessibility. Ongoing
* FCBU Extension office at Katunayake EPZ safety and convenience, as patrons of the
investments to upgrade branch facilities
ATM can drive in through a dedicated entry
gathered momentum in 2017, notably the
driveway and access its services from
deposit kiosk installation effort. A number
of other groundbreaking developments
were rolled out, key among them being the
“Banking Robot”, an automated teller in
the form of a humanoid robot operating
on an advanced Artificial Intelligence (AI)
interface to perform tasks activated by the
customers’ vocal commands.
Manufactured Capital
400
82
83
77
41
300
Sampath PAYAPP - The Most Convenient Way of Making Payments
200
our physical and electronic distribution solution, providing an easy, safe and
100
channels to enable customers to transact secure way for users to make transactions
285
298
293
309
2015
2016
stop-shop for corporate payment, capable One of the main initiatives undertaken to support the changes ensuing from
of delivering an unprecedented level of during the year was to facilitate remote the paradigm shift programme, a new
convenience. Through these investments, access to the Bank’s core banking system, electronic Credit Approval System (CAS)
we also expect to boost Sri Lanka’s enabling the field sales force to connect was set up to expedite the delivery process
position on the ease-of-doing business to the core banking system through their to Corporate Credit clients. A central
global index. In testimony to the fact, we hand-held and mobile devices. As a result repository system was established at
have seen a sharp increase in the year- of this development, sales personnel are the Network Services Centre to give the
on-year usage volumes, with not only large now equipped to assist customers to open management access online real-time MIS
corporates, but also SMEs now signing up new accounts, update their repayment information regarding the consolidated
for the convenience offered through the schedules etc., thereby eliminating the portfolios of high-net-worth customers.
Sampath Vishwa portal. need to visit the branch for such matters.
The introduction of e-signatures to
IT INFRASTRUCTURE In an effort to leverage on emerging streamline the Accounts Opening process
technologies and to help drive the was another major initiative undertaken
The Bank’s ongoing digitization agenda
enhancement of the Bank towards in 2017, with the first phase of the project
continued at an accelerated pace in 2017.
digitalization, the Bank established a new being rolled out across 23% of the branch
Ongoing investments to revamp our IT
Artificial Intelligence based solution with network. The balance 77% is due to be
infrastructure and enhance our technology
a robot ATM. It is a breakthrough which covered in 2018.
capabilities continued throughout the year.
revolutionizes the industry.
The manual transfer of documents
The most significant development for
Other key efforts for the year included the between branches was also upgraded and
the year was the migration to the Finacle
roll-out of new lead management systems a new digitized inter-branch document
10 core banking system as part of the
for the Credit Control Unit (CCU) as well as transfer mechanism was introduced in
strategy to upgrade the existing system in
the Card Centre, aimed at strengthening 2017, all of which have led to a notable
place for the past 11 years. The Finacle 10
recovery efforts at both units. Meanwhile, reduction in administration costs.
core banking solution is a comprehensive
yet agile business solution, which allows us
to integrate our core banking needs quickly
and effectively in response to changes
in the market dynamic. The solution’s
readymade integration adaptors and strict
compliance to industry standards will also
contribute significantly towards reducing
integration costs, in turn helping to
advance our digitization agenda.
INTELLECTUAL CAPITAL
www. sampath.lk
y Availability of a comprehensive
suite of products to cater to
diverse customer segments at
each stage of their lives
INTRODUCTORY INFORMATION | MANAGING OUR BUSINESS MANAGEMENT DISCUSSION & ANALYSIS RISK & GOVERNANCE | FINANCIAL INFORMATION | SUPPLEMENTARY INFORMATION 69
HUMAN CAPITAL
www.sampath.lk
were also rolled out through the e-learning nurturing and, at the same time,
4
platform, covering Branch Operations, intellectually stimulating to give each
Compliance, Credit Operations, Leadership individual the opportunity to learn, perform 3
Development, Customer Relationship and continue to strive for excellence.
Management, and Working Capital 2
Key Initiatives for 2017
Financing.
Extending the Performance-Based Bonus 1
The above were targeted efforts to expand Scheme (PBBS) to all employees to create a
2.3
1.2
1.5
3.0
0
the number of Distance Learning hours, performance culture
2017
2014
2015
2016
carried with the intention of covering a Following its successful roll-out for
minimum of 50% of total training hours Corporate Management in 2015, the PBBS
for the year through Distance Learning. We was extended to all employees in 2016. Strengthen Customer Orientation
were able to achieve 52% training through The PBBS aims to drive the team members Primary Objective
distance learning programmes. towards higher levels of performance Reorient staff to further adopt a
and productivity in order to realize the “Customer-First” mindset, which would
Banks’ vision; “Growing force in Sri in turn help strengthen customer loyalty
Lankan financial services”. Based on team towards the Bank.
performance, the PBBS was launched
under the theme: “one for all and all for
one”.
72 SAMPATH BANK PLC ANNUAL REPORT 2017
Human Capital
STEPS WERE
TAKEN TO FURTHER
STRENGTHEN EMPLOYEE
COMMUNICATION BY
INTRODUCING NEW
COMMUNICATION
CHANNELS INCLUDING
VIDEO CONFERENCING
AND THE EMPLOYEE
HOTLINE, TO GIVE
Awards Ceremony - Sampath Daru Daskam and Rewards for Children
EMPLOYEES DIRECT
ACCESS TO SENIOR
Key Initiatives for 2017 knowledge with a view to improving service
Restructuring the Call Centre delivery. MANAGEMENT.
Renamed as the “Customer Care Centre
207 teams with 1,419 team members
(CCC)”, the aim of the restructuring
participated. A special two-way communication
initiative was to set up the CCC as a
programme was launched to coincide with
strategic business unit. The move was
Strengthen Employee Relations and the roll out of the PBBS. The move was
followed by a series of structural changes
Employee Engagement aimed at creating awareness, commitment
to develop a more service-oriented
Primary Objective for the desired outcomes and obtaining
mindset among the CCC team. To further
To ensure employee commitment and feedback from employees regarding the
support this, a new performance-based
engagement through effective HR PBBS.
reward scheme was rolled out to identify
and reward top performers. Operations practices.
Employee Communication
at the CCC were further segmented as
inbound and outbound in a bid to expedite Key Initiatives for 2017 Steps were taken to further strengthen
the response times for each segment and Change Management Programmes employee communication by introducing
to enhance the cross sell ratio. As a result new communication channels including
To facilitate a smooth transition and
of these changes, we have been able to video conferencing and the employee
prevent a blow-back from the Paradigm
maintain the call abandon ratio well below hotline, to give team members direct
Shift programme, a special task force was
the standard call centre ratios. access to senior management.
appointed within the HR department to
ensure that team members are committed
Continuous Training on CRM and Selling Skills “From MD’s desk” was a communication
to the change programme and continue
initiative to share vital information,
Identifying the need to be “Customer to stay motivated. In addition special
business progress, convey the
Centric” we conducted series of training attention was made to;
management expectations and to
programmes covering a total of 2,211
receive constructive feedback from team
front line and supervisory staff. Apart y Handle grievances of team members
members.
from classroom sessions, participants directly affected by the “Paradigm
were exposed to case studies and role- Shift”
Improvements were also made to enhance
play sessions based on real customer
existing communication channels,
experiences. y Redeploy employees through training
specifically; “Sampath Sandeshaya”; the
and re-skilling
Banks’ in-house employee magazine and
Introduction of Innovative Training Solutions
the “Sampath Emergency Notification
As an outcome of these effective change
An online quiz competition was introduced System” (SENS).
management strategies, we successfully
to encourage employees to advance their
managed over 307 staff reassignments
stemming from the paradigm shift.
INTRODUCTORY INFORMATION | MANAGING OUR BUSINESS MANAGEMENT DISCUSSION & ANALYSIS RISK & GOVERNANCE | FINANCIAL INFORMATION | SUPPLEMENTARY INFORMATION 73
HR Business Partner
Strengthened the role of HR Business
Partners with a view to assist the
management of respective zones in order
to achieve business targets by effective
implementation of HR policies and
procedures in the branches under their
purview. HR Business partners have visited
and conducted discussions with the staff
and attended to various requirements that
have surfaced during these visits.
Sampath STARS
Sampath Special Thanks and Recognition
Scheme (Sampath STARS) recognises the Annual Cricket Carnival 2017
outstanding individuals and teams who
have made exemplary contributions and
A special disaster relief programme Engagement with Children of Sampath Team
commitment in various spheres. The Bank
conducted in the aftermath of extreme The key effort in this regard is the “Daru
has recognised 184 individuals and teams
weather conditions experienced in 2017 Daskam” event held to showcase the
at the ceremony held on 22nd December
provided relief to 69 team members who talents of our employees’ children. 378
2017.
were affected. This included provision children between the ages of 4 to 17 years
Health and Wellbeing of essential items, transportation and participated in this year’s competition in
assistance in the recovery process. the areas of singing, dancing, instrumental,
Our programmes to uplift the health
and well-being of our team members art and speech. Further, the “Rewards for
Sports and Recreation Children” programme annually recognizes
encompass the Annual Health Conference,
Annual Athletic Meet was held on 6th children of team members who have
‘Health and You’; E-Magazine on health
August 2017 and the grand finale of the excelled in national examinations, sports
related topics and E-Communications
Annual Cricket & Netball Carnival was held and special achievements in different
on health and well-being. Annual Health
on 26th August 2017. Colours Nite and fields. 37 children were recognised this
Conference themed ‘Vigour to Move
Sampath Nite were held on 21st April 2017 year.
Forward’ was held on 11th November
and 9th December 2017 respectively. 180
2017 recorded a participation of over 250
teams participated in the quiz competition
team members where eminent medical
held on 19th February 2017.
professionals delivered sessions. Further,
we have in place “Helping Hands”, the
Counselling Cell to provide psychological
support for personal, family and work
related issues. Further Special yoga and
first aid programmes were conducted
during the year.
74 SAMPATH BANK PLC ANNUAL REPORT 2017
Human Capital
Lost days and absenteeism due to health and safety issues – NONE
INTRODUCTORY INFORMATION | MANAGING OUR BUSINESS MANAGEMENT DISCUSSION & ANALYSIS RISK & GOVERNANCE | FINANCIAL INFORMATION | SUPPLEMENTARY INFORMATION 75
AVERAGE TRAINING HOURS PER YEAR PER EMPLOYEE BY GENDER AND EMPLOYEE CATEGORY GRI 404-2, 3
No. Competency Area Participants Training Hours Grade
Management
Management
Management
Management
Management
Other Grades
Operational
Grand Total
Corporate
Executive
Female
Female
Middle
Senior
Junior
Staff
Male
Male
(1) Operations (Cash/Accounts Opening/ 843 454 7,363 3,965 21 327 1,475 1,594 1,848 6,054 8 11,327
Pawning/Cheques/Clearing/Credit Cards)
(2) Credit and Recoveries 274 149 2,268 1,221 25 188 695 901 472 1,208 - 3,489
(3) International Operations (Trade/Foreign 141 76 1,455 784 147 136 174 338 465 979 - 2,239
Currency Operations)
(4) Risk & Compliance 397 215 2,982 1,606 58 383 656 1,557 1,014 920 - 4,587
(5) Finance & Accounting 61 33 634 342 69 141 120 184 326 136 - 976
(6) Marketing (Products/Branding) 159 87 1,154 622 28 - 109 621 650 368 - 1,776
(7) Human Resource Management (HRM) 34 19 181 98 - 150 39 58 7 23 2 279
(8) Legal & Good Governance 44 24 534 287 5 78 198 464 68 8 - 821
(9) Other Technical Programmes 152 82 1,479 796 120 785 378 395 333 265 - 2,275
(Treasury, etc.)
(10) Orientation Programmes 197 107 6,010 3,236 - - 45 170 304 8,712 16 9,247
(11) Customer Service Excellence & Selling Skills 169 91 1,352 728 - 144 82 245 418 1,192 - 2,080
(12) Leadership & Management (Competency 375 203 4,065 2,189 307 1,188 1,906 1,287 1,288 278 - 6,254
Development Programmes/Strategic
Management/Change Management)
(13) IT Skills 1,607 865 22,840 12,299 62 670 1,829 4,161 8,992 19,426 - 35,139
(14) Communication Skills 94 51 764 412 - - - 8 - 864 304 1,176
(15) Health & Safety 76 42 614 330 - 32 72 104 160 464 112 944
(16) Other Non-Technical Skills 164 89 946 509 115 433 226 175 105 79 324 1,455
(17) E-learning and other online solutions 50,300 27,085 45,836 24,680 - - 686 8,087 13,769 47,974 - 70,516
Grand Total 55,087 29,672 100,477 54,102 957 4,655 8,688 20,347 30,218 88,949 766 154,579
All employees receive regular feedback on performance and career development and their level of performance is assessed on annual basis.
76 SAMPATH BANK PLC ANNUAL REPORT 2017
Human Capital
AVERAGE TRAINING HOURS GRI 404-1 AVERAGE TRAINING HOURS PER EMPLOYEE - CATEGORY WISE
2017 2016 No. of Hours
Average training hours per employee 39 34 Corporate Management 38
Average training hours per female 39 35 Senior Management 42
Average training hours per male 39 34 Executive Management 35
Middle Management 38
Junior Management 38
Operational Staff 42
Other Grades 5
BASIC SALARY & REMUNERATION RATIO BY GENDER & EMPLOYEE CATEGORY GRI 405-2
Female Male
Corporate Management 1.00 1.18
Senior Management 1.00 1.06
Executive Management 1.00 0.94
Middle Management 1.00 0.97
Junior Management 1.00 0.99
Operational Staff 1.00 0.94
The Bank has given an equal opportunity for all employees and does not tolerate any form of unfair discrimination on the basis of race,
gender or disability. The ratio of basic salary at the entry level for male and female is 1:1. However, this ratio may change due to different
service period of employees in the Bank and at a particular salary grade.
Composition of Governance Bodies and Breakdown of Employees per Employee Category According to Gender, GRI 405-1
Age Group, Minority Group Membership, and Other Indicators of Diversity
Range Corporate Senior Executive Middle Junior Operational Other Grand
Management Management Management Management Management Staff Total
Female
Female
Female
Female
Female
Female
Female
Male
Male
Male
Male
Male
Male
Male
18-20 - - - - - - - - - - 16 9 - - 25
21-30 - - - - 1 - 6 4 50 31 1,165 420 4 10 1,691
31-40 - - 1 2 49 7 250 102 418 244 245 281 12 35 1,646
41-50 10 3 70 17 122 43 103 60 18 32 - 4 18 45 545
51-55 9 2 14 7 13 13 6 6 1 1 - - 9 22 103
Above 55 1 - - - - - - - - - - - - - 1
Grand Total 20 5 85 26 185 63 365 172 487 308 1,426 714 43 112 4,011
Percentage (%) 80 20 77 23 75 25 68 32 61 39 67 33 28 72 -
INTRODUCTORY INFORMATION | MANAGING OUR BUSINESS MANAGEMENT DISCUSSION & ANALYSIS RISK & GOVERNANCE | FINANCIAL INFORMATION | SUPPLEMENTARY INFORMATION 77
y Redesigning the “Pubudu Account” y Reporting all customer complaints Analysis of Customer Call-ins 2017
gift scheme to match current market related to service issues at branches
trends and the emerging needs of the to DGM-Branch Banking.
target market.
y Compile and report credit card issues 100
y Discontinuation of the “Travel to AGM HR, GCHRO and Head of Card
80
Lite” card due to local regulatory Centre.
restrictions and technical issues. 60
y Compile and report issues at EOD, IT
40
Tactical Marketing related issues to AGM HR, GCHRO and
Primary Objective IT/EDP monthly. 20
6,585
5,287
8,156
Create awareness and increase visibility 0
y Report key customer issues of the Inquires Requests Complaints /
across target customer segments. Concerns
month to AGM HR & GCHRO.
Scan this QR code for a more comprehensive Education for All 62 15.0 42,533
view of our Management Approach on
Social and Relationship Capital - Community Entrepreneurship
19 8.8 14,543
Development
www.sampath.lk
Community Capacity
8 6.4 79,667
COMMUNITY CAPITAL Building
VALUE CREATION MODEL
Emergency Response 8 1.0 6,508
Key Inputs
Note: Investment in other CSR initiatives and CSR communication: Rs 3.0 Mn
MATERIAL TOPICS
Our investments in Community Capital
stem from two material aspects, namely,
Community Development and the
Promotion of Financial Inclusion. These
material aspects along with their respective
Management Approaches are captured in
detail on our website. Please use the above
QR code.
INTRODUCTORY INFORMATION | MANAGING OUR BUSINESS MANAGEMENT DISCUSSION & ANALYSIS RISK & GOVERNANCE | FINANCIAL INFORMATION | SUPPLEMENTARY INFORMATION 81
Primary Objective
PROJECT SUMMARY
To provide grade 5 students with the requisite knowledge
Rs 5.6 Mn and skills to help them better prepare for their first public
Investment from examination.
CSR Fund
Project Scope
The “Pahe Sishyathwa” programme is an island-wide initiative,
07
which aims to prepare students for their first public examination.
Seminars The programme is intended not merely to improve the theoretical
conducted knowledge of students, but also offers key insights into critical
aspects of the examination process while also motivating
>6,400 students to aspire for success by envisioning broader life goals.
Children In addition, the programme also includes a session to encourage
benefited parental support in the child’s journey towards a meaningful
education. The “Pahe Shishyathwa” programme has been
successfully conducted for the past nine consecutive years by
>4,500
Sampath Bank in collaboration with Neth FM.
Parents
benefited Statistics for 2017
District Number of Students Number of Parents
Participated Participated
Batticaloa 834 252
Colombo 933 760
Galle 1,250 820
Gampaha 1,080 900
Kurunegala 935 740
Monaragala 818 700
Ratnapura 608 452
PROJECT “SOAR ABOVE THE REST, INTERN WITH THE BEST” – INTERNSHIP PROGRAMME FOR SCHOOL LEAVERS/UNDERGRADUATES
Primary Objective
PROJECT SUMMARY
Provide school leavers / undergraduates and exposure to the
Rs 37.7 Mn corporate environment.
Investment from
Project Scope
Bank’s Funds
During the eleven month programme, interns are assigned to
Branches / Departments and are expected to work in a range
553 of cross-functional areas, enabling them to gain knowledge,
School leavers develop their leadership skills and enhance their employability.
trained The internship programme is an ongoing initiative of the Bank.
251
Undergraduates
trained
82 SAMPATH BANK PLC ANNUAL REPORT 2017
Primary Objective
PROJECT SUMMARY
Uplifting educational standards of underprivileged schools in Sri
Rs 7.1 Mn Lanka.
Investment from
Project Scope
CSR Fund
The project is a systematic intervention to assist underprivileged
37 schools from each province around the island by developing
the required infrastructure and providing other necessities. In
Schools
celebration of the Bank’s 30th anniversary, a total of Rs 7.1 Mn
facilitated
was invested to assist 37 schools in 19 districts.
>21,000
Progress
Students
benefited District No. of No. of District No. of No. of
Schools Students Schools Students
Facilitated Benefited Facilitated Benefited
Ampara 1 135 Kegalle 2 415
Anuradhapura 3 1,872 Kurunegala 3 380
Batticaloa 3 1,520 Mannar 1 945
Colombo 2 415 Matara 4 916
Galle 1 160 Monaragala 1 400
Gampaha 1 219 Polonnaruwa 2 1,000
Hambantota 2 500 Puttalam 1 219
Jaffna 2 571 Ratnapura 2 10,750
Kalutara 1 206 Trincomalee 1 420
Kandy 4 945
INTRODUCTORY INFORMATION | MANAGING OUR BUSINESS MANAGEMENT DISCUSSION & ANALYSIS RISK & GOVERNANCE | FINANCIAL INFORMATION | SUPPLEMENTARY INFORMATION 83
ENTREPRENEURSHIP DEVELOPMENT
Primary Objective
PROJECT SUMMARY
To break the cycle of poverty by providing solutions to address
Rs 3.2 Mn the problem of rural unemployment.
Investment from
Project Scope
CSR Fund
“Sampath Saviya”, which commenced in 2013, is an ongoing
initiative by Sampath Bank to offer both technical support and
12 financial assistance to start-ups as well as existing business
ventures that lack of the resources to commence or expand their
Workshops
own business. The focus of the “Sampath Saviya” programme
is to first develop the entrepreneurial skills of Micro, Small &
>450 Medium Entrepreneurs (MSMEs) through specially designed
financial literacy programmes aimed at inculcating smart
Entrepreneurs
business practices among participants. Under next stage of the
benefited “Sampath Saviya” programme, those who demonstrate progress
become eligible to obtain financial assistance to further their
entrepreneurial goals. In this context, additional focus is given to
encourage youth and women who own or want to start micro and
small enterprises.
Primary Objective
PROJECT SUMMARY
To provide a networking platform for “Sampath Saviya”
Rs 5.2 Mn participants to promote their products to prospective buyers
and also to connect with industry experts, chambers and trade
Investment from
associations in order to facilitate their business expansion /
CSR Fund
diversification plans.
Project Scope
70
Held as a follow-up initiative to the “Sampath Saviya”
SME Stalls Entrepreneur Development Programme 2017, the SME fair
provided the opportunity for “Sampath Saviya” participants to
showcase their products to potential buyers as well as to the
06
general public. Fully funded and organised by the Bank, the
Advisory Services event, which took place on 25th and 26th of November at the
Stalls BMICH, was held with the participation of the Central Bank of
Sri Lanka, Export Development Board, National Chamber of
>10,000 Commerce Sri Lanka, CEFENET Sri Lanka and the Department
of Entrepreneurship - University of Sri Jayewardenepura.
Visitors
A notable feature of the event was the special emphasis
placed on supporting women entrepreneurs, differently abled
entrepreneurs, exporters, social entrepreneurs and youth.
84 SAMPATH BANK PLC ANNUAL REPORT 2017
ENTREPRENEURSHIP DEVELOPMENT
GRI 203-1
Primary Objective
PROJECT SUMMARY
Empower farming communities in Ambagaswewa in
Rs 3.1 Mn Kahatagasdigiliya with resources needed to generate a stable
livelihood and improve their living standards.
Investment from
CSR Fund Project Scope
Full restoration of the dilapidated Ambagaswewa tank in the
76 Anuradhapura district. Spread across 28 acres, the Ambagaswewa
is the primary source of irrigation for about 40 acres of
Families benefited paddy field belonging to the 76 families involved in farming in
Kahatagasdigiliya. However, the tank bed had become shallow
>300 due to the accumulation of sludge resulting from improper
maintenance. The retention capacity too had fallen drastically due
Direct beneficiaries to damages in the bund, sluice and spill gates leading to wastage
of water. The resulting water scarcity has restricted farmers in the
area to cultivating in only one crop season per annum.
EMERGENCY RESPONSE
PROJECT “HOPE FOR A LIFE” – ASSISTANCE FOR FLOOD VICTIMS
Primary Objective
PROJECT SUMMARY
To ensure the wellbeing of flood victims in the immediate
Rs 0.6 Mn aftermath of the May / June 2017 flood.
Investment from
Project Scope
CSR Fund
Sampath Bank partnered with “Manusath Derana” to conduct
a series of health camps in Rathnapura, Bandaragama, Galle,
04 Kalawana, the areas that were severely hit by floods in May /
Medical camps June 2017. The initiative was aimed at facilitating the emergency
medical needs of flood victims and preventing the spread of
disease. At the conclusion of each health camp, essential items
>6,000
were distributed among flood victims.
Beneficiaries
86 SAMPATH BANK PLC ANNUAL REPORT 2017
NATURAL CAPITAL
The natural resources we use during the solar power systems at Negombo,
course of business, and Sri Lanka’s natural Wellawatta Super, Anuradhapura
ecosystems and rich bio-diversity are Super and Kurunegala Super
considered as our Natural Capital. branches.
2016
yEstablish Environmental & Social Risk after the Colombo Super branch in
Management System
2016. Also we have planned to install
yNew Initiatives to Reduce Energy GRI 302-1, 2, 3, 4
Consumption
yCarbon Footprint Management Energy Consumption
yNew Initiatives to Waste Management Sources : Renewable & Non Renewable
yIncrease lending to the NCRE sector
Electricity Heating Cooling Steam Solar Power
yPromote Green Inventions
Consumption 3,266,407kWh No No No No
(Head Office)
Sold No No No No No
Reductions / - - - - 49,173.7 kWh
MATERIAL TOPICS Savings
We have identified three key aspects to have Using any standards / methodology and assumptions used : No
a material impact on our Natural Capital, Using any conversion rates : No
namely; Energy, Emissions and Effluents & Energy used outside of the organisation : No
Waste. These material aspects along with
their Management Approaches are captured 2017 2016 Reduction
in detail on our website. Please use the Energy Intensity Ratio (Head Office) 2,969 kWh 3,340 kWh 371 kWh
above QR code. (Electricity consumption per employee per annum)
INTRODUCTORY INFORMATION | MANAGING OUR BUSINESS MANAGEMENT DISCUSSION & ANALYSIS RISK & GOVERNANCE | FINANCIAL INFORMATION | SUPPLEMENTARY INFORMATION 87
Natural Capital
Environmental CSR
We want to be known as a model
environmental steward. Through the
environmental initiatives that we chose to
invest in, we strive to elevate our status Environmental Investment Employee Engagement Number of
among our competitors and the broader Initiatives From CSR Volunteered Volunteer Beneficiaries
industry. Fund Employees Hours
WE REALISE THAT AS Key Initiatives for 2017 “Sampath Green School” Programme
“Sampath Green Inventor” Thurstan College, Colombo was selected
A BANK, WE HAVE THE as the first school to kick off the “Sampath
“Sampath Green Inventor” is the iconic
ABILITY TO PLAY A BIGGER green initiative of Sampath Bank launched Green School” project.
“Sampath Green Inventor” Workshop Tree Planting Project at Dee Elle Oya
INTRODUCTORY INFORMATION | MANAGING OUR BUSINESS MANAGEMENT DISCUSSION & ANALYSIS RISK & GOVERNANCE | FINANCIAL INFORMATION | SUPPLEMENTARY INFORMATION 89
“Parisarayata Vinadiyak” Social Media Campaign Internal Campaign on “FABRIC ECO BAG”
90 SAMPATH BANK PLC ANNUAL REPORT 2017
We make a conscious effort to allocate our so however, we have to often contend with
capital and resources efficiently to ensure a trade-off between our material capitals.
that we can continue to maximise long- Given below is a summary of the trade-offs
term value for all stakeholders vis-à-vis made in 2017, in our endeavour to reach
the Bank’s key strategic themes. In doing these goals.
Maintaining industry The business of banking is subject to numerous regulatory changes. Financial Capital
leadership in Implementing new directives sometimes prove to be costly and in turn impact
Social and Relationship Capital
compliance the Bank’s short-term profits. However, leadership in compliance serves to
enhance stakeholder perceptions regarding the Bank and thereby contributes Intellectual Capital
towards strengthening brand equity in the long term.
Pursuing operational In the pursuit of excellence, the Bank is often required to balance the trade Financial Capital
excellence and cost off between short-term profit growth against safeguarding the long-term
Manufactured Capital
leadership sustainability of the core business by investing in;
Be known as the Bank As a leading Bank in Sri Lanka, Sampath Bank serves all segments of the Financial Capital
for all Sri Lankans market. This means the Bank may on occasion be required to contend with
Social and Relationship Capital
certain segments, which have lower levels of profitability. However despite
their low return, it is the Bank’s policy to build strong relationships with these
segments as well, as over time, they are likely to migrate to the middle-market
segment, in turn making a stronger contribution towards the Bank’s bottom line
in the long term.
Safeguard Continuous and ongoing investment in developing people is critical to Financial Capital
competitive maintaining the Bank’s market position as an employer of choice. While the
Human Capital
advantage in the added cost of people development has an impact on the Bank’s bottom line in
market the short term, in the long term, a highly motivated and engaged team would Intellectual Capital
give the Bank a competitive edge and add significantly to brand equity.
Reinforce the While, investments made towards the community and the environment are a Financial Capital
Bank’s position as a drawdown on the Bank’s profits in the short term, such efforts bring broader
Social and Relationship Capital
responsible systemic change and go on to benefit both present and future generations
corporate citizen of Sri Lankans. In the long term, these efforts will strengthen overall brand Natural Capital
reputation as a responsible corporate citizen and a truly green Bank.
Intellectual Capital
91
Business Reports
The Paradigm Shift .................................................92
Consumer Banking ..................................................93
Corporate Banking...................................................96
Global Banking ....................................................... 100
Nostro Accounts, Correspondent
Banks and Exchange Companies ................ 102
Treasury ................................................................... 103
Operational Support............................................. 104
Performance of Subsidiaries............................. 105
Investor Information ............................................ 106
92 SAMPATH BANK PLC ANNUAL REPORT 2017
INTRODUCTORY INFORMATION | MANAGING OUR BUSINESS MANAGEMENT DISCUSSION & ANALYSIS RISK & GOVERNANCE | FINANCIAL INFORMATION | SUPPLEMENTARY INFORMATION 93
CONSUMER BANKING
WITH ROBUST GROWTH Performance against Strategy y Increase customer retention through
Driving low-cost deposits (CASA) within a the provision of superior value-
REPORTED ACROSS rising interest rate environment proved to enhancements
BOTH CASA AND TERM be a challenge for the Bank. Nonetheless, y Providing cash-management
through continuous evaluation and
DEPOSITS, THE BANK’S proactive re-pricing strategies in
solutions to medium and large scale
entities
OVERALL DEPOSIT cognizance with market, the Bank was able
to grow CASA by more than Rs 21.8 Bn in y Focusing on overseas markets to drive
PORTFOLIO AS AT 2017 as compared to only Rs 4.7 Bn in foreign currency deposits
31ST DECEMBER 2017 2016.
LOANS AND ADVANCES
TOUCHED RS 630 BN, Notably, new value enhancements to Strategy and Focus
SIGNALLING AN boost the profile of the young saver, youth
Loan products are a critical component
and senior citizens products contributed
INCREASE OF 22.1% to a higher demand from these specific
of the core business model, with the
Bank heavily interested in growing the
YEAR-ON-YEAR. segments.
consumer-lending book. In fact, the
paradigm shift initiated in 2017 was partly
Reducing the volume of high-cost
to lay the foundation to sustainably grow
term deposits also proved to be more
challenging than initially anticipated. The the consumer-lending portfolio in the
DEPOSITS long-term. The focus for the year
Bank’s iconic reputation and financial
Strategy and Focus stability continued to attract large volumes pivoted on:
The key strategic thrust for the year of term deposits throughout 2017, despite
a conscious decision not to mobilise high- y Restructuring the workflow-
underscores the need to realign the
cost deposits. Term deposits mobilised management systems to improve
deposit mix and optimize the Bank’s long-
during the year exceeded Rs 85 Bn. operational efficiency
term yield curve by:
y Effective re-pricing and targeted
y Driving low-cost deposits in order With robust growth reported across both promotional initiatives to grow
to maintain the Bank’s CASA ratio at CASA and term deposits, the Bank’s overall volumes in each business line
levels above the industry average deposit portfolio as at 31st December
2017 touched Rs 630 Bn, signalling an
y Managing the deposit portfolio mix to increase of 22.1% year-on-year.
mitigate the impact on NIM caused by
rising interest rates Future Plans
y To maintain deposit growth at above As the Bank’s well-positioned
industry average levels deposit mobilisation strategies
continue to yield good results, the
Deposit Mix focus for the future would be to
improve scalability of the Deposit
(%)
portfolio by:
Consumer Banking
386
469
574
2015
2016
13
15
20
0 0
construction and manufacturing sector- processing and quicker turnaround times.
2017
2014
2015
2016
related SMEs, which led to a 25.9% In yet another encouraging sign, total
year-on-year increase in the portfolio. In Pawning Advances card advances grew by 16.7% compared
Pawning as a % of Total Advances (RHS) to the previous year, a sign of the growing
the housing loan segment, the portfolio
acceptance and mainstream appeal of the
recorded a robust 27.2% year-on-year
SampathCards proposition as a convenient
growth, thanks to timely strategies
Future Plans lifestyle product rather than merely a
to capitalise on the ongoing boom in
credit facility.
Sri Lanka’s housing construction and With the operational architecture now in
condominium market. place, the way forward would be to ensure
consistent growth of the consumer- Credit Card Advance Portfolio
In the leasing and hire purchase segment lending book. Achieving this would require
too, the Bank’s multi-channel promotional the Bank: (Rs Mn)
campaigns covering both ATL and BTL
12,000
platforms and several promotional y Retain existing market shares in
campaigns jointly conducted with key current strongholds
9,000
industry stakeholders also contributed to a y Build technological capacity to derive
7.0% increase in the portfolio. a competitive edge and increase 6,000
2015
2016
2015
2016
Future Plans
First established in 2002, Bancassurance
With the card operation already on a firm has demonstrated considerable growth
footing, the growth agenda for the future potential, prompting an added emphasis
would focus on: on significant increase in new business
acquisitions in 2016 and 2017, due to the
y Re-activating dormant cards through establishment of the new operating model
focused promotional campaigns and its work-flow in 2016.
96 SAMPATH BANK PLC ANNUAL REPORT 2017 MANAGEMENT DISCUSSION & ANALYSIS
CORPORATE BANKING
Exchanging an Agreement for USD 100 Mn Senior Debt from China Development Bank
CORPORATE FINANCE Performance Against Strategy With the Financial Services sector
Strategy and Focus Following through on the reconfiguration specialization being a priority, a number
strategy, the Corporate Finance direct of new lending instruments designed
Corporate Finance expanded its core focus
lending portfolio was segmented into specifically for the sector were rolled
to meet the demands of the paradigm
several critical sectors: financial services, out during the year, to enable the sector
shift initiated in the early part of 2017.
power and energy, government exposures to access alternative funding sources,
Consequently, the strategic thrust for the
and margin trading, while the Special particularly as the viability of raising funds
year was to spearhead growth by:
Projects Unit under Corporate Finance via debentures may potentially diminish
continued to structure financing deals on the back of the new Inland Revenue Act
y Introducing a new sector
for customers both via syndications and/ abolishing the tax benefits on debenture
specialization model to service the
or specially structured bilateral loans income.
needs of customers from diverse
sectors. which fed the respective sector portfolios,
especially the off-shore banking unit. In the Power and Energy sector, a number
y Building capacity to serve the of mini hydropower biomass projects which
financial services, which were The move forms part of the effort to were in the pipeline were successfully
brought under the Corporate Finance migrate to a leaner operational model as concluded in 2017. With direct lending to
umbrella following the paradigm shift well as to address the need for sector- the Power and Energy sector an ongoing
programme. Given the structural specific expertise in structuring lending focus area for Corporate Finance, the
aspects of securitisations and other facilities. Bank took the lead in a 10 year syndication
debt products into which this sector deal to finance one of the first-ever PPP
generally taps, the key focus was to (Public-Private-Partnership) based Waste-
Sector-wise
strengthen expertise in designing Corporate Finance Loan Portfolio to-Energy projects in Sri Lanka, which is
bespoke solutions that add value expected to be a much-needed solution for
(%)
to clients in the financial services the waste disposal problem the country is
2 1
sector by safeguarding them against currently facing.
2
potential risk exposures. 2
encouraging signs of growth in the final y Strengthening sector specialization THE AGGRESSIVE
quarter, indicative of improved prospects in in order to position Sampath Bank as
the year ahead. the market leader in sector-specific INDUSTRY-FOCUSED
financial solutions and corporate ACTION STEMMING FROM
Other developments for the year included advisory services, for established as
the successful completion of an IPO for well as emerging sectors.
THE NEW OPERATIONAL
which Sampath Bank was a co-underwriter.
y Building long-term, well-coordinated
STRUCTURE HAD A
Further steps were also taken to enhance
customer access through a range of new
relationships with clients, in order DIRECT IMPACT ON THE
to deliver integrated solutions which
digital solutions, another strategic move to
would help them achieve their
BANK’S EXPOSURE TO
boost fee-based income.
strategic objectives PRIORITY SECTORS OF
Meanwhile as the key custodian of the y Selectively expanding offshore THE ECONOMY.
Bank’s funding base, the Corporate Finance exposures in East Africa and East
the Corporate Credit portfolio, the
unit continued to fulfill its mandate to raise Asia via a combination of strategies emphasis for the year shifted towards:
low-cost funds and also to strengthen such as collaborating with established
the Bank’s Tier II capital and drive growth. development financial institutions/ y Consolidating the advances portfolio
Efforts for the year culminated in the our correspondent banks operating in
successful conclusion of the issuance of y Maintaining / enhancing credit
these markets.
Sri Lanka’s first ever BASEL III compliant quality of the advances portfolio by
y Participating as a financier of strengthening both the pre and post
Debenture which raised Rs 6.0 Bn of Tier
government projects via pursuing disbursement mechanism
II capital for the Bank. Leveraging on
public-private-partnership
the Bank’s position as an economically y Concentrating on sector specialization
opportunities as well as via direct
significant bank in Sri Lanka, the Corporate whilst increasing exposure to priority
lending on a selective basis.
Finance unit also secured a further sectors of the economy
USD 100 Million senior debt from China y Further developing digital platforms y Fuelling growth through yield-based
Development Bank in a landmark off-shore which would enable growth of the fee- lending to manage the critical market
deal with a 5-year tenure. based activities. stresses on the portfolio
Sector-wise
Corporate Credit Loan Portfolio
(%)
3 1
3
8
9 28
11
18 19
Corporate Banking
point, the functions of all Relationship identify and grow quality lending to this
Sector-wise
Managers (RMs) were streamlined to sector in order to maintain the sector FCBU Loan Portfolio
correlate with the industry-segmentation balance in the overall portfolio.
(%)
goals set out under the paradigm shift 2 1
programme. RMs were relieved of their However, the strain of sustaining a 2 1
volume-based strategy amidst interest 3
mixed portfolios and reassigned to
3
service clientele of a specific sector only. rate uncertainties saw the focus shift
55
To support the initiative, sector-specific from volume-based growth towards a 15
CAPITALISING ON ITS
LOCATION WITHIN THE
ZONE, THE EXTENSION
OFFICE ALSO BEGAN
AGGRESSIVELY
CANVASSING UNTAPPED
CUSTOMER SEGMENTS,
SPECIFICALLY TO
BUILD LONG-TERM
RELATIONSHIPS
FCBU began tapping into potential lending opportunities in Myanmar via the Bank’s Rep office
WITH LARGE GLOBAL
EXPORTERS BASED IN door and to facilitate a dedicated service As a result of proactive efforts to drive
THE KATUNAYAKE BOI to the growing needs of the Country’s both on-shore and offshore lending,
ZONE. export sector. Capitalizing on its location the performance of the FCBU business
within the zone, the extension office also exceeded all expected targets for the year.
began aggressively canvassing untapped
customer segments, specifically to build Future Plans
Steps taken to widen client outreach
long-term relationships with large global With the onshore demand fast reaching
through the GT Nexus supply chain
exporters based in the Katunayake BOI saturation point, the key strategic
platform also added a further boost to
zone. imperatives for the FCBU business would
the FCBU’s onshore lending portfolio. The
be to:
partnership with GT Nexus allows complete
Meanwhile the FCBU’s offshore portfolio
transparency of the end-to-end export
received a considerable boost through y Overcome competitive pressures and
process, from the point of initiation to the
business operations as many of the Bank’s expand the onshore lending portfolio
point of final payment. And since all three
long-standing local corporate clients by securing first-mover advantage in
parties - the buyer, the manufacturer
began venturing overseas. The FCBU’s off- public-private partnership ventures
and the Bank - work on this common
shore portfolio grew steadily throughout
transparent platform, the counterparty y Leverage on expertise to deepen the
2017, making its entry into Ethiopia and
risk to the Bank is minimized to a greater penetration in off-shore territories
Kenya while increasing its expansion to
extent, leaving ample opportunity to grow
the Maldives, Bangladesh and Cambodia. y Prudently venture into new territories
the export advances mainly to the apparel
Leveraging on the emerging opportunities
sector.
in the East Asian Region, FCBU began
tapping into potential lending opportunities
To drive this objective, an FCBU extension
in Myanmar via the Bank’s Rep office,
office was opened within the Katunayake
which led to Sampath Bank becoming the
Free Trade Zone premises to deliver
first ever Sri Lankan bank to successfully
banking convenience to the exporter’s
conclude a lending transaction in
Myanmar.
100 SAMPATH BANK PLC ANNUAL REPORT 2017
GLOBAL BANKING
142
162
174
165
2015
2016
1,500
1,000
500
1,156
1,461
1,454
1,616
0
2017
2014
2015
2016
102 SAMPATH BANK PLC ANNUAL REPORT 2017
76 11 14
21 6 2
138 16 69
11 1
10 2 12
36 258
Correspondent
97
Nostro Exchange
Accounts Banks Companies
INTRODUCTORY INFORMATION | MANAGING OUR BUSINESS MANAGEMENT DISCUSSION & ANALYSIS RISK & GOVERNANCE | FINANCIAL INFORMATION | SUPPLEMENTARY INFORMATION 103
TREASURY
Jan-17
Feb-17
Mar-17
Apr-17
May-17
Jun 17
Jul-17
Aug-17
Sep-17
Oct-17
Nov-17
Dec-17
The one year Treasury bill rate was mostly
on an upward trend until end April 2017,
followed by a steady decline, prompting the
Treasury Department to take swift action we provide in-depth market insights FUTURE PLANS
to capitalise on these market movements. and timely advice to our clients to help In the coming year, global markets are
Consequently, both NIMs and capital gains them make informed decisions in the predicted to stay volatile. Interest rates
registered robust year-on-year increases. volatile market environment. We work and currency market volatility is likely
closely with client segment relationship to continue through 2018 as well, due
Meanwhile the CBSL, at the March 2017
managers to develop effective solutions to political uncertainty and changes in
monetary policy meeting, increased both
that are customized to each client’s needs. the monetary and fiscal policy stance in
the SDFR and SLFR by 25 bps to 7.25% and
Access to latest information, insights and developed economies such as US, EU and
8.75% respectively. The AWPLR fluctuated
research provided by our foreign banking UK. The expected increase in interest rates
between a narrow range, recording a low of
partners ensure we are well equipped to by the US Federal Reserve and balance
11.30% and a high of 11.88% during 2017.
help our clients seize the right market sheet normalisation by the EU is also likely
Amidst this environment, the Treasury
opportunities. Our prudent and dedicated to have a major impact on global interest
took action to strengthen the Bank’s fixed
approach to the management of our rates and FX rates in many countries.
income portfolio by increasing investments
clients’ market risks has enabled us to In line with central banks in many Asian
in SLDB, a move that yielded positive
build enduring client relationships. countries, it is anticipated that the CBSL
returns for the Treasury’s bottom line.
too would introduce measures to manage
The Treasury unit succeeded in effectively the rising interest rates and volatility in the
In the foreign exchange business, the
managing the Bank’s liquidity levels local currencies stemming from the said
Rupee reported a nominal depreciation of
by prudently maintaining the liquidity developments. Amidst this environment,
2.46% against the USD for the year, while
at optimum levels above the required the focus of the Treasury would be to:
the REER was seen hovering around the
relevant to DBU and FCBU of the Bank.
105.00 level mark (low – 103.48 & high
Meanwhile, Rs 6 Bn was raised by way of y Continue to improve market
– 109.57). The USD/LKR Spot reported a
a subordinated, convertible debenture, responsiveness in order to strengthen
high of 153.85 on 25th October 2017 and
mainly to facilitate the increased capital core business activities
a low of 149.65 on 03rd January 2017.
adequacy requirements stipulated by the
Leveraging on these market nuances, y Introduce new customer-centric
BASEL III regulations.
Sampath Bank’s Treasury Department products, adding value to the Treasury
continued to offer a wide range of risk The Bank Notes Operation (BNO), which portfolio
management products and solutions to depends on the Treasury function for its
help clients manage their market risks day-to-day rate fixtures and for deploying
across foreign exchange (FX) and interest competitive pricing strategies, also
rates. Tapping our extensive knowledge performed well, recording robust profit
of FX markets and deep understanding growth in 2017.
of our clients’ unique financial needs,
104 SAMPATH BANK PLC ANNUAL REPORT 2017
OPERATIONAL SUPPORT
SIYAPATHA FINANCE PLC SC SECURITIES (PRIVATE) LIMITED above increase is the fair value gain on
Siyapatha Finance PLC which was SC Securities (Pvt) Ltd is the stockbroking investment property of Rs 345.3 Mn which
incorporated in May 2005 is a fully owned arm of the Sampath Bank Group and is is 58.4% growth over the previous year. The
subsidiary of the Bank. fully owned by the Bank. The company has rental income remained unchanged during
been in operation for over 25 years. the year 2017. The total assets base of the
The company performed well in 2017, company increased by 15% to reach Rs 5.0
recording a post-tax profit of Rs 511.1 Prompted by the decline in deposit interest Bn as at 31st December 2017 compared to
Mn, a 56.2% increase compared to the rates towards the latter part of 2017, Rs 4.4 Bn reported as at the year end 2016.
previous year. This is the highest ever profit local investors were seen increasing their
Due to the demand for additional building
recorded by the company in its twelve investments in the share market. Foreign
space by Sampath Bank, the Company’s
year history. The company’s net interest participation in the market also showed
Board decided to add six floors to the
income and net fee & commission income an increase, with net foreign purchases
existing structure.
increased by 50.6% and 77.1% respectively reaching an all-time high of Rs 17.6 Bn
compared to the previous year, while the in 2017. The All Share Price Index (ASPI)
This addition of six floors will increase the
lending portfolio grew by 42.3% to reach and the S&P Index stood at 6,369.3
floor area by a further 77,120 square feet.
Rs 27.5 Bn as at the year end. Despite the and 3,671.7 respectively by end 2017 New facilities and features to be added to
expansion in the loan book, the company showing a YoY increase of 2.3% and 5.0% the building include: a state-of-the-art,
was successful in maintaining its credit respectively. energy-efficient air conditioning plant, two
quality, as evidenced by the NPA ratio of standby generators, two capacitor banks,
2.9% compared to the industry average Under the aforesaid economic conditions, five elevators, a fire detection and alarm
of 6.0% as at 31st December 2017. The the company managed to increase its system, high pressure water pumps, an
Deposit base too has grown to Rs 9.3 Bn by turnover to Rs 30.6 Mn from Rs 22.1 Mn auditorium and a training centre with a
end 2017, compared to Rs 3.4 Bn reported reported in 2016, a growth of 38.7%. The seating capacity of 250.
a year ago. net loss reported by the company too has
decreased from Rs 58.6 Mn in the previous SAMPATH INFORMATION TECHNOLOGY
During the year, the company issued year to Rs 11.2 Mn in the year under review. SOLUTIONS LIMITED
subordinated debentures to the value of Rs Sampath Information Technology Solutions
1.0 Bn, which qualifies under Tier II capital. During the year 2017, Sampath Bank
Limited (SITS) is another fully-owned
Supported by additional funds raised, the made a capital infusion of Rs 100 Mn to
subsidiary of Sampath Bank. SITS mainly
company has mapped out strategies to the company with a view to restructuring
engages in renting of IT equipments to
catalyse its growth momentum further in the business operations. Accordingly, SC cater to the requirements of Sampath
2018. Securities has re-formulated its strategies Group and other financial and non-
to make a turnaround in its performance in financial companies.
Total Assets - subsequent years.
Siyapatha Finance PLC It was a year of transition for SITS where
SAMPATH CENTRE LIMITED the company focused on expanding its
(Rs Bn)
Sampath Centre Limited was established business operations, mainly through the
30 in 1996 as the first subsidiary of the introduction of a new enterprise business
24 Bank. The company owns and manages solutions model. At the same time, SITS
the building at No. 110, Sir James Peiris expanded its document management
18 services, backed by the new document
Mawatha, Colombo 02. Sampath Bank
12 occupies all eight floors of the building, management system. Furthermore, the
which houses the Bank’s head office and company kicked off a strategy to penetrate
6 the Point of Sales (POS) machine market,
the corporate branch. The main source of
10.4
20.8
14.6
29.7
2015
2016
INVESTOR INFORMATION
Bank’s Market Capitalisation Rank Dividend per Share Earnings & Highest Market
Price per Share
(Rs) (Rs) (Rs)
20 25 100 400
17 352.2
15 20 80 320
15 279.9 268.7
12 18.75 252.0
12 17.20
15 60 240
10 11.00 13.00
10 40 160
5
5 20 80
30.6
37.4
49.3
64.9
0 0 0 0
2017
2017
2017
2014
2015
2016
2014
2015
2016
2014
2015
2016
Earnings per Share - Group
Highest Market Price per Share
- Bank (RHS)
75,000 4.8 25
23.47
4.4
23.35
60,000 20 18.42
16.35
53.3
45,000 15
37.5
30,000 10
30,912
44,489
35,125
63,650
15,000 5
11.5
10.0
10.1
9.1
7.2
8.9
6.6
6.6
0 0
Shares 500 & Less
2017
2014
2015
2016
2017
2014
2015
2016
ANALYSIS OF SHAREHOLDERS
Resident / Non Resident
31st December 2017 31st December 2016
No. of No. of % No. of No. of %
Shareholders Shares Shareholders Shares
Resident shareholders 17,099 171,726,298 79.06 17,107 147,341,639 83.25
Non resident shareholders 341 45,495,938 20.94 349 29,639,430 16.75
Total 17,440 217,222,236 100.00 17,456 176,981,069 100.00
Individuals / Institutions
31st December 2017 31st December 2016
No. of No. of % No. of No. of %
Shareholders Shares Shareholders Shares
Individuals 16,871 74,564,057 34.33 16,887 59,556,386 33.65
Institutions 569 142,658,179 65.67 569 117,424,683 66.35
Total 17,440 217,222,236 100.00 17,456 176,981,069 100.00
Bank’s Market Capitalisation Composition of Share Ownership - 2017 Share Trading - Sampath Bank PLC
(No. of Shares) (No. of Shares Traded)
(Rs Mn) (%) (Mn)
0.8
80,000 4.9 40 38
2.5
64,000 35
48,000 30 28 27
91.8
32,000 25
39,677
46,086
42,734
68,577
16,000 20
19
0 15
Shares 500 & Less
2017
2017
2014
2015
2016
2014
2015
2016
Investor Information
SHARE TRADING
Market
2017 2016 2015 2014 2013
No. of transactions 981,977 1,056,849 1,506,790 1,982,709 1,421,303
No. of shares traded 8,468,273,611 7,195,805,445 9,414,661,048 16,721,524,209 9,054,193,822
Value of shares traded (Rs Mn) 220,591 176,935 253,251 340,917 200,468
Bank
2017 2016 2015 2014 2013
No. of transactions 17,547 10,698 14,460 18,403 19,212
No. of shares traded 37,726,071 18,830,195 26,898,512 27,712,319 47,891,453
As a % of total shares in issue 17.37 10.64 15.61 16.50 28.54
Average daily turnover (Rs Mn) 48.94 18.77 29.22 24.34 39.75
Value of shares traded (Rs Mn) 11,793.39 4,484.95 6,982.39 5,866.37 9,620.18
66.2
66.3
65.7
5.5
2,000 40 160 4
61.95
47.35
34.66
28.52
236.30
248.00
260.40
315.70
1,000 20 80 2
1,847
3,362
2,240
4,598
35.5
33.7
33.8
34.3
0 0 0 0
2017
2017
2017
2014
2015
2016
2014
2015
2016
2014
2015
2016
Bank's Share Price Fluctuation Share Trading - Sampath Bank PLC Price to Book Value
As at 31st December
(Rs) (Mn) (Rs Mn) (Rs)
236.30
179.39
248.00
198.47
260.40
238.94
315.70
293.02
200 3 1,000 80 0.3
164.2
150 0 0 0 0.0
2017
2017
Dec-17
2014
2015
2016
2014
2015
2016
Dec-13
Dec-14
Dec-15
Dec-16
Highest Market Price Market Price per Share - Bank
Lowest Market Price Volume Traded (No. of Shares) Net Asset Value per Share - Bank
Closing Price as at 31st December Turnover (RHS) Price to Book Value Ratio (Times)
- Bank (RHS)
Shareholders
Shareholders
Shares
Shares
Shares
No. of
No. of
No. of
No. of
No. of
No. of
%
%
1-250 5,173 29.66 352,898 0.16 79 0.45 6,550 0.00 5,252 30.11 359,448 0.17
251-500 4,003 22.95 1,356,560 0.62 46 0.26 15,807 0.01 4,049 23.22 1,372,367 0.63
501-1,000 2,682 15.38 1,914,177 0.88 50 0.28 36,142 0.02 2,732 15.67 1,950,319 0.90
1,001-2,000 2,024 11.60 2,978,119 1.37 37 0.21 53,648 0.02 2,061 11.82 3,031,767 1.40
2,001-5,000 1,696 9.72 5,458,732 2.51 41 0.24 136,627 0.06 1,737 9.96 5,595,359 2.58
5,001-10,000 746 4.28 5,265,278 2.42 24 0.15 163,276 0.08 770 4.42 5,428,554 2.50
10,001-20,000 386 2.21 5,381,368 2.48 18 0.11 263,819 0.12 404 2.32 5,645,187 2.60
20,001-30,000 142 0.81 3,413,997 1.57 5 0.03 114,219 0.05 147 0.84 3,528,216 1.62
30,001-40,000 70 0.40 2,427,057 1.12 3 0.02 107,816 0.05 73 0.42 2,534,873 1.17
40,001-50,000 29 0.17 1,302,685 0.60 2 0.02 87,269 0.04 31 0.18 1,389,954 0.64
50,001-100,000 62 0.35 4,317,757 1.99 7 0.04 540,783 0.25 69 0.40 4,858,540 2.24
100,001-1,000,000 71 0.41 21,386,943 9.85 15 0.08 7,012,568 3.23 86 0.49 28,399,511 13.07
1,000,001-Over 15 0.09 116,170,727 53.48 14 0.08 36,957,414 17.01 29 0.17 153,128,141 70.49
Total 17,099 98.03 171,726,298 79.06 341 1.97 45,495,938 20.94 17,440 100.00 217,222,236 100.00
110 SAMPATH BANK PLC ANNUAL REPORT 2017
Investor Information
Investor Information
RELATED PARTY TRANSACTIONS EXCEEDING 10% OF THE EQUITY OR 5% OF THE TOTAL ASSETS OF THE BANK (DISCLOSURE AS PER SECTION 9 OF
THE CSE LISTING RULES)
None of the transactions carried out by the Bank with the Related Parties have exceeded the aggregate monetary value of 10% of the
shareholders’ equity of the Bank or 5% of the total assets of the Bank as at 31st December 2017.
DEBENTURE INFORMATION
(A) MARKET VALUES
Debentures - 2012/2017 Highest (Rs) Lowest (Rs) Year End (Rs)
2017 2016 2017 2016 2017 2016
Fixed - 16.50% 100.00 106.60 80.00 101.50 100.00 102.00
Fixed - 15.00% 98.00 101.00 98.00 98.00 98.00 98.00
Floating NT NT NT NT NT NT
NT - Not Traded
Debentures - 2012/2017 were redeemed on 11th October 2017.
Investor Information
(E ) RATIOS - BANK
2017 2016
Debt to equity ratio (%) 78.75 80.96
Interest cover (Times) 6.91 6.31
Quick asset ratio (%) 78.33 80.65
BOARD OF DIRECTORS
Credit Risk Management Unit Market Risk Management Unit Operational Risk Management Unit
Head of Risk & Compliance - Head of Finance and Compliance CEO - Sampath Information Manager -
Siyapatha Finance PLC Officer-SC Securities (Pvt) Ltd Technology Solutions Ltd Sampath Centre Ltd
INTRODUCTORY INFORMATION | MANAGING OUR BUSINESS | MANAGEMENT DISCUSSION & ANALYSIS RISK & GOVERNANCE FINANCIAL INFORMATION | SUPPLEMENTARY INFORMATION 119
GRI 102-30
Board of Directors and Board Integrated Risk Management Internal Audit Function
- Committees Unit y Independent and
y Identification, y Centralised supervision objective assurance of
management and to ensure the the Risk Management/
RISK APPETITE Risk tolerance levels for each risk category MANAGING MATERIAL RISKS
A prudent and conservative risk appetite are set at different trigger levels, with We have analysed and identified the
is the mainstay of our Risk Management clearly defined escalation criteria to top risks that may impact our ability to
process. Determining our risk appetite report significant risks issues and/or limit grow sustainably. These Risks are the
bolsters effective Risk Management by breaches. The Board reserves the right to cornerstone of our overall risk control
ensuring emerging risk and risk taking revise Risk Tolerance Limits as and when strategy and as such are under continuous
activities are recognised, assessed, needed. scrutiny with ongoing improvements
escalated and addressed in a timely forming part of the Bank’s cohesive risk
manner. We believe that while prudent STRESS TESTING control framework.
and appropriately conservative, our risk Stress testing is an integral part of our risk
appetite creates an enabling environment management process. It helps determine CREDIT RISK
for our businesses to generate competitive the Bank’s potential vulnerability to adverse THE POTENTIAL LOSS THAT MAY RESULT
growth and returns. macro-economic scenarios, identify and OWING TO THE FAILURE BY A COUNTERPARTY
define mitigating actions before the onset OR CUSTOMER TO MEET THEIR OBLIGATIONS
Taking a comprehensive view of the of an adverse event. Stress testing is TO THE BANK IN ACCORDANCE WITH AGREED
risk factors affecting the Bank, the conducted at least quarterly for all major TERMS
risk appetite for each risk category is risk categories, while portfolio-specific
reviewed by the Board at least annually stress testing is conducted quarterly for Credit Risk Governance Model
with due consideration to Group strategy, highly sensitive aspects of the business;
Board of Directors
business environment and stakeholder mainly lending, foreign exchange, interest
requirements. sensitive asset/liability and liquidity. The
results of the stress tests are used to
The Bank ensures regular review of existing calibrate the thresholds and establish Board Sub Committees
appetite limits and introducing of new boundaries of the Bank’s Risk Appetite.
limits when the need arises.
Regular stress testing is also done in Executive Level Committees
RISK TOLERANCE LEVELS conjunction with the Internal Capital
Effective thresholds are essential in Adequacy Assessment Process (ICAAP).
managing specific risks within acceptable Credit Risk Management Unit
levels. Risk tolerance levels are therefore All stress tests are formally documented,
integral in driving Risk Appetite into our with all mitigating actions for different
operations. scenarios being recorded in detail and
reported to Management Committees and
Board.
120 SAMPATH BANK PLC ANNUAL REPORT 2017
Construction Transport origination, administration and risk the predictability of the rating
Tourism Credit Card models currently in use. Given
y Key inputs from the Credit Risk
Government Sector the positive outcomes of these
Management Unit for Pre/Post Credit
reports, we have begun using
Risk
Risk Grade-wise our Internal Rating Models to
Distribution of the Borrowers y Independent Pre-Credit Risk move forward in adopting the
(%)
Evaluation by CRMU for facilities over Foundation Internal Rating
Rs 100 Mn Based (FIRB) Approach for
6.0
calculating the Credit Risk
2.0 13.0
y Identification of Early Warning Signals
Capital Charge
(EWS) and watch listing
y Portfolio Risk Management and Credit Concentration Risk - Risk due to the
39.0
Reporting high exposure to specific sectors
40.0
SYSTEM IMPROVEMENTS IN 2017 Process Controls
y Ongoing review of the Bank’s
Goal : Strengthen Pre-Credit concentration risk in a number of
A+ to A
A- to B+ Evaluation procedure areas, such as; Top 20 exposure as a
B to C+ percentage of total portfolio, product-
Below C+ Activity: * Incorporating new borrower
wise, sector-wise region-wise,
Unrated parameters to strengthen the
collateral-wise etc.
“Internal Rating Model”
Managing Credit Risk * Broadening the Financial y Identify Principal Risk Factors
Credit Risk - Risk of Borrower Default Institutions rating model affecting the portfolio and carrying out
Process Controls with the inclusion of external stress testing
ratings and relative asset base y Concentration risk assessed, based on
y All Credit Risk Management functions
ratios to evaluate the macro- Herfindahl - Hirshman Index (HHI)
of the Bank have been formulated in
economic level factors
line with CBSL guidelines on Corporate
Governance and the Integrated * Modifications to the risk- Mitigating Actions
Risk Management Framework for based pricing model y Board approved limits on low/
Licensed Banks as well as the BASEL * Introduction of a new maximum exposure guidelines.
requirements Social and Environmental
y Setting of prudential limits, on low/
Management Policy to guide
y Review by BIRMC, Credit Policy, Risk maximum exposures, which are
lending to specific sectors
and Portfolio Review Committee, Risk reviewed annually
and Compliance Committee and Credit
Risk Management Unit (CRMU)
INTRODUCTORY INFORMATION | MANAGING OUR BUSINESS | MANAGEMENT DISCUSSION & ANALYSIS RISK & GOVERNANCE FINANCIAL INFORMATION | SUPPLEMENTARY INFORMATION 121
y Classification of borrower – sector/ THAT COULD ARISE FROM THE POSSIBLE y Measurement through key ratios
subsector FALL IN VALUE OF INVESTMENT OR TRADING such as
PORTFOLIOS, AS A DIRECT CONSEQUENCE
y Monitoring of exposure against the y Net Loans to Total Assets
OF CHANGES IN MARKET VARIABLES SUCH
appetite limits on monthly basis AS INTEREST RATES, EQUITY PRICES AND y Total Loans to Customer Deposits
y Trend analysis reported to BIRMC FOREIGN EXCHANGE RATES y Liquid Assets to Short Term
Market Risk Governance Model Liabilities
y Results of Stress testing/Sensitivity
analysis report to Management/ BOARD OF DIRECTORS y Bulk Deposits to Total Deposits
BIRMC on quarterly basis for
y Purchased Funds to Total Assets
necessary action
y Commitments to Total Loans
SYSTEM IMPROVEMENTS IN 2017 Board Sub Committees
y Preparation of “Maturity of Assets and
Goal : Strengthen Post-Credit Liabilities Statement” into time bands
Evaluation procedure
Executive Level Committees y Measurement of liquidity in all major
Activity : Carry out detail analysis on risk
currencies
elevated industries
y Assessment of Liquidity Risk during
Market Risk Management Unit Economic Capital Calculation under
Goal : Create awareness to reinforce Internal Capital Adequacy Assessment
the Risk Culture Managing Market Risk Process (ICAAP)
Activity : Knowledge-sharing sessions, Process Controls
Mitigating Actions
developing case studies to be y Formulating the Bank’s Market
used as reference material y Monitoring of Board approved Liquidity
Risk Management functions in line
Risk appetite limits
with CBSL guidelines on Corporate
Country Risk Governance and the Integrated y Measuring of liquidity in all major
Risk Management Framework for currencies and reported to ALCO,
Political risk, exchange rate risk, economic
Licensed Banks as well as the BASEL analyse and decisions taken at ALCO
risk, sovereign risk and transfer risk etc.
requirements y Stress testing results on Liquidity Risk
associated with offshore lending
y Board approved Market Risk is reported to BIRMC and appropriate
Process Controls Management Policy, ALCO Policy, Risk mitigation decisions are made
y Sovereign risk rating Investment Policy and Treasury Policy y Board approved Liquidity Contingency
plan
y Monitoring of specific sanctions on y Board approved limit monitoring
countries framework for Market Risk Operation y Adopting BASEL III liquidity
requirements
y Assessment of political and economic Mitigating Actions
situations Interest Rate Risk
y Regular monitoring and reporting of
exceptions to BIRMC/Board Treasury Potential loss resulting from the Bank’s
Mitigating Actions
Committee (BTC)/ALCO. Assets and Liabilities having different re-
y Introduction of appetite limits/ caps pricing characteristics
on lending y Annual reviews of policies and limit
framework by BIRMC/BTC. Process Controls
y Monitoring of country/ region-wise
exposure Liquidity Risk y Board approved policies
Potential risk arising from the inability to y Prudential Loss Limits for Trading
meet obligations in a timely manner as and Book
when they become due, mainly on account
y Assessment of Interest Rate Risk
of mismatches between the maturities of
during Economic Capital Calculation
the Bank’s Assets and Liabilities.
under Internal Capital Adequacy
Assessment Process (ICAAP)
122 SAMPATH BANK PLC ANNUAL REPORT 2017
GRI 205-1
y Risk reviews on new / amended Legal Risk is the risk arising from non-
systems during requirement compliance with statutory and / or
specification or procurement stage regulatory provisions, uncertainty due
to legal actions or uncertainty in the
INTRODUCTORY INFORMATION | MANAGING OUR BUSINESS | MANAGEMENT DISCUSSION & ANALYSIS RISK & GOVERNANCE FINANCIAL INFORMATION | SUPPLEMENTARY INFORMATION 125
COMPLIANCE
Compliance is an integral component compliance model introduced with the aim Compliance Training
of Sampath Bank’s DNA and it reflects of promulgating the risk-based compliance The training plan was updated with
the Bank’s ongoing commitment to culture at branch, department and group a strong emphasis on Risk Based
professionalism and ethical conduct. level. Underpinned by the new compliance Compliance Modules to raise awareness,
model, the focus for 2017 was mainly specifically at senior and middle
The role of the Compliance function is to three-pronged. management levels. In addition to
ensure that, in conducting its day-to-day the above, training programmes were
functions, the Bank remains compliant Strengthening the Risk Assessment also deployed to improve compliance
with all laws and regulations currently Programme (RAP) awareness among all employees of the
applicable to the business. To achieve this, To improve the robustness of the current Bank.
the Compliance function shall proactively risk assessment methodology and sharpen
engage in building a corporate culture the alignment between the compliance Compliance Technology
based on ethical values, professional plan and the RAP, a comprehensive set of Steps were taken to leverage on the
conduct and the highest standards of Compliance Risk Assessment measures technology to update compliance
integrity, in turn ensuring that these (Risk Based Compliance Modules) were monitoring and testing mechanisms in
principles are applied to the Bank’s developed for Branches, Departments line with current global standards and best
activities at all times. as well as for the Group. Based on these practices. The main aim was to manage
modules, compliance risk assessments compliance risk more proactively through
NEW DEVELOPMENTS FOR 2017 were carried out throughout the year to automation of monitoring process of key
Stemming from previous years’ determine the risk profiles of branches, Compliance areas.
commitment to strengthen micro- departments and the Group.
level compliance, efforts for the year FUTURE PLANS
were spearheaded by a new eight pillar
Moving forward, the key priority would be
to use the new compliance model for the
effective management of Compliance risk.
Accordingly, the focus for the immediate
future would be to ensure that Compliance
Risk Management is integrated into
Risk the strategy development process
assessment at unit level, as a proactive measure
programme thereby strengthening the Banks’ overall
Regulatory Governance compliance culture.
interaction and
coordination
Compliance
monitoring
Compliance Compliance and testing
technology Focus 2017
Policies,
Compliance procedures,
training and related
controls
Reporting and
communication
INTRODUCTORY INFORMATION | MANAGING OUR BUSINESS | MANAGEMENT DISCUSSION & ANALYSIS RISK & GOVERNANCE FINANCIAL INFORMATION | SUPPLEMENTARY INFORMATION 127
CORPORATE GOVERNANCE
CHANNA PALANSURIYA
Chairman
AGM Recoveries
Siyapatha Finance PLC
Trade Services &
International Ops. Depts.
Snr DGM
Investment Dept. Office
GOVERNANCE STRUCTURE
Corporate Banking
SC Securities (Pvt) Ltd
AGM DGM
Branch Network Branch Banking
Bancassurance & Branch Banking
Banking
Lending Products Depts.
Managing Director
Marketing & Business
Board of Directors - Bank
Group Chief
EBU & IT Business AGM IT Business
Information Officer
Development Depts. Development
Board Credit Committee
Strategic Planning
& Research Dept. AGM Strategic Planning Chief Strategy
Human Resources & Research Officer Board Strategic Planning
& Training Dept. Planning & Committee
Budgeting Dept.
Group Chief
Finance & Treasury Board Shareholder
AGM Human Resources HR Officer
Back Office Depts. Relations Committee
Officer
Group Chief
Board Sub Committees
Financial Officer
BOARD COMPOSITION
Managing Director
3
Deputy Chairman
7
Senior Director Chairman BIRMC 1
Chairperson BRPTRC3
EXPERIENCE No. of
Chairperson BNC4 Directors
Banking 2
Chairman BAC5 Finance 2
Business & Management 5
HR Management 1
Law 2
Marketing 2
Engineering 2
Public Administration 3
Non Independent Director (NID) Independent Director (IND) An Individual Director may represent more than one discipline
Underpinning our Corporate Governance Framework are three key principles; Leadership, Accountability and Continuous Improvement.
LEADERSHIP ACCOUNTABILITY
The Board Board’s Responsibilities
The Board collectively provides effective leadership and The Board is responsible for providing leadership, oversight,
oversight to ensure that the Bank grows sustainably in the control, development and long-term success of the Bank.
long term in order to meet the interests of shareholders and all It is also responsible for instilling the appropriate culture,
other stakeholders. values and behaviour at all levels of operation.
Our Governance Structure establishes the fundamental In carrying out its duties, the Board is governed by the Banking
relationships between the Board, its sub committees, Act Direction No. 11 of 2007 issued by the Central Bank of
management, shareholders and other stakeholders. Sri Lanka, on Corporate Governance for Licensed Commercial
Banks and the Code of Conduct for Governance Requirements
for the Board of Directors, which sets out best practices for
ethical behaviour. The formal schedule of matters reserved for
consideration by the Board is disclosed below;
INTRODUCTORY INFORMATION | MANAGING OUR BUSINESS | MANAGEMENT DISCUSSION & ANALYSIS RISK & GOVERNANCE FINANCIAL INFORMATION | SUPPLEMENTARY INFORMATION 131
GRI 102-24
Corporate Governance
Review Committee
Board Nomination
Risk Management
Party Transaction
Board Integrated
Board Meetings
Remuneration
Board Related
Classification
Board Audit
Board HR &
Committee
Committee
Committee
Committee
Directors
THE CODE OF BEST PRACTICE ON CORPORATE GOVERNANCE ISSUED JOINTLY BY THE SECURITIES AND EXCHANGE COMMISSION OF SRI
LANKA AND THE INSTITUTE OF CHARTERED ACCOUNTANTS OF SRI LANKA
SEC & Principle, Compliance and Implementation Status
ICASL
Code
Reference
A. DIRECTORS
A.1 THE BOARD
(1) A.1 Effective Board
The Board of Directors comprises Ten (10) Directors of whom Nine (09) are Non Executive Directors Complied
including the Chairman. The Executive Director is the Managing Director who is also part of the Corporate
Management to whom the day to day running of the organisation has been delegated. The Board has
appointed Board Sub Committees to assist in discharge of their collective duties and also approves
policies, governance structures and the delegation of authority to provide a conducive business
environment for effective performance of the Bank. 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 (KPIs) which include both quantitative and
qualitative measures on a regular basis.
(%)
1. Mr Channa Palansuriya 17/18
100 2. Prof. Malik Ranasinghe 17/18
3. Mr Sanjiva Senanayake 18/18
80 4. Mr Deepal Sooriyaarachchi 18/18
5. Mrs Dhara Wijayatilake 18/18
60 6. Miss Annika Senanayake 17/18
7. Mr Deshal de Mel* 9/9
40 8. Mr Ranil Pathirana 13/18
9. Mrs Saumya Amarasekera 17/18
20 10. Mr Rushanka Silva** 6/6
11. Mr Nanda Fernando*** 17/17
100
100
100
100
100
100
100
94
94
94
72
94
The Board members use iPads to access Board papers via secure connections and are able to join
meetings even through remote access. Details of Board Meetings, Mandatory Board Sub Committee
Meetings and attendance are given on page 132 of this report.
134 SAMPATH BANK PLC ANNUAL REPORT 2017
Corporate Governance
BOARD’S RESPONSIBILITIES: THE FOLLOWING PROCEDURES ARE CARRIED OUT TO STRENGTHEN THE
SAFETY AND SOUNDNESS OF THE BANK
(3) A.1.2 Ensure the Formulation and Implementation of Sound Business Strategy
The Board is responsible for setting strategy, policies and for monitoring performance against agreed Complied
goals and KPIs. During the year, the Board had 06 strategic planning sessions, where the Board reviewed
the progress of the Strategic Plan 2017 - 2019 and proposals of the Corporate Management and re-
aligned strategy and formulated and approved the medium term strategy for the period 2018 to 2020.
(4) A.1.2 Ensure that the Chief Executive Officer (CEO) /Managing Director (MD) and Management Team Possess
the Skills, Experience and Knowledge to Implement the Strategy
The Board Nomination Committee ensures that the Board Members and Key Management Personnel Complied
(KMPs) have the required skills, experience and knowledge to implement strategy.
(5) A.1.2 Ensure Effective CEO/MD and Senior Management Succession Strategy
A Board approved Procedure on Selection and Appointment of CEO and KMPs is in place. Complied
(6) A.1.2 Ensure Effective Systems to Secure Integrity of Information, Internal Controls and Risk Management
Board Audit Committee reviews Internal Audit reports submitted by the Internal Audit Department and Complied
monitors follow up action. Further, based on the assessment of Internal Control Over Financial Reporting
(ICOFR), Directors concluded that the Bank’s Internal Control Over Financial Reporting is effective. A
descriptive account of the measures taken in this regard is contained in the Board Audit Committee
Report given on pages 167 to 169.
(7) A.1.2 Ensure Compliance with Laws, Regulations and Ethical Standards
An independent Compliance function headed by the Group Compliance Officer reporting directly to Complied
the Board Integrated Risk Management Committee, which has responsibility for compliance, has been
established.
(8) A.1.2 Ensure all Stakeholder Interests are Considered in Corporate Decisions
The Articles of Association of the Bank requires the Directors to take decisions, taking into account the Complied
interests of customers, shareholders, employees and the community. Additionally, the Customer Charter,
the Board Shareholder Relations Committee, HR Policy, the Policy on Managing Conflicts of Interest
as well as the Board Related Party Transactions Review Committee are in place in order to uphold the
interests of these key stakeholders.
(9) A.1.2 Ensure that the Company’s Values and Standards are set with Emphasis on Adopting Appropriate
Accounting Policies and Fostering Compliance with Financial Regulations
The Board Audit Committee and the Board review accounting policies annually or as and when required Complied
to ensure that they are in line with the business model of the Bank and evolving international and local
accounting standards and industry best practices.
(10) A.1.2 Fulfill such other Board Functions as are vital, given the scale, nature and complexity of the business
concerned
The Board is committed to fulfill its functions in line with the laws, regulations and good governance Complied
practices adopted by the Bank.
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GRI 102-27
(11) A.1.3 Act in Accordance with Laws Relevant to the Organisation and Procedure for Directors to Obtain
Independent Professional Advice at Company Expense
The Board has put in place, a framework of policies, procedures and a risk management framework to Complied
ensure compliance with relevant laws, CBSL guidelines and international best practices with regard to
the operations of the Bank. The Board obtains independent professional advice as and when necessary
in accordance with the Board approved Policy on Obtaining Independent Professional Advice and these
functions are coordinated through the Company Secretary. Independent professional advisory services
were sought on matters including the implementation of Cyber Security, SLFRS 9, Industrial Relations
and projected economic conditions stemming from the Budget Proposals during the year.
The Articles of Association of the Bank specify that the appointment and removal of the Company
Secretary should be by resolution involving the entire Board. The procedure to select and appoint Chief
Executive Officer and Key Management Personnel too support the discretionary power of the Board of
Directors to appoint the Company Secretary.
(14) A.1.6 Dedicate Adequate Time and Effort to Matters of the Board and the Company
Dates of regular Board meetings and regular Board Sub Committee meetings are scheduled well in Complied
advance and the relevant papers are circulated generally seven days prior to the meeting. There is
provision to circulate papers closer to the meeting on an exceptional basis.
It is estimated that Non Executive Directors dedicated not less than 90 hours during the year under
review for the affairs of the Bank and those Directors who are also members of Board Sub Committees
dedicated not less than 182.5 hours for the affairs of the Bank. The attendance at meetings for the Board
and its Sub Committees is given in page 132.
Corporate Governance
(19) A.4 Availability of Financial Acumen and Knowledge to offer guidance on matters of finance
Financial acumen has been a key attribute of the successful careers of the following Directors who have Complied
held senior management positions related to finance in other leading financial institutions:
yMr Sanjiva Senanayake
yMr Deepal Sooriyaarachchi
yMr Ranil Pathirana
yMr Rushanka Silva
yMr Ranjith Samaranayake (retired w.e.f. 09.08.2017)
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Mr Sanjiva Senanayake has served in key managerial positions in several local and foreign banks
including the International Finance Corporation. One Director holds a Doctorate in Civil Engineering
Economics. Six Directors, including the MD, hold Masters Degrees in Business Administration,
Science (Engineering) and Law respectively. Two members hold Bachelor’s degrees in Law and Art
(Management). One Director is a Fellow Member and another is an Associate Member of the Chartered
Institute of Management Accountants - UK, while the Director who resigned on 01.07.2017 possessed
a Masters’ Degree in Science (International Political Economics) and the Director who retired w.e.f.
09.08.2017 possessed a Bachelor’s Degree in Commerce (Accounting Special).
Independent Directors
Non Independent Directors
There were no Directors deemed Independent where all criteria were not met.
(25) A.5.8 Senior Independent Director (SID) meeting with other Directors Complied
A meeting of the Directors was held with the SID during the year.
(26) A.5.9 Chairman to hold meetings with Non Executive Directors, without Executive Directors being present Complied
Chairman held one meeting with the Non Executive Directors without the Executive Director being
present during the year 2017.
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GRI 102-24
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. During the year 2017, there was no occasion to take such steps.
(29) A.6.1 Chairman to ensure all Directors are properly briefed on issues arising at Board Meetings
All Directors are adequately briefed on matters arising at Board meetings through comprehensive Complied
Board papers. Additionally, the relevant members of the Management team are on standby for further
clarifications as may be required by Directors or will make presentations at Board meetings.
Any Director who does not attend a meeting is updated on proceedings prior to the next meeting
through:
yFormally documented minutes of meetings.
yA separate Board paper prepared highlighting the items which need to be completed and need follow-
up action of the previous meetings. (This is taken up immediately after confirmation of minutes.)
yArchived minutes and Board papers accessible electronically at the convenience of the Directors.
Non Executive Directors have an open invitation to attend the meetings of the Management Committees
and have the opportunity to interact with senior management after Board Meetings.
(30) A.6.2 Board Papers and Agenda to be circulated seven days prior to meetings
As described above, Board papers are generally circulated seven days before the meeting. There is Complied
provision for circulation of urgent papers and or papers on highly sensitive matters within a shorter
notice and also for approval of matters by circulation, but such instances are the exception and not the
rule.
A.8 RE-ELECTION
(34) A.8 All Directors should submit themselves for re-election at regular intervals Complied
As per the Articles of Association of the Bank, 1/3rd of the Directors retire at each Annual General
Meeting subject to re-election. Such Directors who retire are those who held office for the longest time
period since their election/re-appointment. In accordance with this provision, the following Directors
retire and offer themselves for re-election at the Annual General Meeting:
yMr Sanjiva Senanayake
yMiss Annika Senanayake
yMrs Saumya Amarasekera
yMr Channa Palansuriya
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 are 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.
(35) A.8.1 Non Executive Directors are appointed for specified terms subject to re-election
Non Executive Directors are appointed with approval of the Central Bank of Sri Lanka (CBSL) and stand Complied
for election at the immediately succeeding Annual General Meetings in terms of Articles of Association of
the Company.
Mr Rushanka Silva, having been appointed to the Board during the year under review to fill up a casual
vacancy, offers himself for election by shareholders at the Annual General Meeting in accordance with
Article 93 of the Articles of Association of the Company.
(36) A.8.2 All Directors including Chairman to be subject to re-election at first opportunity after appointment and
re-election at least every three years thereafter
All Non Executive Directors stand for re-election at Annual General Meetings as described in response to Complied
A.8 above.
GRI 102-35,36
(39) A.9.3 Disclosure of the method of appraisal of the Board and Board Sub Committee performance
As explained in A.9.1 & A.9.2 above. Complied
B. DIRECTORS’ REMUNERATION
B.1 REMUNERATION PROCEDURE
(43) B.1.1 Appointment of a Remuneration Committee
The Board has established a Board HR & Remuneration Committee to develop policies and determine Complied
remuneration for the Directors and KMPs respectively. No Director is involved in deciding his own
remuneration. The Terms of Reference of this Committee complies with Schedule C of the Code and
other investor guidelines.
In support of this requirement, a Board approved Reward Management Policy for Key Management
Personnel, as well as Board approved Directors’ Remuneration Policy are in place.
Further information regarding the Board HR & Remuneration Committee is given in the Board HR & Complied
Remuneration Committee Report on pages 170 & 171.
142 SAMPATH BANK PLC ANNUAL REPORT 2017
Corporate Governance
(44) B.1.2 & Remuneration Committee to comprise exclusively Non Executive Directors
B.1.3
The Board HR & Remuneration Committee comprises the following Directors all of whom are Non Complied
Executive Directors.
yMr Deepal Sooriyaarachchi (Chairman)
yMr Channa Palansuriya
yMrs Dhara Wijayatilake
yMiss Annika Senanayake
yMr Deshal De Mel ( who served on the Board until 01.07.2017)
yMrs Saumya Amarasekera
The aggregate remuneration to Executive and Non Executive Directors are given in Note No. 49.3.1 to the Complied
Financial Statements on page 286.
Names of the Directors of the Board HR & Remuneration Committee are disclosed on pages 170 & 171 in Complied
this Annual Report.
The Annual Report is circulated to all shareholders 15 working days prior to the AGM and a Sinhala version
is published each year to meet the needs of a diverse group of shareholders. Additionally, the Chairman’s
and MD’s messages are translated into Tamil as well each year.
The Bank posts on its website (www.sampath.lk) copies of Annual Reports, Interim Reports etc. These
are posted on the website as soon as practicable after they have been released to the Colombo Stock
Exchange.
(64) C.2.3 Implementation of the policy and methodology for communication with Shareholders
Shareholders are consulted on their preference to receive the Annual Report from the Bank either by Complied
means of a compact disk or in printed form. Shareholders may elect to receive the Annual Report from
the Bank in printed either in English or in Sinhala form free of charge at any time.
Interim Reports are published in all three languages (English, Sinhala and Tamil) in leading newspapers Complied
within 60 days of the quarter end.
(66) C.2.5 Process to make all Directors aware of major issues and concerns of Shareholders
The Company Secretary maintains a record of all correspondences received. She directs as soon as Complied
practicable such correspondence to the Board, individual Directors or the relevant officers as applicable.
(70) D.1.1 Interim reports, price-sensitive public reports, regulatory reports and statutory information Complied
requirements
Interim reports were published within 45 days of each quarter end which included information to assist
shareholders gain an understanding of the state of affairs of the Bank.
Price sensitive information was disclosed in a comprehensive but concise manner to the Colombo Stock
Exchange on a timely basis.
Reports required by the regulators including Central Bank of Sri Lanka, Department of Inland Revenue,
Registrar of Companies, Colombo Stock Exchange were all filed in a timely manner in compliance with
the relevant requirements and these provided sufficient information for the user to obtain a balanced
assessment of the Bank`s operations.
(71) D.1.2 Declaration in Annual Report of the Board of Directors on the Affairs of the Company
The Annual Report of the Board of Directors on the Affairs of the Company on pages 179 to 188 contains Complied
the declarations as required by the Code.
(72) D.1.3 Responsibilities of the Board for the preparation and presentation of Financial Statements and
Statement by the Auditors about their reporting responsibilities
The Statement of Directors’ Responsibility for Financial Reporting and Report of the Auditors which Complied
includes a statement about their reporting responsibilities are provided on pages 193 & 194, and 195
respectively.
146 SAMPATH BANK PLC ANNUAL REPORT 2017
(74) D.1.5 Declaration of the Directors that the business is a Going Concern
This information is provided in the Annual Report of the Board of Directors on the Affairs of the Company Complied
given on pages 179 to 188.
(75) D.1.6 Notify Shareholders in case Net Assets of the Bank fall below 50%
This situation did not arise during the year under review. However, had the need arisen, the Bank would Complied
have duly notified the shareholders.
A directive has been issued, explaining the procedure to be followed in granting accommodation to
Directors or to close relations of Directors, such accommodation requiring approval at a meeting of the
Board of Directors, by not less than 2/3rds of the number of Directors other than the Director concerned,
voting in favour of such accommodation. The terms and conditions of the facility include a condition that
it will be secured by such security as may from time to time be determined by the Monetary Board as
well.
Directors and KMPs submit declarations declaring their transactions to the Bank on a quarterly and
annual basis.
All Related Party Transactions as defined in Sri Lanka Accounting Standards - LKAS 24 (Related Party
Transactions) are disclosed in Note No. 49 to the Financial Statements on pages 285 to 289.
The Board Audit Committee reviews the Internal Audit function at regular intervals
(80) D.3.1 Composition and Terms of Reference for Board Audit Committee
The Board Audit Committee consists of Non Executive Directors and is chaired by an Independent Non Complied
Executive Director. Members are selected to provide a broad set of financial, commercial and other
relevant experience to meet the Committee’s objectives. The MD, Group Chief Financial Officer, Chief
Internal Auditor or Chief Manager - Systems Audit and representatives of the External Auditors are invited
to attend the meetings. The Board Audit Committee has an external consultant to advice the Committee,
who attends the meetings on invitation.
(81) D.3.2 Review of External Audit function and relationship with External Auditors
The Committee has a key oversight role in relation to the External Auditors Messrs. Ernst & Young, whose Complied
primary relationship is with the Committee. The Bank’s Auditor Independence Policy ensures that the
independence and objectivity of the External Auditors is 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.
Corporate Governance
Additionally, a separate part of the company website is dedicated to Investor Relations which provides
relevant information online to all investors.
Shareholders can contact the Company Secretary for further information if required.
G. SUSTAINABILITY REPORTING
G.1 PRINCIPLES OF SUSTAINABILITY
Sustainability is a business approach that creates long term stakeholder value by embracing
opportunities and managing risks derived from economic, environmental and social developments and
their potential implications and impacts on the business activities of the entity.
Sustainability reporting is the practice of recognizing, measuring, disclosing and being accountable
to internal and external stakeholders for organisational performance towards the goals of sustainable
development in the context of the overall business activities and strategy of the entity and be directed to
the target stakeholders; usually shareholders, employees, consumers, society and Government.
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 (CBSL)
CBSL Principle, Compliance and Implementation Status
Section
3(1) Responsibilities of the Board
The Board has strengthened the safety and the soundness of the Bank in the following manner.
(2) 3(1)(i)(b) Overall business strategy including risk policy and management
The Bank’s strategy is set by the Board in consultation with the Corporate Management and the Complied
Strategic Plan for the period 2018 - 2020 has been approved by the Board. Risk management
framework 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 on a monthly basis.
A mechanism/process to identify and mitigate the risks arising out of new strategies are in place at
Board level.
The Board has approved and implemented the following communication channels:
yShareholders - 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 to contact 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
CEO/MD’s messages are translated into Tamil as well to facilitate extended communication with
shareholders.
yCustomers - Customers include depositors, creditors and borrowers. The Bank has a Board
approved Customer Complaints Handling Policy. The Customer Complaint Handling Procedure
has been printed in all three languages and disseminated to all customer contact points of the
Bank. This document outlines the Customer Complaints Handling procedure of the Bank, provides
relevant information on contact details of the Bank for this purpose and also of the Financial
Ombudsman. A 24 hour trilingual customer hotline to support customer queries has been
established and reports of complaints are reviewed by the relevant Board Sub Committees.
yStaff – Staff members are given access to the management to voice their concerns through the
Whistle Blowing Policy and the Grievance Handling Procedure.
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GRI 102-25, 31
(7) 3(1)(i)(g) Define areas of authority and key responsibilities for Directors and Key Management Personnel
Areas of authority and key responsibilities have been defined for Directors and KMPs through Code of Complied
conduct and Governance Requirement for Directors and the relevant Position Description of the KMPs
respectively.
(9) 3(1)(i)(i) Assesses effectiveness of own governance practices including selection and nomination of Directors
and KMPs, management of conflict of interest and determination of weaknesses
Selection, nomination and election of Directors are made by the Board Nomination Committee based Complied
on their field of expertise in accordance with the Board approved Procedure. Directors’ interests
are disclosed to the Board at the commencement of every meeting. A Director who has a particular
interest abstains from voting in such a situation and he/she is not counted in the quorum.
The Board appraises its own performance though each Director completing the Self Evaluation Form Complied
in relation to business strategy and contributions of the members based on their field of expertise.
The responses are collated by the Company Secretary and submitted to the Board for review. Matters
of concern are brought to the attention of the Board by the Company Secretary.
Corporate Governance
Compliance Reports submitted to the CBSL which include all returns to regulators are presented to Complied
the Board quarterly and monitored closely by the Board.
The CEO/MD attended all CEO/MD forums on Governance organised by CBSL and briefed the Board Complied
during 2017.
Monthly meetings are scheduled and informed to the Board at the beginning of each calendar year Complied
to enable submission of proposals in the agenda for regular meetings where such matters and
proposals relate to the promotion of business and the management of risk of the Bank.
Additionally, Notices, Agenda and all related Board papers are loaded through a secure link onto iPads Complied
for Directors to access.
All Directors have attended at least 2/3rds of the total number of Board meetings during the year Complied
under review.
(22) 3(1)(x) Minutes to be of sufficient detail and serve as a reference for regulators and supervisory authorities
The detailed minutes of the meetings include: Complied
yA summary of data and information used by the Board in its deliberations
yThe matters considered by the Board
yThe fact-finding discussions and the issues of contention or dissent
yThe testimonies and confirmations of relevant executives with regard to the Board’s strategies
and policies and adherence to relevant laws and regulations
yMatters regarding the risks to which the Bank is exposed and an overview of the risk management
measures including reports of the Board Integrated Risk Management Committee
yThe decisions and Board resolutions including reports of all Board Sub Committees.
(23) 3(1)(xi) Directors’ ability to seek independent professional advice
The Bank has adopted a Board approved Policy for “Directors’ Access to Independent Professional Complied
Advise” and the Board resorts to such advice when deemed necessary.
The Board Sub Committees and various professionals in Corporate and Senior Management advise Complied
the Board on various matters relevant to them. In addition, Directors are able to obtain independent
professional advice, as and when necessary, in discharging their responsibilities. These meetings are
coordinated by the Company Secretary.
Corporate Governance
The Board has approved a procedure to appoint Directors providing, inter-alia for appointment of
Independent Directors as well.
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(37) 3(2)(viii) Identify Independent Non Executive Directors in communications and disclose the categories of
Directors in Annual Report
The Independent Non Executive Directors are expressly identified as such in all corporate Complied
communications that disclose the names of Directors of the Bank. The composition of the Board,
by category of Directors, including the names of the Chairman, Executive Directors, Non Executive
Directors and Independent Non Executive Directors are given on page 132 of the Corporate
Governance Report.
Mr Rushanka Silva, who was appointed to the Board w.e.f. 01.09.2017 will stand for election by
shareholders at the AGM.
The resignation and retirement of directors during the year 2017 were duly informed to the CSE
accordingly
(41) 3(2)(xii) Prohibition of Directors or employees of a bank becoming a Director at another bank
The Board and the Board Nomination Committee take into account this requirement in their Complied
deliberations when considering appointments of Directors. The Employee Code of Conduct (Blue
Book) prohibits employees to be elected/nominated as a director of another bank.
156 SAMPATH BANK PLC ANNUAL REPORT 2017
Corporate Governance
(43) 3(3)(ii) Directors should not hold Directorships of more than 20 Companies
None of the Directors hold office as a director in more than 20 companies. Complied
(45) 3(4)(ii) Extent of delegation should not hinder Board’s ability to discharge its functions
The Board delegates authority to Management to carry out certain duties from time to time. The Complied
management, who carry out duties on behalf of the Board under the provisions of such delegated
authorities report to the Board regularly on matters attended to by them.
(46) 3(4)(iii) Review delegation arrangements periodically to ensure relevance to operations of the Bank
The Board periodically reviews and approves the delegation arrangements in place and ensures that Complied
the extent of delegation addresses the needs of the Bank whilst enabling the Board to discharge their
functions effectively.
(48) 3(5)(ii) Non Executive Chairman and appointment of a Senior Independent Director
The Chairman is a Non Executive Director but not an Independent Director as he is also a Director of Complied
a fully owned subsidiary of the Bank as well as being a Director of another Company in which another
Director (Mr Rushanka Silva) is also a member. The Board has appointed Mr Sanjiva Senanayake as
Senior Independent Director with appropriate Terms of Reference to ensure the independent element
in decision making which has been disclosed in the Annual Report
(49) 3(5)(iii) Disclosure of the identity of the Chairman and CEO / MD and any relationships with the Board
Members
The identity of the Chairman and CEO/MD are disclosed in the Annual Report on pages 16 to 21 and Complied
there are many references to these roles throughout.
The Chairman and one Non Executive, Non Independent Director are Common Directors on the board
of another Company.
Same and except for their business relationship above, there is no material financial, business or Complied
family relationships between the Chairman, CEO/MD and other members of the Board other than
those disclosed on pages 16 to 21 and in Note No. 49 to the Financial Statements given on pages 285
to 289 as per annual declarations and the register of Directors Interests which is updated regularly.
(50) 3(5)(iv) Chairman to: (a) Provide leadership to the Board; (b) Ensure that the Board works effectively and
discharges its responsibilities; (c) Ensure that all key and appropriate issues are discussed by the
Board in a timely manner.
The Board approved the key responsibilities of the Chairman and this document includes the matters Complied
identified in relevant guidelines and codes. The self-evaluation process evidences that the Chairman
provides leadership to the Board, the Board works effectively and discharges its responsibilities and
all key and appropriate issues are discussed by the Board in a timely manner.
(51) 3(5)(v) Responsibility for Agenda lies with Chairman but may be delegated to the Company Secretary
The Company Secretary draws up the agenda for the meetings in consultation with the Chairman. Complied
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(53) 3(5)(vii) Encourage active participation by all Directors and lead in acting in the interests of the Bank.
The Board encourages all Directors to make a full and active contribution. This is evident in the self- Complied
evaluation forms submitted by each Director at the year end.
(54) 3(5)(viii) Encourage participation of Non Executive Directors and relationships between Non Executive and
Executive Directors
09 out of the 10 members of the Board are Non Executive Directors creating a conducive environment Complied
for active participation by the Non Executive Directors. All Non Executive Directors participate in Sub
Committees of the Board ensuring further opportunity for active participation. The Bank has also
appointed a Senior Independent Director which further supports the participation and strengthens
views of the Non Executive Directors.
(55) 3(5)(ix) Refrain from direct supervision of Key Management Personnel and executive duties
The Chairman does not get involved in the supervision of KMPs or any other executive duties. Complied
(56) 3(5)(x) Ensure effective communication with Shareholders
The Bank historically has active shareholder participation at the AGM and at the Shareholder Complied
Relations Meeting which is held 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.
(57) 3(5)(xi) CEO/MD functions as the apex executive in charge of the day-to-day operations
The responsibility of day to day operations of the Bank have been delegated to the CEO/MD. Complied
The Chairpersons of the Sub Committees are present at the AGM to clarify any matters that may be
referred to them by the Chairman.
158 SAMPATH BANK PLC ANNUAL REPORT 2017
Corporate Governance
yThe appointment of the External Auditor for audit services to be provided in compliance with the
relevant statutes;
yThe implementation of the Central Bank guidelines issued to Auditors from time to time;
yThe application of the relevant accounting standards; and
yThe service period, audit fee and any resignation or dismissal of the Auditors
The Board Audit Committee ensures that the service period of the engagement of the External Audit
partner shall not exceed five years, and that the particular Audit partner is not re-engaged for the
audit before the expiry of three years from the date of the completion of the previous term.
(62) 3(6)(ii)(d) Review and monitor External Auditors’ independence and objectivity and the effectiveness of the
audit processes
The Board Audit Committee (BAC) obtains representations from the External Auditors on their Complied
independence and that the audit is carried out in accordance with the applicable Standards and best
practices.
yAn assessment of the Bank’s compliance with the relevant Directions in relation to Corporate
Governance and Internal Controls Over Financial Reporting;
yThe preparation of financial statements for external purposes in accordance with relevant
accounting principles and reporting obligations;
As all audits within the group are carried out by the same External Auditor, there was no requirement
to discuss arrangements for coordinating activities with other auditors.
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The Board Audit Committee makes recommendations to the Board on the above on a quarterly basis.
(66) 3(6)(ii)(h) Discussions with External Auditor without the Executive Management on interim and final audits
The Board Audit Committee discusses issues, problems and reservations (if any) arising from the Complied
interim and final audits with the External Auditors. The Committee met the External Auditors in the
absence of executive management of the Bank on 02 occasions during the year 2017.
Corporate Governance
(75) 3(6)(ii)(q) Whistle Blowing Policy and relationship with External Auditor
The Bank has a Board approved Whistle Blowing Policy whereby an employee of the Bank may, in Complied
confidence, raise concerns about possible improprieties in financial reporting, internal control or
other matters. The Company Secretary forwards all communications received in this regard, including
anonymous communications, to the Chairman of the Board Audit Committee who addresses the
issue in an appropriate manner. This Policy is annually reviewed by the Board Audit Committee.
The Board Audit Committee is the key representative body for overseeing the Bank’s relations with the Complied
External Auditors and meets the External Auditors on a regular basis to discharge this function.
3(6)(iii) Board Human Resources and Remuneration Committee (BHR & RC)
(76a) 3(6)(iii)(a) Policy to determine the remuneration of Directors.
A Board approved Policy to determine the remuneration relating to Directors is in place. Complied
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(77) 3(6)(iii)(b) Goals and targets for the Directors, MD and KMPs
Goals and targets for the CEO/MD and the KMPs for the year 2017 are documented under the Complied
Objective Setting for the year approved by the Committee. The Duties and responsibilities of the Non
Executive Directors are contained in the Bank’s Code of Conduct and the Governance Requirements
for Directors and the Terms of Reference of each Board Sub Committee approved by the Board of
Directors.
(78) 3(6)(iii)(c) Evaluation of the performance of the MD/CEO and KMPs against the set targets and goals.
Performance evaluations of the CEO/MD and KMPs for the year ended 31st December 2017 will be Complied
reviewed by the Committee.
The performance evaluations of the CEO/MD and KMP’s for the year ended 2016 was carried out Complied
within the first quarter of 2017. The performance evaluation for the year ended 31st December 2017
will be carried out within the first quarter of 2018.
(79) 3(6)(iii)(d) “Terms of Reference” provides that the MD is not present at meetings when matters relating to the
MD are being discussed
Terms of Reference of the Committee provides that the CEO/MD should not be a member of the Complied
Committee. MD/CEO attends meetings of the Committee on invitation and when matters relating
to him are discussed, he is not present. CEO/MD was not present when matters relating to him were
discussed during the year.
(82) 3(6)(iv)(c) Eligibility criteria for appointments to key managerial positions including the CEO
The Committee sets the eligibility criteria to be considered, including qualifications, experience Complied
and key attributes, for appointment or promotion to key managerial positions and the CEO/MD. The
Committee considers the applicable statutes and guidelines in setting the criteria.
These have been documented and included in the Job Descriptions completed for the CEO/MD and
KMPs.
(83) 3(6)(iv)(d) Fit and proper criteria for Directors, CEO and KMPs
The Committee obtains annual declarations from Directors, CEO/MD and HR Department obtains Complied
declarations from KMPs to ensure that they are fit and proper persons to hold office as specified in
the criteria given in Banking Act Direction No. 11 of 2007, Section 3(3) and as set out in the statutes.
162 SAMPATH BANK PLC ANNUAL REPORT 2017
Corporate Governance
(87) 3(6)(v)(b) Risk assessment of the Bank, Subsidiary Companies and Associate Companies
Credit Risk, Market Risk, Liquidity Risk and the Operational Risk are assessed and the reports Complied
submitted to the BIRMC through the Group Chief Risk Officer. Risks are assessed at the BIRMC and
the relevant reports are submitted by the Risk Management Department to the BIRMC.
The Board has approved on recommendation of BIRMC, the policies on Credit Risk Management,
Market Risk Management and Operational Risk Management which provide a framework for
management and assessment of risks. Accordingly, quarterly information on pre- established risk
indicators are reviewed by the BIRMC.
The BIRMC has a process to assess and evaluate all risks of the Bank and the findings and issues are
submitted to the Board for their review and action if any. BIRMC evaluates the risk management of
Subsidiary companies both at the Bank level and Group level.
(88) 3(6)(v)(c) Review the adequacy and effectiveness of management level committees
BIRMC reviews the adequacy and the effectiveness of all management level committees including Complied
the Credit Policy Risk and Portfolio Review Committee and the ALCO to address specific risks and to
manage those risks within the laid down limits specified by the BIRMC as required by the Direction.
(91) 3(6)(v)(f) Officers responsible for failure to identify specific risks or implement corrective action
Terms of Reference of the BIRMC provides for the BIRMC to recommend to Board to take corrective Complied
action as directed by Director of Bank Supervision in respect of officers identified to be responsible
for failure to identify specific risks, upon being informed by the MD/CEO.
INTRODUCTORY INFORMATION | MANAGING OUR BUSINESS | MANAGEMENT DISCUSSION & ANALYSIS RISK & GOVERNANCE FINANCIAL INFORMATION | SUPPLEMENTARY INFORMATION 163
GRI 102-25
Further, Directors are individually requested to declare their transactions with the Bank on a quarterly
and annual basis and the Bank’s Corporate web is updated with the information obtained. The
avoidance of Conflict of Interest is further supported by the Board approved policy on Managing
Conflict of Interest.
(96) 3(7)(iii) Monitoring of Related Party Transactions Defined as more favourable treatment
The Bank has to implement either a preventive or a detective system to ensure that no favourable Not
treatment is offered to Related Parties noted in 3(7)(i) above. Arrangements to implement a Complied
preventive system is presently under way.
Corporate Governance
Employees of the Bank are aware of the requirement to obtain necessary security as defined by the Complied
Monetary Board if the need arises.
A process to monitor compliance with this regulation has been established. Complied
(99) 3(7)(vi) Favourable treatment or accommodation to Bank employees or their close relations
No favourable treatment / accommodation are provided to Bank employees other than staff benefits Complied
provided in terms of the operating instructions issued by the Bank from time to time governing same.
Employees of the Bank are informed through operational circulars to refrain from granting favourable
treatment to other employees or their close relations or to any concern in which an employee or
close relation has a substantial interest except as provided in the Bank’s Operational Guidelines and
Directives.
3(8) Disclosures
(101) 3(8)(i) Publish Annual and Quarterly Financial Statements
Annual audited Financial Statements and quarterly Financial Statements are prepared and published Complied
in accordance with the formats prescribed by the supervisory and regulatory authorities and
applicable Accounting Standards.
(103) 3(8)(ii)(b) Report by the Board on the Bank’s internal control mechanism
The Annual Report includes the following reports where the Board confirms that the financial Complied
reporting system has been designed to provide reasonable assurance regarding the reliability of
financial reporting, and that the preparation of financial statements for external purposes has been
done in accordance with relevant accounting principles and regulatory requirements:
yDirectors’ Statement on Internal Control over Financial Reporting given on pages 189 & 190.
INTRODUCTORY INFORMATION | MANAGING OUR BUSINESS | MANAGEMENT DISCUSSION & ANALYSIS RISK & GOVERNANCE FINANCIAL INFORMATION | SUPPLEMENTARY INFORMATION 165
GRI 102-35
(106) 3(8)(ii)(e) Total accommodation granted to each category of related parties and as a percentage of the Bank’s
regulatory capital
Related Party Transactions are given in Note No. 49 to the Financial Statement on pages 285 to 289. Complied
Net accommodation granted to Related Parties are given below;
Category of related party transaction As a % of regulatory Amount
capital of the Bank Rs 000
Corporate Governance
(108) 3(8)(ii)(g) Confirmation by the Board on the Annual Corporate Governance Report
Board has confirmed in the Annual Report of the Board of Directors on the Affairs of the Company, Complied
that all the findings of the Factual Findings Report of Auditors have been incorporated in the Bank’s
Annual Corporate Governance Report.
(109) 3(8)(ii)(h) Report confirming compliance with prudential requirements, regulations, laws and internal controls
The Statement of Directors’ Responsibility on Financial Reporting given on pages 193 & 194 clearly Complied
sets out details regarding compliance with prudential requirements, regulations, laws and internal
controls. There were no instances of material non-compliance to report on corrective action taken
during the year.
The Board Audit Committee (The and the External Auditors also attended provisions, accounting standards
Committee), which was established on these meetings by invitation. 04 of these and accounting policies which are
10th April 1997, is appointed by and meetings were held to consider and consistently applied.
responsible to the Board of Directors recommend to the Board of Directors,
6. Reviewing Internal Audit reports and
(the Board). The Committee comprises the Bank’s quarterly and Annual Financial
liaising with Corporate Management
04 Non Executive Independent Directors, Statements.
of the Bank in taking precautionary
who conduct Committee proceedings in
measures to minimise and control
accordance with the Terms of Reference TERMS OF REFERENCE
weaknesses, procedure violations,
approved by the Board. The Committee’s The establishment, role and functions of frauds and errors.
composition as at 31st December 2017 is: the Board Audit Committee are regulated
by the Banking Act Direction No. 11 of 7. Assessing the independence and
Mr Ranil Pathirana 2007, the Mandatory Code of Corporate reviewing the adequacy of the scope,
(Chairman) (IND/NED) Governance for Licensed Commercial functions and resources of the
Banks issued by the Central Bank of Sri Internal Audit Department, including
Prof Malik Ranasinghe Lanka, the Rules on Corporate Governance the appointment of the Chief Internal
as per Section 7.10 of Listing Rules issued Auditor and the performance of the
(IND/NED)
by the Colombo Stock Exchange and Head and senior staff members of the
the Code of Best Practice on Corporate Internal Audit Department
Mr Deepal Sooriyaarachchi
(IND/NED) Governance issued jointly by the Securities 8. Overseeing the appointment,
and Exchange Commission of Sri Lanka compensation, resignation and
Mrs Dhara Wijayatilake (SEC) and the Institute of Chartered dismissal of the External Auditors,
Accountants of Sri Lanka (ICASL). The including review of the External Audit
(IND/NED)
Committee submits its minutes and function, its cost and effectiveness
reports on its activities to the Board and monitoring of the External
(IND - Independent Director, NED – Non
regularly. Committee also assists the Auditors’ independence and to ensure
Executive Director)
Board in its general oversight of financial that the engagement of the Audit
reporting, internal controls and functions partner shall not exceed five years and
Mrs Ranjani Joseph, a senior practicing
relating to internal and external audits. that the particular Audit partner is not
Chartered Accountant, serves the Board
Audit Committee in the capacity of a re-engaged for the audit before the
ROLE AND RESPONSIBILITIES expiry of three years from the date of
Consultant and is invited to attend the
meetings. The Committee is responsible for: the completion of the previous term.
9. Reviewing the effectiveness of the
Brief profiles of the members are given on 1. Reviewing financial information of the
Bank’s system of Internal Control
pages 16 to 21 of the Annual Report. The Bank, in order to monitor the integrity
Over Financial Reporting to provide
Company Secretary, and in her absence, of the Financial Statements of the
reasonable assurance regarding the
the Chief Internal Auditor functions as the Bank, its Annual Report, accounts
reliability of financial reporting and the
Secretary to the Committee. and quarterly reports prepared for
preparation of Financial Statements
disclosure.
for external purposes have been
The Chairman of the Committee, Mr Ranil 2. Reporting to the Board on the quality, done in accordance with applicable
Pathirana who is an Independent Non appropriateness and acceptability of accounting standards and regulatory
Executive Director, is a Fellow Member of the Bank’s accounting policies and requirements.
the Chartered Institute of Management practices.
Accountants, UK and counts many years 10. Engaging Independent Advisors for
of experience in the Financial Services 3. Assessing the reasonableness of the specialised functions where it deems
industry. underlying assumptions for estimates necessary.
and judgments made in preparing the
MEETINGS Financial Statements. ACTIVITIES IN 2017
The Committee met on 15 occasions 4. Reviewing accounting and financial Financial Reporting
during the year 2017. Attendance by the reporting, risk management processes The Committee, as part of its responsibility
Committee members at these meetings and regulatory compliance. to oversee the Bank’s financial reporting
is given in the table on page 132 of the process on behalf of the Board of
5. Reviewing the Financial Statements
Annual Report. The Managing Director, Directors, has reviewed and discussed
(including quarterly interim
Group Chief Financial Officer, Chief Internal with the Management and the External
statements) prior to publication to
Auditor, Chief Manager-System Audit
ensure compliance with statutory
168 SAMPATH BANK PLC ANNUAL REPORT 2017
Auditors, the quarterly and the Annual The Bank assessed the effectiveness of its Commercial Banks issued by the Central
Financial Statements prior to their Internal Control Over Financial Reporting Bank of Sri Lanka, the Annual Corporate
release. The review included the quality, as of 31st December 2017 based on Governance Report for 2017 is provided on
appropriateness and acceptability of the criteria set out in the Guidance for pages 150 to 166. The External Auditors of
accounting policies and practices, the Directors of Banks on “The Directors’ the Bank have performed procedures set
clarity of the disclosures and the extent Statement of Internal Control”, issued by out in Sri Lanka Related Services Practice
of compliance with financial reporting the ICASL in 2010. Statement 4750 issued by the ICASL
standards, in terms of Companies Act No. (SLRSPS 4750), to meet the compliance
7 of 2007, Banking Act No. 30 of 1988 and The Bank’s assessment was based on requirement of the said Corporate
other relevant financial and governance processes documented by the respective Governance directive. Their findings
reporting requirements. To facilitate the process owners. For the successful presented in their report dated 15th
review, the Committee considered reports implementation of this task, a steering February 2018 addressed to the Board
from the Group Chief Financial Officer committee (Internal Control Over Financial are consistent with the matters disclosed
and reports from the External Auditors on Reporting Steering Committee) headed above and any inconsistencies to those
the outcome of the half-year review and by the Group Chief Financial Officer reported by the Board on pages 150 to 166
Annual Audit. comprising of Corporate Management have not been identified.
and other relevant Department Heads
ICASL has issued the Sri Lanka was formulated in 2010 with the guidance Internal Audit
Accounting Standard - SLFRS 9 (Financial of the Bank’s External Auditors (Ernst & During the year, the Board Audit
Instruments), which would be effective Young). At present, Group Chief Financial Committee continued to fulfill its mandate
from 1st January 2018. The Bank Officer, Chief Internal Auditor, Group Chief to monitor and review the scope, extent
commenced working towards this goal Risk Officer, Group Compliance Officer and effectiveness of the activities of the
during the year 2016 with the assistance and Company Secretary serve in the Bank’s Internal Audit Department, including
of an external consultant. The Bank has Internal Control Over Financial Reporting review of the progress made on Audit
Steering Committee. The Internal Audit activities and achievements against the
disclosed the relevant details on potential
Department carried out walk through tests Bank’s Audit Plan. The Committee reviewed
implications in the Financial Statements
on the documented processes to establish the Internal Audit Plan and monitored
for the year ended 31st December 2017
their adequacy and commented where its implementation through regular
as required by the reporting framework in
necessary. communications with the Chief Internal
Note No. 4.1 to the Financial Statements.
Auditor.
Based on Internal Auditors’ and External
Sri Lanka Accounting Standard - SLFRS
Auditors’ assessments, the Board has In parallel, reviews were also conducted to
15 (Revenue from Contracts with
concluded that, as of 31st December assess the efficiency of the Internal Audit
Customers) would also become effective
2017, the Bank’s Internal Control Over Function in its capacity as the “Third-line-
from 1st January 2018. The Bank, with
Financial Reporting is effective. Directors’ of-defense”. In its role as the “Third-line-
the assistance of an external consultant,
Statement on the Bank’s Internal Control of-defense”, the Internal Audit Department
carried out an impact assessment,
Over Financial Reporting is provided on is required to conduct system audits,
essentially focusing on the material fee
pages 189 & 190. The Bank’s External Branch, Zonal Office and Head Office
and commission income categories.
Auditors have audited the effectiveness of Departments’ audits as well as Forensic
After analysing the current accounting
the Bank’s Internal Control Over Financial / Fraud Investigations in order to provide
treatment with the requirements of SLFRS Reporting and have reported to the Board an independent, objective assurance and
15, it was established that the adoption of that nothing has come to their attention consulting services adding value and
this Accounting Standard in 2018 does not that causes them to believe that the improving the operations by bringing a
have a material impact on the Bank. financial reporting is inconsistent with systematic and disciplined approach to
their understanding of the processes evaluate and improve the effectiveness of
Internal Control Over Financial Reporting adopted by the Board in the review of the the Group’s governance, risk management
(ICOFR) design and effectiveness of the internal and internal controls. Accordingly, in 2017
The Bank is required to comply with control system of the Bank. The External the Internal Audit Department carried out
Section 3(8)(ii)(b) of the Banking Act Auditors’ Report on the Bank’s Internal comprehensive audits covering all aspects
Direction No. 11 of 2007 and assess the Control Over Financial Reporting is of the business. The areas covered and
effectiveness of Internal Control Over provided on page 191. the regularity of audits were dependent
Financial Reporting as of 31st December on the risk boundary for each section,
2017. Annual Corporate Governance Report with higher risk areas subject to more
As required by Section 3(8)(ii)(g) of the frequent audits. To further augment this
Banking Act Direction No. 11 of 2007,
on Corporate Governance for Licensed
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GRI 102-34
process, the Internal Audit Department 4. Reviewed the Management Letter December 2018, subject to the approval of
commenced “Root Cause Analysis” in the issued by the External Auditors shareholders at the next Annual General
year under review, a new technique to together with management responses Meeting.
examine findings of Branch / Department thereto.
audits and isolate possible systemic Whistle Blowing
5. Met the External Auditors on two
issues to be escalated to the Board for The Bank’s Whistle Blowing Policy
occasions during the year without
corrective action. Of the Internal Audit continued to be implemented as a
the Executive Directors and the
reports prepared on this basis, 736 Branch component of the Corporate Fraud Risk
Management being present to ensure
reports, 32 Department reports and 05 Management Framework. The Policy allows
that there was no limitation of scope
reports on Subsidiaries, were reviewed by any team member who has a legitimate
in relation to the Audit and to allow for
the Board Audit Committee during 2017, concern on an existing or potential
full disclosure of any incidents, which
with recommendations made to Corporate “wrong doing”, by any person within the
could have had a negative impact on
Management along with follow up action Bank, to come forward voluntarily, and
the effectiveness of the External Audit.
to ensure that suggestions were applied in bring such concern to the notice of the
It was concluded that there was no
practice. Chairman of the Board Audit Committee
cause for concern.
through the Company Secretary. Concerns
The Committee also reviewed the major 6. Reviewed the Non-Audit Services raised are investigated and the identity
findings of Internal Investigations carried provided by the External Auditors and of the person raising the concern is kept
out during the year. was of the view that such services confidential, Even anonymous complaints
were not within the category of are investigated under the said policy.
All Internal Audit reports were made services identified as prohibited under: This procedure continues to be strictly
available to External Auditors as well. monitored by the Board Audit Committee.
y The guidelines issued by the
Central Bank of Sri Lanka for
The Committee reviewed the resource REPORTING TO THE BOARD
External Auditors relating to their
requirements of the Internal Audit
statutory duties in terms of Section The Minutes of the Committee meetings
Department and conducted performance
39 of the Banking Act No. 30 of are tabled at the Board meetings enabling
appraisals of 2016 for the Head and
1988. all Board members to have access to them.
senior staff members of the Internal Audit
Department. The performance evaluation y The Guideline for Listed Companies
PROFESSIONAL ADVICE
of the Head and the Senior staff members on Audit and Audit Committees
of the Internal Audit Department for issued by the Securities and The Committee has the authority to seek
the year 2017 will be carried out by the Exchange Commission of Sri Lanka. external professional advice on matters
committee during the first quarter of 2018. within its purview and from time to time.
7. Reviewed the Letter of Representation During the year, consultations were held
issued to the External Auditors by the with various parties, on matters under the
External Auditors
Board. Committee’s purview.
With regard to the External Audit Function
of the Bank, the role played by the 8. Reviewed the Letter of Independence
Confirmation issued by the External BOARD AUDIT COMMITTEE EVALUATION
Committee is as follows:
Auditors as required by the Companies The annual evaluation of the Committee
1. Undertook the annual evaluation of Act No. 7 of 2007, confirming that was conducted by the members of the
the Independence and Objectivity they do not have any relationship or Board Audit Committee during the year
of the External Auditor and the interest in the company, which may and concluded that its performance was
effectiveness of the audit process. have a bearing on their independence effective.
within the meaning of the Code of
2. Met with the External Auditors to On behalf of the Board Audit Committee
Conduct and Ethics of the ICASL.
discuss their audit approach and
procedure, including matters relating 9. Reviewed the service period of the
to the scope of the audit and Auditors’ engagement of the External Audit
Independence. partner to ensure that it has not
exceeded five years. RANIL PATHIRANA
3. Reviewed the audited Financial
Statements with the External Auditors The Committee has recommended to Chairman - Board Audit Committee
who are responsible for expressing an the Board, that Messrs Ernst and Young,
opinion on its conformity with the Sri Chartered Accountants, be reappointed Colombo, Sri Lanka
Lanka Accounting Standards. for the financial year ending 31st 15th February 2018
170 SAMPATH BANK PLC ANNUAL REPORT 2017
PROFESSIONAL ADVICE
DEEPAL SOORIYAARACHCHI
The Committee has the authority to seek
Chairman – Board Human Resources and
external professional advice on matters
Remuneration Committee
within its purview.
Colombo, Sri Lanka
15th February 2018
172 SAMPATH BANK PLC ANNUAL REPORT 2017
The Board Nomination Committee (the also makes recommendations to the 9. The Committee is responsible
Committee) was formed on 10th January Board with regard to any changes it for ensuring that it is chaired by
2002 which comprises 05 Non Executive considers appropriate for the progress an Independent Director and is
Directors. The composition of the and success of the Bank. constituted with a majority of
Committee as at 31st December 2017 is: Independent Directors.
2. Recommends suitable persons after
careful consideration based on the 10. To make recommendations on any
Miss Annika Senanayake
competencies required for a particular other matter delegated by the Board
(Chairperson) (IND/NED) job and the Bank’s business need. of Directors.
Mr Channa Palansuriya 3. Considers and recommends the
PERFORMANCE
(NID/NED) requirements of additional/new
expertise of current Directors and The members of the Committee work
Mr Sanjiva Senanayake recommends succession planning for closely with the Board, in reviewing the
Directors resigning or relinquishing structure and skills needed for a steadfast,
(IND/NED)
their positions or retiring. strong and successful organisation.
Mrs Dhara Wijayatilake Further, the Committee also reviews its
4. Carefully reviews management own performance, constitution and Terms
(IND/NED) progression and succession planning of Reference to ensure that it is operating
for the Key Management Personnel effectively, and if required recommends
Mrs Saumya Amarasekera
(KMPs). The Committee ensures that necessary changes.
(NID/NED) management personnel of high calibre
are appointed to guide the Bank to During the year under review, the
(NID - Non Independent Director, IND
achieve greater heights. Committee has continued to focus on
- Independent Director and NED - Non
Executive Director) a progressive organisational plan in
5. The Committee sets criteria including
keeping with the forward and evolutionary
qualifications, experience and key
The Managing Director (MD) attends momentum of the Sri Lankan banking
attributes required for eligibility to
industry.
meetings by invitation. be considered for appointment or
promotion to the post of MD and other
REPORTING TO THE BOARD
Brief profiles of the members are given on KMPs.
pages 16 to 21 of the Annual Report. The The Minutes of the Board Nomination
6. The Committee is also responsible Committee meetings are tabled at Board
Company Secretary of the Bank functions
for recommending to the Board meetings enabling all Board members to
as the Secretary to the Committee.
of Directors, with regard to the have access to them.
positions of MD and KMPs as and
MEETINGS
when vacancies occur. It is mandatory PROFESSIONAL ADVICE
During 2017 the Committee held 13 for the Committee to evaluate the
meetings. Attendance by the Committee The Committee has the authority to seek
balance of skills, knowledge and
members at each of these meetings is external professional advice on matters
experience on the Board before
given in the table on page 132 of the under its purview.
such appointment. The Committee
Annual Report. is accountable for preparing a
BOARD NOMINATION COMMITTEE EVALUATION
description of the role / position that
TERMS OF REFERENCE is vacated; it should clearly analyse The annual evaluation of the Committee
The role and functions of the Committee the capabilities and skills required for was conducted by the members of the
are regulated by the Banking Act Direction a particular appointment. Board Nomination Committee during the
No. 11 of 2007, the Mandatory Code year and concluded that its performance
7. The Committee is accountable for was effective.
of Corporate Governance for Licensed
making recommendations after review
Commercial Banks issued by the Central
to re-appoint Non Executive Directors On behalf of the Board Nomination
Bank of Sri Lanka (CBSL).
annually as recommended by CBSL Committee
guidelines and when they are due for
ROLE AND RESPONSIBILITIES
re-appointment as per the Articles of
1. Continuously reviews the structure Association of the Bank.
and composition of the Board of
Directors (the Board). The Committee 8. The Committee is responsible for ANNIKA SENANAYAKE
also reviews the skills, knowledge, ensuring that Directors, MD and
Chairperson - Board Nomination
expertise and experience of the Board KMPs are fit and proper persons to
Committee
required in comparison to the current hold office in compliance with the
banking environment. The Committee regulatory and statutory provisions. Colombo, Sri Lanka
15th February 2018
INTRODUCTORY INFORMATION | MANAGING OUR BUSINESS | MANAGEMENT DISCUSSION & ANALYSIS RISK & GOVERNANCE FINANCIAL INFORMATION | SUPPLEMENTARY INFORMATION 173
Risk and Operational Risk, have been Operational Risk Management in the 10. Performing Evaluation of Senior Officers
defined and approved by the Board on Bank. The Committee carried out the
the recommendation of the Committee. performance evaluation of the Group
Regular reports have been provided to the 6. Internal Capital Adequacy Assessment Risk Officer and Group Compliance
Committee on the actual performance of Process (ICAAP): Officer for 2016 during 2017 and will
identified risk areas. ICAAP document for both the Bank carry out the performance evaluation
and the Group was developed for 2016 of the Group Risk Officer and Group
PERFORMANCE year end position, and was reviewed Compliance Officer for 2017 during
The Committee undertook the following and approved by the Committee the first quarter of 2018.
activities in discharging its responsibilities and the Board. This document was
during the year: forwarded to the Regulator in 2017, REPORTING TO THE BOARD
well before the regulatory timeline. The Minutes of the Committee meetings
1. Risk Appetite: are tabled at Board meetings.
Risk Appetite limits and Key Risk 7. Compliance:
Indicators for all key risk areas were The Committee received Compliance PROFESSIONAL ADVICE
set and periodically monitored. Reports from the Group Compliance The Committee has the authority to seek
Officer and reviewed same to assess external professional advice on matters
2. Risk Management Policies: the extent of compliance with the under its purview.
Policies related to Risk Management regulatory requirements.
and Compliance areas were BOARD INTEGRATED RISK MANAGEMENT
reviewed during the year, amended 8. Internal Controls: COMMITTEE EVALUATION
as appropriate and have been Internal Loss Event Reports and the The annual evaluation of the Committee
incorporated. adequacy of internal control and was conducted by the members of the
procedures (except Internal Controls Board Integrated Risk Management
3. Stress Testing: over Financial Reporting which is Committee during the year who concluded
The overall Stress Testing Framework handled by Board Audit Committee) that its performance was effective.
was reviewed during the year and the were reviewed regularly and
results of the tests were monitored. recommendations for improvements APPRECIATION
Necessary recommendations were made. Progress on The Committee wishes to thank Mr
to improve the Bank’s Stress implementation of recommendations Ranil Pathirana for his service on the
Tolerance levels were discussed and was also monitored. Committee until 01st April 2017 and Mr
implemented as required. Ranjith Samaranayake, who retired w.e.f.
9. Outsourced Activities: 09.08.2017, for their valuable contributions
4. Progress on BASEL II/BASEL III The implementation of the over the years.
Compliance: Outsourcing Policy was monitored
Progress on the implementation of to ensure compliance with CBSL On behalf of the Board Integrated Risk
key components of BASEL II/BASEL III directives and guidelines. Management Committee
against set targets was reviewed and
monitored to ensure that the Bank is The Committee actively
able to meet the timelines set by the encouraged all the participants in
Central Bank of Sri Lanka (CBSL). Committee meetings to view risks
unconventionally as well, going beyond SANJIVA SENANAYAKE
5. IT Systems Support: rules and regulations, focusing on the Chairman - Board Integrated Risk
future and taking into account event Management Committee
Recommendations were made to
enhance efficiency of monitoring and and circumstances external to the
Bank, which may not get captured in Colombo, Sri Lanka
to reduce/avoid risks through the use
standard risk measures. 15th February 2018
of IT Systems in respect of Credit and
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FINANCIAL CALENDAR
2016 Annual Report and Audited Financial Statements signed on 13th February 2017
31st Annual General Meeting held on 31st March 2017
Rs 14.00 per share Interim Scrip Dividend for 2016 distributed on 28th February 2017
Rs 4.75 per share Final Cash Dividend for 2016 distributed on 31st March 2017
2017 Annual Report and Audited Financial Statements signed on 15th February 2018
32nd Annual General Meeting to be held on 29th March 2018
Interim Financial Statements published in terms of Rule 7.4 of the Colombo Stock Exchange (CSE) and as per the requirements of the
Central Bank of Sri Lanka:
2016 4th Quarter interim results released on 14th February 2017 27th February 2017 27th February 2017 27th February 2017
2017 1st Quarter interim results released on 05th May 2017 09th May 2017 16th May 2017 16th May 2017
2017 2nd Quarter interim results released on 04th August 2017 11th August 2017 15th August 2017 15th August 2017
2017 3rd Quarter interim results released on 06th November 2017 10th November 2017 14th November 2017 14th November 2017
2018 Annual Report and Audited Financial Statements to be signed in February 2019
33rd Annual General Meeting to be held in March 2019
Dividend for 2018 to be payable in April 2019*
Interim Financial Statements to be published in terms of Rule 7.4 of the Colombo Stock Exchange and as per the requirements of the
Central Bank of Sri Lanka:
2017 4th Quarter interim results 28th February 2018 31st March 2018 31st March 2018 31st March 2018
to be released on or before
2018 1st Quarter interim results 15th May 2018 31st May 2018 31st May 2018 31st May 2018
to be released on or before
2018 2nd Quarter interim results 15th August 2018 31st August 2018 31st August 2018 31st August 2018
to be released on or before
2018 3rd Quarter interim results 15th November 2018 30th November 2018 30th November 2018 30th November 2018
to be released on or before
2018 4th Quarter interim results 28th February 2019 31st March 2019 31st March 2019 31st March 2019
to be released on or before
Siyapatha Finance PLC Granting leasing, hire purchase, factoring & other loan facilities & accepting
deposits
Sampath Centre Ltd Renting of commercial property
S C Securities (Pvt) Ltd Stock broking
Sampath Information Technology Solutions Ltd Software development, renting of IT equipment, IT services outsourcing and
document management services.
180 SAMPATH BANK PLC ANNUAL REPORT 2017
4 CHANGES TO THE GROUP STRUCTURE 7 FINANCIAL STATEMENTS carried out the audit on the Financial
The Bank invested additional The Financial Statements of the Statements of the Group and the Bank
Rs 75 Mn and Rs 25 Mn in S C Group and the Bank have been for the year ended 31st December
Securities (Pvt) Ltd on 17th April 2017 prepared in accordance with the 2017 and their report on those
and 26th December 2017 respectively Sri Lanka Accounting Standards Financial Statements, as required by
thus increasing its investment in this (SLFRSs & LKASs) laid down by the Section 168 (1) (c) of the Companies
fully owned subsidiary from Rs 78.9 Institute of Chartered Accountants Act is given on page 195.
Mn to Rs 178.9 Mn. There were no of Sri Lanka, and comply with the
other changes made to the Group requirements of the Companies Act 10 SIGNIFICANT ACCOUNTING POLICIES
structure during the year under review. No. 7 of 2007, the Banking Act No. 30 The significant accounting policies
of 1988 and regulatory requirements adopted in the preparation of the
5 REVIEW OF OPERATIONS inclusive of specific disclosures. The Financial Statements are given on
A review of the financial and aforementioned Financial Statements pages 204 to 333 which comply with
operational performance of the Bank for the year ended 31st December Section 168 (1) (d) of the Companies
and the Group together with important 2017 duly signed by the Group Chief Act.
events that took place during the Financial Officer, three Directors of the
year 2017 as required by the Section Bank and the Company Secretary are 11 FINANCIAL RESULTS AND
168 (1) (a) of the Companies Act are given on pages 196 to 333 which form APPROPRIATIONS
contained in the Chairman’s Message an integral part of this Annual Report 11.1 Income
(pages 32 to 35), the Managing of the Board of Directors (as per the The gross income of the Group for
Director’s Review (pages 36 to 40), Section 168 (1) (b) of the Companies 2017 was Rs 97,440,220,000/-
and Management Discussion and Act). (2016: Rs 70,445,341,000/-)
Analysis (pages 53 to 115). These whilst the Bank’s gross income was
reports form an integral part of 8 DIRECTORS’ RESPONSIBILITY FOR Rs 92,589,785,000/- (2016: Rs
the Annual Report of the Board of FINANCIAL REPORTING 67,584,689,000/-). An analysis of the
Directors. The Directors are responsible for the gross income is given in Note 6 to the
preparation of Financial Statements Financial Statements.
6 FUTURE DEVELOPMENTS of the Group and the Bank to reflect
The Bank focuses on a business a true and fair view of its state of 11.2 Profit and Appropriations
expansion drive through the existing affairs. The Directors are of the view The Group has recorded a 33%
Branch Network, concentrating that these Financial Statements growth in both profit before tax and
mainly on its core banking appearing on pages 196 to 333 have profit after tax in 2017. The Bank’s
operations to increase its market been prepared in conformity with profit before tax and profit after tax
share and profitability. This will be the requirements of the Sri Lanka for the year too recorded a growth
further supplemented by a more Accounting Standards, Companies of 32% and 33% respectively over
vigorous drive on innovative product Act, Sri Lanka Accounting and Auditing 2016. Group’s Total Comprehensive
development, process improvements Standards Act No. 15 of 1995, the Income (net of tax) for the year
and staff development, aimed Banking Act and amendments thereto, is Rs 12,685,200,000/- (2016:
at fulfilling the rapidly changing the Listing Rules of the Colombo Rs 11,760,912,000/-) whilst
customer needs in the challenging Stock Exchange and the Corporate the Bank has recorded a Total
market conditions and maximizing Governance Code for Licensed Comprehensive Income (net of tax)
the value we create for all the Commercial Banks issued by the of Rs 12,679,910,000/- (2016: Rs
stakeholders. No new branches were Central Bank of Sri Lanka (CBSL). The 10,484,794,000/-). A detailed breakup
opened during the year. As required Statement of Directors’ Responsibility of the profits & appropriations of the
under Section 168 (1) (a) of the for Financial Reporting is given on Bank is given below:
Companies Act, an overview of the pages 193 & 194 and forms an
future development of the Bank and integral part of the Annual Report of
the Group is given in the Chairman’s the Board of Directors.
Message (pages 32 to 35), the
Managing Director’s Review (pages 36 9 AUDITORS’ REPORT
to 40), and Management Discussion The Auditors of the Bank are
and Analysis (pages 53 to 115). Messrs Ernst & Young, Chartered
These reports form an integral part Accountants. Messrs Ernst & Young
of the Annual Report of the Board of
Directors.
INTRODUCTORY INFORMATION | MANAGING OUR BUSINESS | MANAGEMENT DISCUSSION & ANALYSIS | RISK & GOVERNANCE FINANCIAL INFORMATION SUPPLEMENTARY INFORMATION 181
Profit for the year after payment of all operating expenses and provision for 16,605,925 12,599,858
depreciation and contingencies
Less: Income tax expense 4,501,805 3,475,188
Net profit after taxation 12,104,120 9,124,670
Other comprehensive income (OCI)
Actuarial (losses) / gains on defined benefit plans (634,766) 564,648
Deferred tax effect on above 177,735 (158,102)
11,647,089 9,531,216
Unappropriated balance brought forward from previous year 4,397,449 3,066,297
Balance available before appropriation / adjustments 16,044,538 12,597,513
Appropriations
Transfer to Statutory Reserve Fund (610,000) (460,000)
Transfer to General Reserve (6,000,000) (5,500,000)
Dividend
Final cash dividend - 2015 (Rs 6.00 per share) - (1,033,876)
Final scrip dividend - 2015 (Rs 7.00 per share) - (1,206,188)
Interim scrip dividend - 2016 (Rs 14.00 per share) (2,477,734) -
Final cash dividend - 2016 (Rs 4.75 per share) (884,405) -
Unappropriated balance carried forward 6,072,399 4,397,449
Proposed dividend
Interim Scrip dividend - 2016 (Rs 14.00 per share) 2,477,734
Final cash dividend - 2016 (Rs 4.75 per share) 884,405
Final scrip dividend - 2017 (Rs 17.20 per share) 4,598,427
14. RESERVES
A summary of the Group’s reserves is given below.
As at 31st December 2017 2016
Rs 000 Rs 000
15 CAPITAL EXPENDITURE prices into the Financial Statements value of Rs 6,000,000,000/- has an
The total capital expenditure on as at 31st December 2017. There option for conversion to ordinary
acquisition of property, plant and were no significant changes identified voting shares by the Bank, solely if
equipment and intangible assets of by the valuers relating to the market instructed by the Central Bank of Sri
the Group and the Bank amounted to values of other properties in the same Lanka in compliance with Basel III
Rs 2,487,506,000/- and class of assets in December 2017. The requirements.
Rs 2,009,300,000/- respectively (2016 Directors are of the opinion that the
Group: Rs 1,469,514,000/- and Bank: revalued amounts are not in excess The details of the debentures
Rs 762,508,000/-). Details are given of the current market values of such outstanding as at 31st December
in Notes 33 and 34 to the Financial properties. The details of freehold 2017 are given in Note 39.1 to
Statements. properties owned by the Bank are the Financial Statements. These
given in Note 33.4 to the Financial debentures are eligible for the Tier II
16 CAPITAL COMMITMENTS Statements. Capital of the Bank.
The capital expenditure approved and
contracted for, as at the reporting date 19 STATED CAPITAL, DEBENTURES AND The Bank has issued a deep
is given in Note 48.3 to the Financial BONDS discounted zero coupon bond with a
Statements. 19.1 Stated Capital - Bank maturity value of Rs 3,458,108,968/-
The Stated Capital of the Bank as at for 20 years. The present paid up value
17 PROPERTY, PLANT AND EQUIPMENT 31st December 2017 amounted to of this bond is Rs 2,120,767,000/-
(PPE) Rs 16,307,721,908.88 consisting of (2016: Rs 1,942,931,000/-) and this
Details of property, plant and 217,222,236 ordinary shares (2016: forms part of the Tier II Capital. The
equipment are given on Note 33 to the Rs 6,471,199,070.43 consisting of above Bond was issued in August
Financial Statements. 176,981,069 ordinary shares). The 2003 and will mature in August 2023.
number of shares in issue of the Bank The details are given in Note 39.2 to
18 MARKET VALUE OF FREEHOLD increased from 176,981,069 ordinary the Financial Statements.
PROPERTIES shares to 217,222,236 ordinary shares
All freehold lands and buildings of the as a result of the payment of interim 19.3 Issue of Shares and Debt Capital –
Group and the Bank were revalued Scrip Dividend for 2016 and the 1:6 Subsidiaries
in November / December 2016 by Rights Issue in 2017. The Subsidiaries of the Bank did not
professionally qualified independent make any share or debenture issues
valuers, and brought into the Financial The details of the shares issued are during the year other than those
Statements in that year. The Group given in Note 43.1 to the Financial mentioned below. Siyapatha Finance
reassessed the market values of the Statements. PLC issued 1,652,420 Ordinary Shares
entire class of freehold lands and by way of a scrip dividend during
buildings in December 2017 through 19.2 Debt Capital - Bank the year (2016: 1,624,726). As a
professionally qualified independent result its stated capital increased
The Bank has issued rated, unsecured,
valuers, to ensure that the carrying by Rs 58,942,000/- (2016: Rs
subordinated, redeemable debentures
amount of such properties reflects 51,975,000/-) from Rs 576,975,000/-
to the value of Rs 31,000,000,000/-
the current market prices. Accordingly, as at 31st December 2016 to Rs
as at 31st December 2017 (2016:
material market value changes 635,917,000/- as at 31st December
Rs 26,500,000,000/-), which
were identified pertaining to seven 2017. Siyapatha Finance PLC had
are listed on the Colombo Stock
properties and their values were issued rated, unsecured, subordinated,
Exchange. Out of the above, the
adjusted to bring the current market redeemable debentures to the value
debentures issued in 2017 to the
INTRODUCTORY INFORMATION | MANAGING OUR BUSINESS | MANAGEMENT DISCUSSION & ANALYSIS | RISK & GOVERNANCE FINANCIAL INFORMATION SUPPLEMENTARY INFORMATION 183
of Rs 1,000,000,000/- during the year, 22 EQUITABLE TREATMENT TO Mr Rushanka Silva was appointed
which are listed on the Colombo Stock SHAREHOLDERS to the Board with effect from 01st
Exchange (2016: Rs 2,500,000,000/-). The Bank has at all times ensured that September 2017 to fill up a casual
all shareholders are treated equitably. vacancy that occurred in the Board.
S C Securities (Pvt) Ltd increased its Mr Deshal De Mel (Director) resigned
share capital by Rs 100,000,000 from 23 THE BOARD OF DIRECTORS from the Board with effect from
Rs 78,921,000/- as at 31st December The Board of Directors of the Bank 01st July 2017 and Mr Ranjith
2016 to Rs 178,921,000/- as at 31st comprises ten (2016: eleven) with Samaranayake (Executive Director)
December 2017. wide financial and commercial retired from the Board with effect
knowledge and experience. The names from 09th August 2017.
20 SHARE INFORMATION of the Directors of the Bank during
Information relating to earnings, the period 1st January 2017 to 31st 25 RETIREMENT AND RE-ELECTION / RE-
dividends, net assets and market value December 2017 are given below APPOINTMENT OF DIRECTORS
per share is given in the Financial as per Section 168 (1) (h) of the In terms of Articles No. 86 and 87
Highlights on page 6. Information Companies Act. Their brief profiles are of the Articles of Association of the
on the trading of the shares and given on pages 16 to 21 of the Annual Company, Mr Sanjiva Senanayake,
movement in the number of shares Report. The classification of Directors Miss Annika Senanayake, Mrs
of the Bank is given in the Investor into Executive (ED), Non-Executive Saumya Amarasekera and Mr Channa
Information section on pages 106 to (NED) and Independent (IND), Non- Palansuriya retire by rotation and
115. Independent (NID) is given against being eligible, offer themselves
the names as per Listing Rules and for re-election on the unanimous
21 SHAREHOLDING Corporate Governance Rules of recommendation of the Board
There were 17,440 registered ordinary Colombo Stock Exchange and Banking Nomination Committee and approval
shareholders as at 31st December Act Direction No. 11 of 2007 issued by of the Board of Directors.
2017 (2016: 17,456). Information the Central Bank of Sri Lanka.
on the distribution of shareholding Mr Rushanka Silva having been
and the respective percentages are 24 CHANGES IN DIRECTORATE appointed to the Board with effect
given on pages 107 and 109 of the The Bank has disclosed the names of from 01st September 2017 to fill
Annual Report. Details of top twenty the persons holding office as Directors up a casual vacancy in the Board,
shareholders, percentages of their of the Bank as at the end of the offers himself for election by the
holdings and percentage holding of accounting period and the names of shareholders in terms of Article 93 of
the public too are given in the Investor any persons who ceased to hold office the Articles of Association.
Information section on page 110. as Directors of the Bank during the
accounting period in terms of Section
168 (1) (h) of the Companies Act.
Mr Channa Palansuriya NED/NID Director from 01.01.2012; Deputy Chairman from 26.01.2012 up to 12.11.2015. Re-
appointed as a Director on 28.04.2016 and Chairman since 01.08.2016
Prof Malik Ranasinghe NED/IND Director since 30.08.2011. Deputy Chairman since 01.08.2016
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
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/NID Director since 01.01.2012 & Resigned w.e.f. 01.07.2017
Mr Ranil Pathirana NED/IND Director since 01.01.2012, Independent Director since 31.01.2015
Mrs Saumya Amarasekera NED/NID Director since 01.06.2012
Mr Rushanka Silva NED/NID Director since 01.09.2017
Mr Nanda Fernando ED Managing Director since 13.09.2016
Mr Ranjith Samaranayake ED Executive Director w.e.f 01.01.2009 & Retired w.e.f. 09.08.2017
184 SAMPATH BANK PLC ANNUAL REPORT 2017
Sections 210 and 211 of the 27 REGISTER OF DIRECTORS AND 28.3 Board Nomination Committee
Companies Act do not apply to the SECRETARIES Miss Annika Senanayake (Chairperson)
Bank, in view of the more stringent As required under Section 223 (1)
Mr Channa Palansuriya
provision contained in Section 3 (3) of the Companies Act, the Bank
(i) of Banking Act Direction No. 11 of maintains a Register of Directors Mr Sanjiva Senanayake
2007 on Corporate Governance for and Secretaries which contains the Mrs Dhara Wijayatilake
Licensed Commercial Bank, which name, surname, former name (if Mrs Saumya Amarasekera
restricts the age of a Director of a any), residential address, business,
Licensed Commercial Bank to 70 occupation, dates of appointment and 28.4 Board Integrated Risk Management
years. dates of resignation (if applicable) of Committee
each Director and the Secretary. Mr Sanjiva Senanayake (Chairman)
26 LIST OF DIRECTORS OF THE
Mr Deepal Sooriyaarachchi
SUBSIDIARIES OF THE BANK 28 BOARD SUB COMMITTEES
Miss Annika Senanayake
Names of the Directors of Subsidiary The Board, while assuming the overall
companies are as follows: responsibility and accountability Mr Ranil Pathirana (Until 01.04.2017)
for the management oversight of Mrs Saumya Amarasekera
26.1 Siyapatha Finance PLC the Bank, has also appointed Board Mr Nanda Fernando
Mr Channa Palansuriya (Chairman) Sub Committees to ensure that the Mr Ranjith Samaranayake
Mr W M P L De Alwis (Deputy Chairman) activities of the Bank at all times are (Retired w.e.f. 09.08.2017)
conducted with the highest ethical
Dr H S D Soysa (Senior Director)
standards and the best interests of 28.5 Board Related Party Transactions
Mr P M A Sirimane all its stakeholders. The Board formed Review Committee
Mr Tharaka Ranwala many Sub Committees including Mrs Dhara Wijayatilake (Chairperson)
Mr P S Cumaranatunga the following four mandatory Board
Prof Malik Ranasinghe
Sub Committees as required by
Ms Aroshi Nanayakkara Mr Sanjiva Senanayake
the Banking Act Direction No. 11 of
Mr K M S P Herath (Managing Director) 2007 and one mandatory Board Sub Mr Deepal Sooriyaarachchi
Committee as required by Section 9 Mr Nanda Fernando (w.e.f 01.09.2017)
26.2 Sampath Centre Ltd
of the Listing Rules of the Colombo Mr Ranjith Samaranayake (Retired
Mr I W Senanayake (Chairman) Stock Exchange. The composition of w.e.f. 09.08.2017)
Mr S G Wijesinha these five Sub Committees as at 31st
Mr Ranjith Samaranayake December 2017 were as follows: Apart from the above five mandatory
Board Sub Committees, the Board has
Mr Rushanka Silva
28.1 Board Audit Committee also appointed the following seven non
Mr D Ihalalanda - mandatory Board Sub Committees:
Mr Ranil Pathirana (Chairman)
Mr S P Kannangara
Prof Malik Ranasinghe
28.6 Board Credit Committee
26.3 S C Securities (Pvt) Ltd Mr Deepal Sooriyaarachchi Prof Malik Ranasinghe (Chairman)
Mr S G Wijesinha (Chairman) Mrs Dhara Wijayatilake Mr Channa Palansuriya
Mrs Ranjani Joseph (Consultant to the
Mr W M P L De Alwis Mrs Dhara Wijayatilake
Committee)
Mr Ranjith Samaranayake Mr Rushanka Silva (w.e.f 01.10.2017)
28.2 Board Human Resources and Mr Nanda Fernando
26.4 Sampath Information Technology Remuneration Committee Mr Ranjith Samaranayake (Retired
Solutions Ltd
Mr Deepal Sooriyaarachchi (Chairman) w.e.f. 09.08.2017)
Mr Ranjith Samaranayake (Chairman)
Mr Channa Palansuriya Mr Aravinda Perera (Consultant to the
Mr L J K Hettiaratchi Committee until 03.07.2017)
Mrs Dhara Wijayatilake
Mr D J Gunaratne
Miss Annika Senanayake 28.7 Board Strategic Planning Committee
Mr M V Indrasoma
Mr Deshal de Mel Mr Channa Palansuriya (Chairman)
Mr M A Salgado (Resigned w.e.f. 01.07.2017) Prof Malik Ranasinghe
Mrs Saumya Amarasekera Mrs Dhara Wijayatilake
INTRODUCTORY INFORMATION | MANAGING OUR BUSINESS | MANAGEMENT DISCUSSION & ANALYSIS | RISK & GOVERNANCE FINANCIAL INFORMATION SUPPLEMENTARY INFORMATION 185
Miss Annika Senanayake 28.12 Board Capital Planning Committee and in terms of Corporate Governance,
Mr Ranil Pathirana Prof Malik Ranasinghe (Chairman) Directors have refrained from voting
on matters in which they were
Mr Rushanka Silva (w.e.f 01.10.2017) Mr Sanjiva Senanayake
materially interested. The Directors
Mr Nanda Fernando Mr Ranil Pathirana have no direct or indirect interest in a
Mr Ranjith Samaranayake Mr Nanda Fernando contract or a proposed contract with
(Retired w.e.f. 09.08.2017) the Bank other than those disclosed.
Mr Deshal de Mel 29 DIRECTORS’ MEETINGS
(Resigned w.e.f. 01.07.2017) The details of Directors meetings 31 RELATED PARTY TRANSACTIONS
Mr Aravinda Perera (Consultant to the which comprise Board meetings and Directors have also disclosed
Committee until 03.07.2017) the Board Sub Committee meetings transactions if any, that could
and the attendance of Directors be classified as Related Party
28.8 Board Shareholder Relations at these meetings are given in the Transactions in terms of Sri Lanka
Committee Corporate Governance Report on page Accounting Standards - LKAS 24
Prof Malik Ranasinghe (Chairman) 132 of the Annual Report. (Related Party Disclosure) which
Mr Deepal Sooriyaarachchi is adopted in preparation of the
30 DIRECTORS’ INTEREST REGISTER AND Financial Statements. Those
Mr Rushanka Silva (w.e.f 01.10.2017) DIRECTORS’ INTEREST IN CONTRACTS transactions disclosed by the
Mr Nanda Fernando OR PROPOSED CONTRACTS Directors are given in Note 49 to the
Mr Deshal de Mel (Resigned w.e.f. The Bank maintains the Directors’ Financial Statements which form an
01.07.2017) Interest Register as required under integral part of the Annual Report of
the provisions of Section 168 (1) the Board of Directors.
28.9 Board Treasury Committee (e) of the Companies Act. Directors
Mr Sanjiva Senanayake (Chairman) of the Bank have made necessary Bank has complied with the
Prof Malik Ranasinghe declarations of their interest in requirement of the Code of Best
contracts or proposed contracts, in Practice issued by SEC, Listing
Miss Annika Senanayake
terms of the Sections 192 (1) and Rules of CSE and with all disclosure
Mr Nanda Fernando
192 (2) of the Companies Act. These requirement stipulated thereunder.
Mr Deshal de Mel interests have been recorded in the
(Resigned w.e.f. 01.07.2017) Interest Register which is available 32 DIRECTORS’ INTEREST IN ORDINARY
Mr Ranjith Samaranayake for inspection in terms of the Act. The SHARES AND DEBENTURES
(Retired w.e.f. 09.08.2017) particulars of the Directors’ Interest The shareholdings of Directors as at
in Contracts are given on page 188 31st December 2017 were as follows:
28.10 Board Marketing Committee of the Annual Report and form an
None of the Directors hold any
Mr Deepal Sooriyaarachchi (Chairman) integral part of the Annual Report of
Debentures issued by the Bank.
(w.e.f 02.07.2017) the Board of Directors. As a practice
Mr Channa Palansuriya
Miss Annika Senanayake Name of the Director No. of Shares as at 31st No. of Shares as at 31st
Mrs Saumya Amarasekera December 2017 December 2016
33 DIRECTORS’ INTEREST IN SHARES AND and related to the employees have 2,417,000/- (2016: Rs 2,589,000/-)
DEBENTURES OF SUBSIDIARIES been paid on a timely basis. in terms of the resolution passed
Mr Channa Palansuriya is a Director of at the last Annual General Meeting.
Siyapatha Finance PLC and holds one 39 OUTSTANDING LITIGATION Out of the aforementioned sum,
share in the same. The share is held in In the opinion of the Directors and in the donations made by the Bank
trust for Sampath Bank. consultation with the Bank’s lawyers, to Government approved charities
litigation currently pending against the amounted to Rs Nil (2016: Rs Nil). The
34 DIRECTORS’ REMUNERATION Bank will not have a material impact Bank does not make donations for
As required under the Section 168 (1) on the reported financial results or the political purposes.
(f), details of Directors’ emoluments future operations of the Bank. Details
and other benefits paid in respect of litigation pending against the Bank 43 SIGNIFICANT SHAREHOLDINGS IN OTHER
of the Group and the Bank during are given in Note 48.2 to the Financial ORGANIZATIONS
the financial year under review are Statements. The Bank continues to hold 9.47%
given in Note 49.3.1 to the Financial shareholding in LankaBangla Finance
Statements. 40 EVENTS AFTER THE REPORTING PERIOD Limited in Bangladesh. Details are
No circumstances have arisen since given in Note 29.3 to the Financial
35 OUR TEAM MEMBERS the Statement of Financial Position Statements.
The Bank believes that its real date which would require adjustments
potential rests on the strength and to, or disclosure in, the accounts, 44 RISK MANAGEMENT AND INTERNAL
capabilities of its team members except those disclosed in Note 51 to CONTROL
in a rapidly changing environment. the Financial Statements. 44.1 Material Foreseeable Risk Factors
All efforts are directed at having a The Bank has an ongoing process in
motivated and competent team in 41 GOING CONCERN place to identify, evaluate and manage
order to grow and achieve results as The Directors, after making necessary the risks that are faced by the Bank.
projected in the Strategic Plan and inquiries and reviews including reviews This process is detailed in the Risk
the Budget. As at 31st December of the budget for the ensuing year, Management Report on pages 118 to
2017, the number of employees on the capital expenditure requirements, 125. The Directors, on a regular basis
payroll of the Bank was 4,011 (2016: future prospects and risks, cash flows review the above mentioned process
3,960). and such other matters required to be through the Board Integrated Risk
addressed in the Code of Best Practice Management Committee.
36 ESOPs on Corporate Governance issued
The Bank did not have any Employee jointly by the Institute of Chartered 44.2 Internal Controls
Share Ownership / Option Plans during Accountants of Sri Lanka and the
The Directors of the Bank have taken
the year. Securities and Exchange Commission
reasonable steps to safeguard the
of Sri Lanka and the Direction on
assets of the Group and the Bank
37 ENVIRONMENTAL PROTECTION Corporate Governance issued by the
and to prevent and detect frauds
To the best knowledge of the Board, CBSL, are satisfied that the Bank
and any other irregularities. For this
the Bank has not engaged in any has adequate resources to continue
purpose the Directors have instituted
activity that is harmful or hazardous operations into the foreseeable future.
effective and comprehensive systems
to the environment. The Directors Accordingly, they continue to adopt
of internal controls for identifying,
also confirm that to the best of the going concern basis in preparing
recording, evaluating and managing
their knowledge and belief the Bank the Financial Statements.
the significant risks faced by the Bank
has complied with the relevant
/ Group throughout the year and it is
environmental laws and regulations. 42 DONATIONS
being regularly reviewed by the Board
As required by the Section 168 (1)
of Directors.
38 STATUTORY PAYMENTS (g) of the Companies Act, information
The Directors, to the best of their pertaining to donations made by
This comprises internal reviews,
knowledge and belief, are satisfied the Bank during the year is given
internal audit and the whole system
that all statutory payments due to the below. During the year the Bank
of financial and other controls
Government, other regulatory bodies made donations to the value of Rs
required to carry on the operations
INTRODUCTORY INFORMATION | MANAGING OUR BUSINESS | MANAGEMENT DISCUSSION & ANALYSIS | RISK & GOVERNANCE FINANCIAL INFORMATION SUPPLEMENTARY INFORMATION 187
in an orderly manner, safeguard the Board of Directors confirm that the Based on the declaration provided
assets, prevent and detect frauds and Bank is compliant with prudential by Messrs Ernst & Young, and as
other irregularities and secure, as requirements, regulations, laws and far as the Directors are aware, the
far as practicable, the accuracy and internal controls and measures have Auditors do not have any relationship
reliability of the records. been taken to rectify any material with or interest with the Bank that in
non-compliances. their judgments, may reasonably be
45 CORPORATE GOVERNANCE thought to have a bearing on their
The Directors of the Bank are 46 AUDITORS independence within the meaning
committed towards maintaining The Auditors of the Bank during the of the Code of Professional Conduct
an effective Corporate Governance year were Messrs Ernst & Young, and Ethics issued by the Institute of
Framework and implementing Chartered Accountants. They also Chartered Accountants of Sri Lanka,
processes required to ensure that function as the Auditors for the applicable on the date of this report.
the Bank is compliant with the Bank’s Subsidiary companies namely,
Code of Best Practice on Corporate Sampath Centre Ltd, SC Securities The retiring Auditors, Messrs Ernst
Governance issued jointly by the (Pvt) Ltd, Siyapatha Finance PLC and & Young, have expressed their
Institute of Chartered Accountants Sampath Information Technology willingness to continue in office.
of Sri Lanka and the Securities and Solutions Ltd. Audit fees paid to They come up for re-election at the
Exchange Commission of Sri Lanka Messrs Ernst & Young for the year Annual General Meeting, with the
and the Direction on Corporate ended 31st December 2017 by the recommendation of the Board Audit
Governance issued by the CBSL. Group and the Bank amounted to Rs Committee and the Board of Directors.
Details are given on Corporate 16,919,000/- (2016: Rs 15,152,000/-) In accordance with the Companies
Governance Report on pages 127 to and Rs 13,888,000/- (2016: Rs Act, a resolution proposing the re-
166 of this Annual Report. 12,495,000/-) respectively. appointment of Messrs Ernst & Young,
Chartered Accountants, as Auditors is
As required by Section 3(8) (ii) (g) of Further, the Group and the Bank paid being proposed at the Annual General
the Banking Act Direction No. 11 of Rs 6,880,000/- (2016: Rs 6,293,000/-) Meeting.
2007 on Corporate Governance for and Rs 5,419,000/- (2016: Rs
Licensed Commercial Banks, issued 5,122,000/-) respectively to Messrs 47 NOTICE OF MEETING
by the CBSL, the Board of Directors Ernst & Young as audit related fees The 32nd Annual General Meeting
confirm that all the findings of the and expenses. In addition, they were of the Bank will be held at “The
“Factual Findings Report” of auditors paid Rs 12,245,000/- (2016: Rs Balmoral”, The Kingsbury, No. 48,
issued under “Sri Lanka Related 5,975,000/-) and Rs 10,127,000/- Janadhipathi Mawatha, Colombo 01
Services Practice Statement 4750” (2016: Rs 4,617,000/-) by the on 29th March 2018. The Notice of
have been incorporated in the annual Group and the Bank respectively for Meeting is given on page 368 of the
Corporate Governance Report on permitted non-audit related services Annual Report.
pages 150 to 166 of this Annual including tax consultancy services.
Report. Further, as required by Section Details of the audit fees paid are As required by Section 168 (1) (k)
3(8) (ii) (h) of the Banking Act given on Note 14.1 to the Financial of the Companies Act, the Board of
Direction No. 11 of 2007 on Corporate Statements. Directors hereby acknowledge the
Governance for Licensed Commercial contents of this report.
Banks, issued by the CBSL, the
Mr Nanda Fernando
Institute of Bankers of Sri Lanka Director Deposits 2,623 1,659
Repo 29,983 16,664
Prof Malik Ranasinghe
Access Engineering PLC Independent Non Deposits 47,800 41,681
Executive Director Investment in debentures 303,707 303,707
Debentures issued by the Bank 100,000 100,000
Indirect facilities 3,100,000 529,589 527,603
United Motors Lanka PLC Independent Non Deposits 319 177
Executive Director
Resus Energy PLC Independent Non Loan & receivables - 964 -
Executive Director Deposits 4,566 4,495
Indirect facilities 12,344 12,344 -
Mr Deepal Sooriyaarachchi
AIA Insurance Lanka PLC Independent Non Deposits 7,694 -
Executive Director Debentures issued by the Bank 1,100,310 1,246,720
Singer Sri Lanka PLC Independent Non Loan & receivables 800,000 260,775 83,013
Executive Director Investment in debentures 617,378 754,621
Indirect facilities 300,000 165,320 226,675
Panasian Power PLC Independent Non Loan & receivables 693,203 693,203 700,000
Executive Director Deposits 254 2,536
Indirect facilities 50,000 50,000 -
Mrs Dhara Wijayatilake
Ceylon Chamber of Commerce Chief Executive Debentures issued by the Bank 767,000 707,000
Officer Deposits 37,512 -
Mr Ranil Pathirana
Windforce (Pvt) Ltd Non Executive Director Deposits 21,170 563
Repo 168,000 -
Indirect facilities 110,000 105,000 -
Renewgen (Pvt) Ltd Chairman Loan & receivables 5,459 5,459 -
Deposits 29,735 -
Star Packaging (Pvt) Ltd Non Executive Director Loan & receivables 407,000 109,258 55,785
Deposits 34 2,312
Indirect facilities 307,000 153,012 -
ODEL PLC Non Executive Director Loan & receivables 150,000 105,546 30,402
Deposits 10,060 4,964
Indirect facilities 75,000 7,294 -
Hirdaramani International Exports (Pvt) Ltd Managing Director Deposits 83,838 1,790
Hirdaramani Industries (Pvt) Ltd Director Deposits 485 491
Ceylon Knit Trend (Pvt) Ltd Director Deposits 252,537 123
Rosewood (Pvt) Ltd Director Deposits 217 2,725
Repo 75,000 -
Alumex PLC Director Loan & receivables 388,229 256,412 944
Deposits 5,114 3,717
Indirect facilities 250,000 185,275 244,051
Mr Rushanka Silva
Indra Property Development (Pvt) Ltd Director Deposits 159 -
Serendib Finance Ltd Director Loan & receivables 3,137,963 2,339,987 -
INTRODUCTORY INFORMATION | MANAGING OUR BUSINESS | MANAGEMENT DISCUSSION & ANALYSIS | RISK & GOVERNANCE FINANCIAL INFORMATION SUPPLEMENTARY INFORMATION 189
more effectively and efficiently. The for financial assets classifications, provide a reasonable assurance regarding
Management is currently reviewing measurement and impairment. the reliability of financial reporting and the
various options available to automate The models have been developed, preparation of financial statements for
the financial reporting process. The tested and submitted for External external purposes and is in accordance
assessment did not include subsidiary Auditors for verification. The Board with relevant accounting principles and
companies of the Bank. will continuously strengthen the regulatory requirements of the Central
processes required for validation and Bank of Sri Lanka.
y The Board has taken into
compliance with SLFRS 9 with the
consideration the requirements of
support of the External Consultant. REVIEW OF THE STATEMENT BY EXTERNAL
the Sri Lanka Accounting Standard
AUDITORS
SLFRS - 9 (Financial Instruments) y The comments made by the External
The External Auditors, Messrs Ernst &
which is effective from 1st January Auditors in connection with internal
Young, have reviewed the above Directors’
2018 by replacing the Sri Lanka control system over financial reporting
Statement on Internal Control over
Accounting Standard – LKAS 39 in previous years were reviewed during
Financial Reporting included in the Annual
(Financial Instruments: Recognition the year and appropriate steps have
Report of the Bank for the year ended
and Measurement). This will been taken to address any matters
31st December 2017 and reported to
have a significant impact on the raised. The recommendations made
the Board that nothing has come to their
calculation of impairment on financial by the External Auditors in 2017 in
attention that causes them to believe that
instruments as it uses forward looking connection with the internal control
the statement is inconsistent with their
‘expected credit loss model’ compared system over financial reporting will be
understanding of the process adopted
to the previously applied ‘incurred dealt with in the future.
by the Board in the review of the design
credit loss model’ under LKAS 39.
and effectiveness of the Internal Control
The Bank has obtained the services CONFIRMATION
Over Financial Reporting of the Bank.
of an External Consultant for SLFRS Based on the above processes, the Board
Their Report on the Statement of Internal
9 implementation. Multidisciplinary confirms that the financial reporting
Control over Financial Reporting is given on
implementation teams are formed system of the Bank has been designed to
page 191 of this Annual Report.
required to carry on the operations Committee meetings and other Board Sub
in an orderly manner, safeguard the Committee meetings and expressed their
assets, prevent and detect frauds and opinion as reported by them in the Annual
other irregularities and secure as far as Report on page 195.
practicable the accuracy and reliability of
the records. COMPLIANCE REPORT
The Directors confirm that to the best of
Based on their assessment of Internal their knowledge, all taxes, duties and levies
Control Over Financial Reporting (ICOFR), payable by the Bank and its Subsidiaries,
in compliance with Direction 3(8)(ii)(b) of all contributions, levies and taxes
the Banking Act Direction No. 11 of 2007 payable on behalf of and in respect of the
on Corporate Governance, the Directors employees of the Bank and its Subsidiaries
have concluded that, as of 31st December and all other known statutory dues as
2017, the Group’s Internal Controls Over were due and payable by the Bank and its
Financial Reporting are effective. The Subsidiaries as at reporting date have been
Directors’ Statement on Internal Control paid or, where relevant, provided for, except
Over Financial Reporting and Annual as specified in Note No. 48 to the Financial
Report of the Board of Directors on the Statements covering contingent liabilities.
Affairs of the Company are provided on The Directors confirm that based on their
pages 189 to 190 and pages 179 to 188 assessment, the accounting controls
respectively of this Annual Report. The are adequate and nothing has come to
External Auditors’ Independent Assurance their attention to indicate any breakdown
Report on the “Directors’ Statement on in the functioning of these controls,
Internal Control Over Financial Reporting” resulting in material loss to the Bank.
is given on page 191 of this Annual Report. The Directors also confirm that the Bank
will have adequate resources to continue
As required by Section 56(2) of the in operational existence and as a going
Companies Act, the Directors have made concern for the foreseeable future.
an assessment of the Solvency of the
Bank, immediately after the proposed The Directors are of the view that they have
final dividends and confirm that the Bank discharged their responsibilities as set out
satisfies the Solvency Test required by the in the above statement.
Section 57 of Companies Act. The Directors
have also obtained the Certificates of By order of the Board,
Solvency from the External Auditors of the
Bank, Messrs Ernst & Young.
REPORT ON THE FINANCIAL STATEMENTS An audit involves performing procedures REPORT ON OTHER LEGAL AND REGULATORY
We have audited the accompanying to obtain audit evidence about the REQUIREMENTS
financial statements of Sampath Bank amounts and disclosures in the financial As required by Section 163(2) of the
PLC, (the “Bank”), and the consolidated statements. The procedures selected Companies Act No. 7 of 2007, we state the
financial statements of the Bank and its depend on the auditor’s judgment, following:
subsidiaries (the “Group”), which comprise including the assessment of the risks of
the statement of financial position as at material misstatement of the financial a) The basis of opinion and scope and
31 December 2017, and the statement of statements, whether due to fraud or error. limitations of the audit are as stated
profit or loss, statement of comprehensive In making those risk assessments, the above.
income, statement of changes in equity auditor considers internal control relevant
and, statement of cash flows for the year to the bank’s preparation of the financial b) In our opinion :
then ended, and a summary of significant statements that give a true and fair view in
accounting policies and other explanatory order to design audit procedures that are y we have obtained all the information
information set out on pages 196 to 333. appropriate in the circumstances, but not and explanations that were required
for the purpose of expressing an opinion for the audit and, as far as appears
BOARD’S RESPONSIBILITY FOR THE on the effectiveness of the bank’s internal from our examination, proper
FINANCIAL STATEMENTS control. An audit also includes evaluating accounting records have been kept by
The Board of Directors (the “Board”) is the appropriateness of accounting the Bank,
responsible for the preparation of these policies used and the reasonableness of
financial statements that give a true and y the financial statements of the Bank
accounting estimates made by Board, as
fair view in accordance with Sri Lanka give true and fair view of the financial
well as evaluating the overall presentation
Accounting Standards, and for such position as at 31 December 2017,
of the financial statements.
internal controls as Board determines is and of its financial performance and
necessary to enable the preparation of We believe that the audit evidence we have cash flows for the year then ended in
financial statements that are free from obtained is sufficient and appropriate to accordance with Sri Lanka Accounting
material misstatement, whether due to provide a basis for our audit opinion. Standards, and
fraud or error.
OPINION y the financial statements of the Bank
AUDITORS’ RESPONSIBILITY In our opinion, the consolidated financial and the Group, comply with the
Our responsibility is to express an opinion statements give a true and fair view of requirements of Section 151 and 153
on these financial statements based the financial position of the Group as at of the Companies Act No. 7 of 2007.
on our audit. We conducted our audit 31 December 2017, and of its financial
in accordance with Sri Lanka Auditing performance and cash flows for the year
Standards. Those standards require that then ended in accordance with Sri Lanka
we comply with ethical requirements Accounting Standards.
and plan and perform the audit to obtain Ernst & Young
reasonable assurance about whether the Chartered Accountants
financial statements are free from material
misstatement. 15 February 2018
Colombo
196 SAMPATH BANK PLC ANNUAL REPORT 2017
Less: VAT & NBT on financial services 15 4,078,901 2,814,023 45 4,309,389 2,942,523 46
Profit before income tax 16,605,925 12,599,858 32 17,510,228 13,213,529 33
Attributable to:
Equity holders of the Bank 12,104,120 9,124,670 33 12,682,500 9,496,073 34
Non - controlling interest - 5,173 (100)
12,104,120 9,124,670 33 12,682,500 9,501,246 33
Earnings per share : Basic / Diluted (Rs) 17 61.95 47.35 31 64.91 49.28 32
* Calculated based on proposed dividend, which is to be approved at the Annual General Meeting.
The Notes to the Financial Statements from pages 204 to 333 form an integral part of these Financial Statements.
INTRODUCTORY INFORMATION | MANAGING OUR BUSINESS | MANAGEMENT DISCUSSION & ANALYSIS | RISK & GOVERNANCE FINANCIAL INFORMATION SUPPLEMENTARY INFORMATION 197
Bank Group
For the year ended 31st December 2017 2016 Change 2017 2016 Change
Rs 000 Rs 000 % Rs 000 Rs 000 %
Other comprehensive income net of tax 575,790 1,360,124 (58) 2,700 2,259,666 (100)
Total comprehensive income for the year net
of tax 12,679,910 10,484,794 21 12,685,200 11,760,912 8
Attributable to:
Equity holders of the Bank 12,679,910 10,484,794 21 12,685,200 11,730,064 8
Non - controlling interest - 30,848 (100)
12,679,910 10,484,794 21 12,685,200 11,760,912 8
The Notes to the Financial Statements from pages 204 to 333 form an integral part of these Financial Statements.
198 SAMPATH BANK PLC ANNUAL REPORT 2017
ASSETS
Cash & cash equivalents 20 22,334,315 17,064,013 31 22,612,939 17,221,809 31
Balances with Central Bank of Sri Lanka 21 41,100,364 33,724,856 22 41,100,364 33,724,856 22
Placements with banks 22 3,159,326 8,749,763 (64) 3,225,025 8,749,763 (63)
Reverse repurchase agreements 1,200,762 33,860,083 (96) 2,392,852 34,629,422 (93)
Derivative financial instruments 23 496,918 109,872 352 496,918 109,872 352
Financial assets - held for trading 24 19,910,621 28,109,193 (29) 19,977,657 28,117,789 (29)
Financial assets - held for trading pledged as
collaterals 25 591,886 10,380,213 (94) 524,850 10,371,617 (95)
Loans to & receivables from banks 26 2,084,507 2,641,733 (21) 2,084,507 2,641,733 (21)
Loans to & receivables from other customers 27 560,798,940 456,189,052 23 586,370,704 472,754,947 24
Other loans & receivables 28 49,352,443 38,708,440 28 49,352,443 38,708,440 28
Financial assets - available for sale 29 72,911,447 14,270,190 411 73,013,072 14,329,468 410
Financial assets - available for sale pledged as
collaterals 30 4,184,272 657,903 536 4,082,703 598,681 582
Financial assets - held to maturity 31 - - - 12,428 16,933 (27)
Investment in subsidiaries 32 1,356,075 1,227,896 10 - - -
Property, plant & equipment 33 7,269,942 5,971,517 22 12,631,442 10,709,207 18
Intangible assets 34 946,845 337,348 181 996,703 356,131 180
Current tax receivables 40 - - - 6,425 10,365 (38)
Deferred tax assets 35 - - - 401 857 (53)
Other assets 36 7,403,463 6,510,214 14 7,835,236 7,046,611 11
Total Assets 795,102,126 658,512,286 21 826,716,669 680,098,501 22
LIABILITIES
Due to banks 37 4,743,748 6,907,354 (31) 4,820,287 6,954,618 (31)
Derivative financial instruments 23 103,947 63,611 63 103,947 63,611 63
Securities sold under repurchase agreements 4,386,335 10,159,225 (57) 4,231,946 10,095,117 (58)
Due to other customers 38 625,814,313 509,683,233 23 634,641,381 512,550,404 24
Debt issued & other borrowed funds 39 76,098,240 72,128,237 6 91,257,152 84,179,232 8
Dividend payable 99,259 84,860 17 99,259 84,860 17
Current tax liabilities 40 5,527,323 4,316,297 28 5,630,670 4,386,251 28
Deferred tax liabilities 35 1,353,339 872,794 55 2,776,681 1,077,674 158
Other liabilities 41 11,742,147 9,059,401 30 12,612,529 10,182,582 24
Other provisions 42 1,583,558 748,440 112 1,634,367 782,075 109
Total Liabilities 731,452,209 614,023,452 19 757,808,219 630,356,424 20
INTRODUCTORY INFORMATION | MANAGING OUR BUSINESS | MANAGEMENT DISCUSSION & ANALYSIS | RISK & GOVERNANCE FINANCIAL INFORMATION SUPPLEMENTARY INFORMATION 199
EQUITY
Stated capital 43 16,307,722 6,471,200 152 16,307,722 6,471,200 152
Reserves
Statutory reserve 44 2,860,000 2,250,000 27 2,973,000 2,336,422 27
Other reserves 45 38,409,796 31,370,185 22 41,093,901 34,619,026 19
Retained earnings 46 6,072,399 4,397,449 38 8,533,827 6,315,429 35
Total equity attributable to equity holders of
the Bank 63,649,917 44,488,834 43 68,908,450 49,742,077 39
Non - controlling interest 47 - - -
Total Equity 63,649,917 44,488,834 43 68,908,450 49,742,077 39
The Notes to the Financial Statements from pages 204 to 333 form 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. 07 of 2007.
Net cash generated during the year 859,812 6,066,580 1,017,064 6,051,731
Cash & cash equivalents at the beginning of the year 24,517,417 18,450,837 24,627,949 18,576,218
Cash & cash equivalents at the end of the year (Note b) 25,377,229 24,517,417 25,645,013 24,627,949
The Notes to the Financial Statements from pages 204 to 333 form an integral part of these Financial Statements.
INTRODUCTORY INFORMATION | MANAGING OUR BUSINESS | MANAGEMENT DISCUSSION & ANALYSIS | RISK & GOVERNANCE FINANCIAL INFORMATION SUPPLEMENTARY INFORMATION 201
NOTE (a) RECONCILIATION OF OPERATING PROFIT BEFORE CHANGES IN OPERATING ASSETS AND LIABILITIES
Note Bank Group
For the year ended 31st December 2017 2016 2017 2016
Rs 000 Rs 000 Rs 000 Rs 000
The Notes to the Financial Statements from pages 204 to 333 form an integral part of these Financial Statements.
Bank Stated Statutory Other Reserves Retained Total
Capital Reserve Revaluation Available General Earnings Equity
(Note 43) Fund Reserve for Sale Reserve (Note 46)
(Note 44) (Note 45.1) Reserve (Note 45.3)
(Note 45.2)
Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000
Balance as at 1st January 2016 5,381,405 1,790,000 1,846,649 875,723 22,165,000 3,066,297 35,125,074
Total comprehensive income for the year 2016
Profit for the year - - - - - 9,124,670 9,124,670
Other comprehensive income - - 557,982 395,596 - 406,546 1,360,124
Total comprehensive income for the year 2016 - - 557,982 395,596 - 9,531,216 10,484,794
Transactions with equity holders, recognised directly in equity,
202 SAMPATH BANK PLC ANNUAL REPORT 2017
Balance as at 1st January 2017 6,471,200 2,250,000 2,404,631 1,271,319 27,694,235 4,397,449 44,488,834
STATEMENT OF CHANGES IN EQUITY
The Notes to the Financial Statements from pages 204 to 333 form an integral part of these Financial Statements.
Group Stated Statutory Other Reserves Retained Shareholders’ Non Total
Capital Reserve Revaluation Available for General Earnings Fund Controlling Equity
(Note 43) Fund Reserve Sale Reserve Reserve (Note 46) Interest
(Note 44) (Note 45.1) (Note 45.2) (Note 45.3) (Note 47)
Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000
Balance as at 1st January 2016 5,381,405 1,860,058 4,202,261 875,723 22,165,001 4,624,088 39,108,536 94,663 39,203,199
Total comprehensive income for the year 2016
Profit for the year - - - - - 9,496,073 9,496,073 5,173 9,501,246
Other comprehensive income - - 1,430,885 395,596 - 407,510 2,233,991 25,675 2,259,666
Total comprehensive income for the year 2016 - - 1,430,885 395,596 - 9,903,583 11,730,064 30,848 11,760,912
Transactions with equity holders, recognised directly in
equity, contributions by and distributions to equity
holders
Final dividend for 2015 : Cash - - - - - (1,033,876) (1,033,876) (1,000) (1,034,876)
Final dividend for 2015 : Scrip 1,089,795 - - - - (1,206,188) (116,393) - (116,393)
Unclaimed dividend adjustments - - - - 29,235 - 29,235 - 29,235
Total contributions by and distributions to equity holders 1,089,795 - - - 29,235 (2,240,064) (1,121,034) (1,000) (1,122,034)
Transfer of remaining non - controlling interest to
parent's equity - - 20,325 - - 4,186 24,511 (124,511) (100,000)
Transfer to reserves during the year - 476,364 - - 5,500,000 (5,976,364) - - -
Balance as at 31st December 2016 6,471,200 2,336,422 5,653,471 1,271,319 27,694,236 6,315,429 49,742,077 - 49,742,077
Balance as at 1st January 2017 6,471,200 2,336,422 5,653,471 1,271,319 27,694,236 6,315,429 49,742,077 - 49,742,077
Total comprehensive income for the year 2017
Profit for the year - - - - - 12,682,500 12,682,500 - 12,682,500
Other comprehensive income - - (560,317) 1,028,402 - (465,385) 2,700 - 2,700
INTRODUCTORY INFORMATION | MANAGING OUR BUSINESS | MANAGEMENT DISCUSSION & ANALYSIS | RISK & GOVERNANCE
Total comprehensive income for the year 2017 - - (560,317) 1,028,402 - 12,217,115 12,685,200 - 12,685,200
Transactions with equity holders, recognised directly in
equity, contributions by and distributions to equity
holders
Rights issue 7,602,778 - - - - - 7,602,778 - 7,602,778
Interim dividend for 2016 : scrip 2,233,744 - - - - (2,477,734) (243,990) - (243,990)
FINANCIAL INFORMATION
The Notes to the Financial Statements from pages 204 to 333 form an integral part of these Financial Statements.
SUPPLEMENTARY INFORMATION
203
204 SAMPATH BANK PLC ANNUAL REPORT 2017
1 REPORTING ENTITY investment services, issuing of credit 2.3 Approval of Financial Statements by
1.1 General cards and debit cards, off - shore Directors
Sampath Bank PLC (‘The Bank’), is banking, resident and non-resident The Financial Statements of the
a domiciled, public limited liability foreign currency operations, electronic Group as at and for the year ended
company incorporated in Sri Lanka banking services such as: telephone 31st December 2017 were authorized
on 10th March 1986 under the banking, internet banking, mobile for issue by the Board of Directors in
Companies Act No. 17 of 1982. It is a banking and money remittance accordance with the resolution of the
Licensed Commercial Bank registered facilities, pawning, leasing, factoring, Directors on 15th February 2018.
under the Banking Act No. 30 of 1988 hire purchase, travel related services
(Banking Act) and amendments and dealing in government securities 2.4 Basis of Measurement
thereto. The Bank was re-registered etc.
The Financial Statements of the Group
with the Registrar General of have been prepared on the historical
Companies as per the requirements 1.3.2 Subsidiaries
cost basis, except for the following
of the Companies Act No.7 of 2007 Ownership of Subsidiaries as of 31st material items in the Statement of
(Companies Act) on 28th April 2008 December 2017 and 31st December Financial Position:
under the name of Sampath Bank PLC. 2016 is given in Note 32 to the
The registered office of the Bank is Financial Statements. There were no y Derivative financial instruments are
located at No. 110, Sir James Peiris significant changes in the nature of measured at fair value (Note 23 )
Mawatha, Colombo 02. The shares the principal activities of the Group
of the Bank have a primary listing on during the financial year under review. y Available for sale financial assets are
the Colombo Stock Exchange. The measured at fair value
staff strength of the Bank as at 31st 2 BASIS OF PREPARATION (Note 29 & Note 30)
December 2017 was 4,011 (2016: 2.1 Statement of Compliance
3,960). The Consolidated Financial y Financial assets classified as fair value
Statements of the Group and the through profit or loss are measured at
1.2 Consolidated Financial Statements Separate Financial Statements of the fair value
The Consolidated Financial Bank, which comprise the Statement (Note 24 & Note 25)
Statements of the Bank as at and for of Financial Position, Statement
the year ended 31st December 2017 of Profit or Loss, Statement of y Land and buildings which are
comprise the Bank (Parent Company) Comprehensive Income, Statement measured at cost at the time of
and its Subsidiaries (together referred of Changes in Equity, Statement of acquisition subsequently measured at
to as the “Group” and individually as Cash Flows and Notes to the Financial revalued amounts, which are the fair
“Group entities”). The Subsidiaries Statements have been prepared values at the date of revaluation
of the Bank as at 31st December and presented in accordance with (Note 33)
2017 were Sampath Centre Ltd, Sri Lanka Accounting Standards
SC Securities (Pvt) Ltd, Siyapatha (SLFRSs and LKASs) laid down by the y Liabilities for defined benefit
Finance PLC and Sampath Information Institute of Chartered Accountants obligations are recognised at the
Technology Solutions Ltd. of Sri Lanka and in compliance with present value of the defined benefit
the requirements of the Companies obligation less the fair value of the
Sampath Bank PLC is the ultimate Act No. 7 of 2007. The presentation plan assets (Note 42)
parent of the Group. of the Financial Statements is also in
compliance with the requirements of 2.5 Functional and Presentation Currency
The Financial Statements of all the Banking Act No. 30 of 1988 and The Financial Statements of the Group
companies in the Group have a amendments thereto. are presented in Sri Lankan Rupees
common financial year which ends on (Rs), which is the currency of the
31st December. 2.2 Responsibility for Financial Statements primary economic environment in
The Board of Directors is responsible which Sampath Bank PLC operates.
1.3 Principal Activities and Nature of for the preparation and presentation Financial information presented in
Operations of Financial Statements of the Sri Lankan Rupees has been rounded
1.3.1 Bank Group and the Bank as per Sri Lanka to the nearest thousand unless
Accounting Standards and the indicated otherwise. There was no
The Bank provides a comprehensive
provisions of the Companies Act No. 7 change in the Group’s presentation
range of financial services
of 2007. and functional currency during the
encompassing accepting deposits,
year under review.
corporate and retail banking, project
financing, trade finance, treasury and
INTRODUCTORY INFORMATION | MANAGING OUR BUSINESS | MANAGEMENT DISCUSSION & ANALYSIS | RISK & GOVERNANCE FINANCIAL INFORMATION SUPPLEMENTARY INFORMATION 205
2.6 Presentation of Financial Statements finance activities and investing or to cease operations of the Group.
The assets and liabilities of the activities have been recognised. Therefore, the Financial Statements
Group presented in the Statement Cash and cash equivalents comprise continue to be prepared on the going
of Financial Position are grouped by short term, highly liquid investments concern basis.
nature and listed in an order that that are readily convertible to known
reflects their relative liquidity and amounts of cash and are subject to an 2.10.2 Impairment Losses on Loans and
maturity pattern. No adjustments have insignificant risk of changes in value. Advances
been made for inflationary factors The Group reviews its individually
affecting the Financial Statements. Cash and cash equivalents include significant loans and advances
An analysis on recovery or settlement cash in hand, balances with banks, at each reporting date to assess
within 12 months after the reporting placements with banks (less than whether an impairment loss should
date (current) and more than 12 3 months), money at call and short be recorded in the Statement of Profit
months after the reporting date notice, net of unfavourable local & or Loss. In particular, management’s
(non-current) is presented in the foreign bank balances. judgment is required in the estimation
Note 54. of the amount and timing of future
2.10 Significant Accounting Judgments, cash flows when determining the
2.7 Materiality and Aggregation Estimates and Assumptions impairment loss. These estimates
In compliance with Sri Lanka The preparation of Financial are based on assumptions about a
Accounting Standard - LKAS 01 Statements of the Group in number of factors and actual results
(Presentation of Financial conformity with Sri Lanka Accounting may differ, resulting in future changes
Statements), each material class of Standards requires the management to the impairment allowance made.
similar items is presented separately to make judgments, estimates
in the Financial Statements. Items and assumptions that affect the Loans and advances that have been
of dissimilar nature or functions too application of accounting policies assessed individually and found to
are presented separately unless they and the reported amounts of assets, be not impaired and all individually
are immaterial. Financial assets and liabilities, income and expenses. insignificant loans and advances
financial liabilities are offset and the Actual results may differ from these are then assessed collectively, by
net amount reported in the Statement estimates. categorising them into groups of
of Financial Position only when there assets with similar risk characteristics,
Estimates and underlying to determine whether a provision
is a legally enforceable right to offset
assumptions are reviewed on an should be made due to incurred loss
the recognised amounts and there
ongoing basis. Revisions to accounting events for which there is objective
is an intention to settle on a net
estimates are recognised in the period evidence, but the effects of which
basis, or to realise the assets and
in which the estimate is revised and in are not yet evident. The collective
settle the liability simultaneously.
any future periods affected. assessment takes account of data
Income and expenses are not offset
in the Statement of Profit or Loss from the loan portfolio such as credit
The most significant areas of quality, portfolio size, concentration
unless required or permitted by an
estimation, uncertainty and critical etc. as well as judgments based
Accounting Standard.
judgments in applying accounting on current economic conditions.
policies that have most significant Impairment of loans and advances is
2.8 Comparative Information
effect on the amounts recognised in discussed in detail under Note 3.3.8 to
The comparative information is
the Financial Statements of the Group the Financial Statements.
re-classified wherever necessary
are as follows:
to conform to the current year’s
2.10.3 Impairment of Available for Sale
presentation the details of which 2.10.1 Going Concern Investments
are given in Note 55 to the Financial
The Directors have made an The Group reviews its debt securities
Statements.
assessment of the Group’s ability to classified as available for sale, at each
continue as a going concern and are reporting date to assess whether they
2.9 Statement of Cash Flow
satisfied that it has the resources are impaired. Objective evidence that
The cash flow statement has been
to continue in business for the an available for sale debt security is
prepared by using the direct method
foreseeable future. Furthermore, impaired includes among other things
in accordance with the Sri Lanka
Board is not aware of any material significant financial difficulty of the
Accounting Standard - LKAS 7
uncertainties that may cast significant issuer, a breach of contract such as
(Statement of Cash Flows), whereby
doubt upon the Group’s ability to a default or delinquency in interest
gross cash receipts and gross cash
continue as a going concern and or principal payments etc. The Group
payments of operating activities,
they do not intend either to liquidate also records impairment charges on
206 SAMPATH BANK PLC ANNUAL REPORT 2017
available for sale equity investments requirements of new Inland Revenue freehold land and buildings including
when there is a significant or Act No. 24 of 2017 which was methods of valuation are given in Note
prolonged decline in fair value below substantively enacted as at the 33.3 to the Financial Statements.
their cost. The determination of what reporting date, except treatment on
is ‘significant’ or ‘prolonged’ requires finance lease transactions and new 2.10.9 Useful Life-time of the Property, Plant
judgment. The Group generally capital allowance rates. The relevant and Equipment
treats ‘significant’ as 20% or more transitional provisions are not yet The Group reviews the residual
and ‘prolonged’ as greater than introduced by the Department of values, useful lives and methods of
six months. In addition, the Group Inland Revenue. depreciation of property, plant and
evaluates, among other factors, equipment at each reporting date.
historical share price movements, The details of deferred tax Judgment of the management is
duration and extent up to which the computation is given in Note 35 to the exercised in the estimation of these
fair value of an investment is less than Financial Statements. values, rates, methods and hence they
its cost. are subject to uncertainty.
2.10.7 Defined Benefit Plans
2.10.4 Fair Value of Financial Instruments The cost of the defined benefit 2.10.10 Commitments and Contingencies
The determination of fair values plans and the present value of their All discernible risks are accounted
of financial assets and financial obligations are determined using for in determining the amount of
liabilities recorded on the Statement actuarial valuations. all known liabilities. Contingent
of Financial Position for which there liabilities are possible obligations
is no observable market price are The actuarial valuation involves whose existence will be confirmed
determined using a variety of valuation making assumptions about discount only by uncertain future events
techniques that include the use of rates, future salary increases, or present obligations where the
mathematical models. The valuation mortality rates and possible future transfer of economic benefit is
of financial instruments is described pension increases if any. Due to the not probable or cannot be reliably
in more detail in Note 52. long term nature of these plans, such measured. Contingent liabilities are
estimates are subject to significant not recognised in the Statement of
The Group measures fair value using uncertainty. All assumptions are Financial Position but are disclosed
the fair value hierarchy that reflects reviewed at each reporting date. unless they are remote. Details of
the significance of input used in commitments and contingencies are
making measurements. The fair value In determining the appropriate given in Note 48.
hierarchy is given in Note 52.4. discount rate, management considers
the interest rates of Sri Lanka 2.10.11 Classification of Investment
2.10.5 Financial Assets and Liabilities government bonds with maturities Properties
Classification corresponding to the expected
Management requires using its
The Group’s accounting policies duration of the defined benefit
judgment to determine whether a
provide scope for assets and liabilities obligation. The mortality rate is based
property qualifies as an investment
to be classified, at inception into on publicly available mortality tables.
property. The Group has developed
different accounting categories. Future salary increases and pension
criteria so it can exercise its judgment
The classification of financial increases are based on expected
consistently. A property that is held to
instruments is given in Note 19, future inflation rate and expected
earn rentals or for capital appreciation
‘Analysis of Financial Instruments by future salary increase rates of the
or both and which generates cash
Measurement Basis’. Group.
flows largely independently of the
other assets held by the Group
2.10.6 Taxation 2.10.8 Fair Value of Property, Plant and
are accounted for as investment
Equipment
The Group is subject to income tax properties. On the other hand, a
and judgment is required to determine The freehold land and buildings property that is used for operations or
the total provision for current, of the Group are reflected at fair in the process of providing services or
deferred and other taxes due to the value at the date of revaluation less for administrative purposes and which
uncertainties that exist with respect any accumulated depreciation and do not directly generate cash flows as
to the interpretation of the applicable impairment losses. The Group engages a standalone asset are accounted for
tax laws, at the time of preparation of independent valuation specialists to as property, plant and equipment. The
these Financial Statements. determine fair value of freehold lands Group assesses on an annual basis
and buildings in terms of the Sri Lanka the accounting classification of its
For the calculation of deferred Accounting Standard –SLFRS 13, (Fair properties taking into consideration
tax, the Group has adopted the Value Measurement). The details of the current use of such properties.
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Currently the Group does not have any transferred does not include amounts sale equity instruments, financial
investment property. related to the settlement of pre- liabilities designated as a hedge of a
existing relationships. Such amounts net investment in a foreign operation,
3 GENERAL ACCOUNTING POLICIES are generally recognised in profit or or qualifying cash flow hedges are
The accounting policies set out below loss. Transaction costs, other than recognised in other comprehensive
have been applied consistently to all those associated with the issue of income.
periods presented in these Financial debt or equity securities, that the
Statements, unless otherwise Group incurs in connection with a Forward exchange contracts are
indicated. business combination are expensed valued at the forward market rates
as incurred. ruling on the reporting date. Resulting
3.1 Basis of Consolidation net unrealised gains or losses are
The Group’s Financial Statements 3.2 Foreign Currency Transactions and dealt within the Statement of Profit or
comprise consolidation of the Balances Loss under ‘Net trading gain / loss’.
Financial Statements of the Bank All foreign currency transactions
and its Subsidiaries in terms are translated into the functional 3.3 Financial Instruments - Initial
of the Sri Lanka Accounting currency, which is Sri Lankan Rupees, Recognition, Classification and
Standard - SLFRS 10 (Consolidated using the exchange rates prevailing Subsequent Measurement
Financial Statements). The Bank’s at the dates of the transactions were 3.3.1 Date of Recognition
Financial Statements comprise affected. All financial assets and liabilities are
the amalgamation of the Financial initially recognised on the trade date,
Statements of the Domestic Banking Monetary assets and liabilities i.e. the date that the Group becomes a
Unit and the 0ff-Shore Banking Unit. denominated in foreign currencies at party to the contractual provisions of
the reporting date are translated to Sri the instrument. This includes ‘regular
3.1.1 Business Combinations and Goodwill Lankan Rupees using the spot foreign way trades’. Regular way trade means
Business combinations are accounted exchange rate ruling at that date purchases or sales of financial assets
for using the acquisition method as and all differences arising on non- that require delivery of assets within
per the requirements of Sri Lanka trading activities are taken to ‘Other the time frame generally established
Accounting Standard - SLFRS 03 operating income’ in the Statement by regulation or convention in the
(Business Combinations). of Profit or Loss. The foreign currency market place.
gain or loss on monetary items is
The Group measures goodwill as the difference between amortised 3.3.2 Recognition and Initial Measurement of
the fair value of the consideration cost in the functional currency at the Financial Instruments
transferred including the recognised beginning of the period, adjusted for
The classification of financial
amount of any non-controlling effective interest and payments during
instruments at the initial recognition
interest in the acquiree, less the the period, and the amortised cost
depends on their purpose and
net recognised amount (generally in foreign currency translated at the
characteristics and the management’s
fair value) of the identifiable assets rates of exchange prevailing at the
intention in acquiring them. Further
acquired and liabilities assumed, end of the reporting period.
details on classification of financial
all measured as of the acquisition assets and financial liabilities are
date. When the excess is negative, a Non - monetary items in a foreign
given under Note 3.3.3 & Note 3.3.4
bargain purchase gain is recognised currency that are measured in terms
respectively. All financial instruments
immediately in profit or loss, if of historical cost are translated using
are measured initially at their fair
controlling power is acquired. the exchange rates as at the dates
value plus transaction costs that are
of the initial transactions. Non -
directly attributable to acquisition or
The changes in parent’s ownership monetary items in foreign currency
issue of such financial instruments
interest in a subsidiary that do not measured at fair value are translated
except in the case of financial assets
result in the parent losing control of using the exchange rates at the date
and financial liabilities at fair value
the subsidiary are equity transactions. when the fair value was determined.
through profit or loss, as per the
Sri Lanka Accounting Standard -
The Group elects on a transaction- Foreign exchange differences arising
LKAS 39 (Financial Instruments:
by- transaction basis whether to on the settlement or reporting of
Recognition and Measurement).
measure non-controlling interest at monetary items at rates different from
Transaction cost in relation to
its fair value, or at its proportionate those which were initially recorded are
financial assets and financial liabilities
share of the recognised amount of dealt with in the Statement of Profit
at fair value through profit or loss are
the identifiable net assets, at the or Loss. However foreign currency
dealt with in the Statement of Profit
acquisition date. The consideration differences arising on available-for-
or Loss.
208 SAMPATH BANK PLC ANNUAL REPORT 2017
3.3.2 (a) ‘Day 1’ Profit or Loss or repurchasing in the near term or 3.3.3 (a) (ii) Financial Assets Designated at
When the transaction price differs holds as a part of a portfolio that is Fair Value through Profit or Loss
from the fair value of other observable managed together for short-term The Group designates financial assets
current market transactions in the profit or position taking. This category at fair value through profit or loss in
same instrument, or based on a also includes derivative financial the following circumstances:
valuation technique whose variables instruments entered into by the Group
include only data from observable that are not designated as hedging y Such designation eliminates or
markets, the Group recognises the instruments in hedge relationships significantly reduces measurement or
difference between the transaction as defined by Sri Lanka Accounting recognition inconsistency that would
price and fair value (a ‘Day 1’ profit Standard - LKAS 39 (Financial otherwise arise from measuring the
or loss) in the Statement of Profit or Instruments: Recognition and assets
Loss over the tenor of the financial Measurement).
y The assets are part of a group of
instrument using the effective interest financial assets, financial liabilities
rate method. In cases where fair value Financial assets held for trading are
recorded in the Statement of Financial or both, which are managed and
is determined using data which is not their performance evaluated on a
observable, the difference between Position at fair value. Changes in fair
value are recognised in ‘Net trading fair value basis, in accordance with
the transaction price and model value a documented risk management or
gain / loss’. Dividend income is
is only recognised in the Statement of investment strategy
recorded in ‘Net trading gain / loss’
Profit or Loss when the inputs become
when the right to receive the payment y The asset contains one or more
observable, or when the instrument is
has been established. Interest income embedded derivatives that
derecognised.
earned from financial assets held for significantly modify the cash flows
3.3.3 Classification and Subsequent trading is recorded under ‘Interest that would otherwise have been
Measurement of Financial Assets income: Financial assets held for required under the contract
trading’ using the effective interest
At the inception, a financial asset is Financial assets designated at fair
rate.
classified into one of the following: value through profit or loss are
The Group evaluates its held for recorded in the Statement of Financial
a. Financial assets at fair value trading asset portfolio, other than Position at fair value. Changes in fair
through profit or loss derivatives, to determine whether value are recorded in ‘Net gain or loss
i. Financial assets held for the intention to sell them in the on financial instruments designated at
trading near future is still appropriate. When fair value through profit or loss’ in the
ii. Financial assets designated the Group is unable to trade these Statement of Profit or Loss. Interest
at fair value through profit or financial assets due to inactive earned is accrued under ‘Interest
loss markets and management’s intention income’, using the effective interest
to sell them in the foreseeable future rate method, while dividend income
b. Held to maturity financial assets
significantly changes, the Group may is recorded under ‘Other operating
c. Loans and receivables elect to reclassify these financial income’ when the right to receive the
d. Financial assets available for sale assets. payment has been established.
The subsequent measurement of Financial assets held for trading The Group has not designated
financial assets depends on their include instruments such as any financial assets upon initial
classification. government securities and equity recognition as designated at fair value
instruments that have been acquired through profit or loss.
3.3.3 (a) Financial Assets at Fair Value principally for the purpose of selling
through Profit or Loss or repurchasing in the near term 3.3.3 (b) Held to Maturity Financial Assets
A financial asset is classified as fair and derivatives, including separated Held to maturity financial assets are
value through profit or loss if it is held embedded derivatives unless they non-derivative financial assets with
for trading or is designated at fair are designated as effective hedging fixed or determinable payments and
value through profit or loss. instruments. fixed maturities, which the Group has
the intention and ability to hold to
3.3.3 (a) (i) Financial Assets Held for Trading Details of ‘financial assets held for maturity. After the initial recognition,
trading’ are given in Notes 24 & 25 to held to maturity financial investments
Financial assets are classified as
the Financial Statements. are subsequently measured at
held for trading if they are acquired
principally for the purpose of selling amortised cost using the effective
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interest rate, less impairment. The ‘Available for sale’ are those which are a. Financial liabilities at fair value
amortisation is included in ‘Interest neither classified as ‘Held for trading’ through profit or loss
income’ in the Statement of Profit nor ‘designated at fair value through i. Financial liabilities held for
or Loss. The losses arising from profit or loss’. Debt securities in this trading
impairment of such investments are category are intended to be held for an
ii. Financial liabilities designated
recognised in the Statement of Profit indefinite period of time and may be
at fair value through profit
or Loss. sold in response to needs for liquidity
or loss
or in response to changes in the
Details of ‘Financial investments - market conditions. The Group has not b. Financial liabilities at amortised
held to maturity’ are given in Note 31 designated any loans and receivables cost
to the Financial Statements. as available for sale.
3.3.4 (a) Financial Liabilities at Fair Value
3.3.3 (c) Loans and Receivables After initial measurement, available through Profit or Loss
Loans and receivables include non- for sale financial investments are Financial liabilities at fair value
derivative financial assets with fixed or subsequently measured at fair value. through profit or loss include financial
determinable payments that are not Unrealised gains and losses are liabilities held for trading and financial
quoted in an active market, other than: recognised directly in equity through liabilities designated upon initial
‘Other comprehensive income / recognition as fair value through
y Those that the Group intends to sell expense’ in the ‘Available for sale profit or loss. Subsequent to initial
immediately or in the near term and reserve’. When the investment is recognition, financial liabilities at
those that the Group, upon initial disposed of, the cumulative gain or fair value through profit or loss are
loss previously recognised in equity measured at fair value and changes
recognition, designates as fair value
is recognised in the Statement there in are recognised in profit or
through profit or loss
of Profit or Loss under ‘Net gain loss.
y Those that the Group, upon initial
from financial investments’. Where
recognition, designates as available 3.3.4 (a) (i) Financial Liabilities held for
the Group holds more than one
for sale Trading
investment in the same security,
y Those for which the Group may not they are deemed to be disposed of Financial liabilities are classified as
recover substantially all of its initial on a first-in first-out basis. Interest held for trading if they are acquired
investment through contractual cash earned whilst holding ‘Available for principally for the purpose of selling
flows, other than because of credit sale financial investments’ is reported or repurchasing in the near term or
deterioration as ‘Interest income’ using the effective holds as a part of a portfolio that
interest rate. Dividend earned whilst is managed together for short-
After initial measurement, loans holding ‘Available for sale financial term profit or position taking. This
and receivables are subsequently investments’ are recognised in the category includes derivative financial
measured at amortised cost using the Statement of Profit or Loss as ‘Net instruments entered into by the Group
effective interest rate, less allowance gain from financial investments’ when that are not designated as hedging
for impairment. The amortisation the right to receive the payment has instruments in hedge relationships as
is included in ‘Interest income’ in been established. The losses arising defined by the Sri Lanka Accounting
the Statement of Profit or Loss. The from impairment of such investments Standard - LKAS 39 (Financial
Instruments: Recognition and
losses arising from impairment are are recognised in the Statement of
Measurement).
recognised in ‘Impairment charge / Profit or Loss under ‘Impairment
reversal for loans and other losses’ in charge for loans and other losses’ and
3.3.4 (a) (ii) Financial Liabilities Designated at
the Statement of Profit or Loss. removed from the ‘Available for sale
Fair Value through Profit or Loss
reserve’.
Loans and receivables include cash The Group designates financial
& cash equivalents, balances with Details of ‘Financial assets - available liabilities at fair value through profit or
Central Bank, placement with banks, for sale’ are given in Note 29 & Note loss in the following circumstances:
reverse repurchase agreements, loans 30 to the Financial Statements.
to & receivables from banks and other y Such designation eliminates or
customers etc. 3.3.4 Classification and Subsequent significantly reduces measurement or
Measurement of Financial Liabilities recognition inconsistency that would
3.3.3 (d) Financial Assets Available for Sale otherwise arise from measuring the
At the inception, the Group determines
liabilities
Available for sale financial assets the classification of its financial
include equity and debt securities. liabilities. Accordingly financial
Equity investments classified as liabilities are classified as:
210 SAMPATH BANK PLC ANNUAL REPORT 2017
y The liabilities are part of a group of Note 39 (Debt issued and other as a result of increased recoverability
financial liabilities, financial assets borrowed funds) to the Financial of those cash receipts, the effect of
or both, which are managed and Statements. that increase is recognised as an
their performance evaluated on a adjustment to the effective interest
fair value basis, in accordance with 3.3.5 Reclassification of Financial rate from the date of the change in
a documented risk management or Instruments estimate rather than an adjustment
investment strategy 3.3.5 (a) Reclassification of Financial to the carrying amount of the asset at
Instruments ‘At fair value through profit the date of change in estimate.
y The liability contains one or or loss’
more embedded derivatives that The Group does not reclassify any
The Group does not reclassify
significantly modify the cash flows financial instrument into the ‘Fair
derivative financial instruments out
that would otherwise have been value through profit or loss’ category
of the fair value through profit or loss
required under the contract after initial recognition.
category while it is held or issued.
The Group has not designated 3.3.5 (b) Reclassification of ‘Available for sale’
Non derivative financial instruments
any financial liabilities upon initial Financial Instruments
designated at fair value through profit
recognition as fair value through profit The Group may reclassify financial
or loss upon initial recognition are not
or loss. assets out of available for sale
reclassified subsequently out of fair
value through profit or loss category. category as a result of change
3.3.4 (b) Financial Liabilities at Amortised
in intention or ability or in rare
Cost
The Group may, in rare circumstances, circumstances that a reliable measure
Financial instruments issued by of fair value is no longer available.
reclassify financial instruments out
the Group that are not classified as
of fair value through profit or loss
fair value through profit or loss are A financial asset classified as available
category if such instruments are
classified as financial liabilities at for sale that would have met the
no longer held for the purpose of
amortised cost under ‘Due to banks, definition of loans and receivables
selling or repurchasing in the near
‘Due to other customers’, ‘Securities at the initial recognition may be
term notwithstanding that such
sold under repurchase agreements’ reclassified out of available for sale
financial instruments may have been
and ‘Debt issued and other borrowed category to the loans and receivables
acquired principally for the purpose
funds’ as appropriate, where the category if the Group has the intention
of selling or repurchasing in the near
substance of the contractual and ability to hold such asset for the
term. Financial assets classified as
arrangement results in the Group foreseeable future or until maturity.
fair value through profit or loss at
having an obligation either to deliver
the initial recognition which would
cash or another financial asset The fair value of financial instruments
have also met the definition of ‘loans
to another entity, or to exchange at the date of reclassification is
and receivables’ as at that date is
financial assets or financial liabilities treated as the new cost or amortised
reclassified out of the fair value
with another entity under conditions cost of the financial instrument after
through profit or loss category only if
that are potentially unfavourable to reclassification. Difference between
the Group has the intention and ability
the entity or settling the obligation by the new amortised cost and the
to hold such asset for the foreseeable
delivering variable number of entity’s maturity value is amortised over the
future or until maturity.
own equity instruments. remaining life of the asset using
The fair value of financial instruments the effective interest rate. Any gain
After initial recognition, such financial or loss already recognised in Other
at the date of reclassification is
liabilities are subsequently measured Comprehensive Income in respect of
treated as the new cost or amortised
at amortised cost using the effective the reclassified financial instrument
cost of the financial instrument after
interest rate method. Amortisation until the date of reclassification is
reclassification. Any gain or loss
is included in ‘Interest expenses’ in accounted as follows.
already recognised in respect of the
the Statement of Profit or Loss. Gains
reclassified financial instrument until
and losses are recognised in the i) Financial assets with fixed maturity:
the date of reclassification is not
Statement of Profit or Loss when the Gain or loss recognised up to the date
reversed to the Statement of Profit or
liabilities are derecognised. of reclassification is amortised to
Loss.
profit or loss over the remaining life
The details of the Group’s financial of the investment using the effective
If a financial asset is reclassified, and
liabilities at amortised cost are shown interest rate. If the financial asset is
if the Group subsequently increases
in Note 37 (Due to banks), Note 38 subsequently impaired, any previous
its estimates of future cash receipts
(Due to other customers) and gain or loss that has been recognised
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in other comprehensive income is Above reclassifications are at associated liability. The transferred
reclassified from equity to profit or the election of management and asset and the associated liability are
loss. determined on an instrument by measured on a basis that reflects the
instrument basis. The Group has not rights and obligations that the Group
ii) Financial assets without fixed maturity: reclassified any financial instrument has retained.
Gain or loss recognised up to the date during the year.
of reclassification is recognised in When the Group’s continuing
profit or loss only when the financial 3.3.6 Derecognition of Financial Assets and involvement that takes the form
asset is sold or otherwise disposed of. Liabilities of guaranteeing the transferred
If the financial asset is subsequently 3.3.6 (a) Derecognition of Financial Assets asset, the extent of the continuing
impaired, any previous gain or loss involvement is measured at the lower
The Group derecognises a financial
that has been recognised in other of the original carrying amount of the
asset (or, where applicable a part of
comprehensive income is reclassified asset and the maximum amount of
a financial asset or part of a group of
from equity to profit or loss. consideration received by the Group
similar financial assets) when:
that the Group could be required to
If a financial asset is reclassified, and repay.
y the rights to receive cash flows from
if the Group subsequently increases the asset have expired; or
its estimates of future cash receipts 3.3.6 (b) Derecognition of Financial Liabilities
as a result of increased recoverability y the Group has transferred its rights to A financial liability is derecognised
of those cash receipts, the effect receive cash flows from the asset when the obligation under the liability
of that increase is recognised as an or is discharged or cancelled or expired.
adjustment to the effective interest y has assumed an obligation to pay the Where an existing financial liability is
rate from the date of the change in received cash flows in full without replaced by another from the same
estimate rather than an adjustment material delay to a third party under lender on substantially different terms
to the carrying amount of the asset at a ‘pass-through’ arrangement and or the terms of an existing liability
the date of change in estimate. either the Group has transferred are substantially modified, such an
substantially all the risks and rewards exchange or modification is treated as
3.3.5 (c) Reclassification of ‘Held to maturity’ of the asset or the Group has neither a derecognition of the original liability
Financial Instruments transferred nor retained substantially and the recognition of a new liability.
As a result of a change in intention all the risks and rewards of the asset,
or ability,if it is no longer appropriate but has transferred control of the The difference between the carrying
to classify an investment as held asset. value of the original financial liability
to maturity, Group may reclassify and the consideration paid is
such financial assets as available On derecognition of a financial asset, recognised in profit or loss.
for sale and remeasured at fair value. the difference between the carrying
Any difference between the carrying amount of the asset (or the carrying 3.3.6 (c) Repurchase and Reverse
value of the financial asset before amount allocated to the portion of the Repurchase Agreements
reclassification and fair value is asset derecognised) and the sum of Securities sold under agreement
recognised in equity through other the consideration received (including to repurchase at a specified future
comprehensive income. any new asset obtained less any new date are not derecognised from the
liability assumed) and any cumulative Statement of Financial Position as
However, if the Group were to sell or gain or loss that had been recognised the Group retains substantially all of
reclassify more than an insignificant in other comprehensive income is the risks and rewards of ownership.
amount of held to maturity recognised in profit or loss. The corresponding cash received
investments before maturity [other is recognised in the Statement of
than in certain specific circumstances When the Group has transferred its Financial Position as a liability with
permitted in the Sri Lanka Accounting rights to receive cash flows from an a corresponding obligation to return
Standard - LKAS 39 (Financial asset or has entered into a pass- it, including accrued interest under
Instruments: Recognition and through arrangement and has neither ‘Securities sold under repurchase
Measurement], the entire category transferred nor retained substantially agreements’, reflecting the
would be tainted and would have all of the risks and rewards of the transaction’s economic substance to
to be reclassified as ‘Available for asset nor transferred control of the the Group. The difference between the
sale’. Furthermore, the Group would asset, the asset is recognised to sale and repurchase prices is treated
be prohibited from classifying any the extent of the Group’s continuing as interest expense and is accrued
financial asset as ‘Held to maturity’ involvement in the asset. In that over the life of the agreement using
during the following two years. case, the Group also recognises an the effective interest rate. When the
212 SAMPATH BANK PLC ANNUAL REPORT 2017
Group has the right to sell or repledge group of financial assets is deemed y A significant downgrading in credit
the securities, the Group reclassifies to be impaired if and only if there is rating by an external credit rating
those securities in its Statement of objective evidence of impairment as a agency.
Financial Position as ‘Financial assets result of one or more events, that have
held for trading pledged as collateral occurred after the initial recognition If there is objective evidence that an
(Note 25)’ or ‘Financial assets of the asset (an ‘incurred loss event’) impairment loss has been incurred,
available for sale pledged as collateral and that loss event (or events) has the amount of the loss is measured by
(Note 30)’, as appropriate. an impact on the estimated future discounting the expected future cash
cash flows of the financial asset or the flows of a financial asset at its original
Conversely, securities purchased group of financial assets that can be effective interest rate and comparing
under agreements to resell at reliably estimated. the resultant present value with the
a specified future date are not financial asset’s current carrying
recognised in the Statement of 3.3.8 (a) Impairment of Financial Assets amount. The impairment allowances
Financial Position. The consideration carried at Amortised Cost on individually significant accounts
paid, including accrued interest, For financial assets carried at are reviewed more regularly when
is recorded in the Statement of amortised cost, such as amounts circumstances require. This normally
Financial Position, under ‘Reverse due from banks, loans and advances encompasses re-assessment of the
repurchase agreements’ reflecting the taken by customers, held to maturity enforceability of any collateral held
transaction’s economic substance to investments etc., the Group first and the timing and amount of actual
the Group. The difference between the assesses individually whether and anticipated receipts. Individually
purchase and resale prices is recorded objective evidence of impairment assessed impairment allowances
as ‘Interest income’ and is accrued exists for financial assets that are are only released when there is
over the life of the agreement using individually significant or collectively reasonable and objective evidence of
the effective interest rate. If securities for financial assets that are not a reduction in the established loss
purchased under agreement to resell individually significant. estimate. Interest on impaired assets
are subsequently sold to third parties, continues to be recognised through
the obligation to return the securities In the event the Group determines the unwinding of the discount.
is recorded as a short sale within that no objective evidence of
‘Financial liabilities held for trading’ impairment exists for an individually When impairment losses are
and measured at fair value with any assessed financial asset, it includes determined for those financial
gains or losses included in ‘Net trading the asset in a group of financial assets assets where objective evidence
gain / loss’. with similar credit risk characteristics of impairment exists, the following
and collectively assesses them for factors are considered:
3.3.7 0ffsetting of Financial Instruments impairment. However assets that are
Financial assets and financial individually assessed for impairment y Bank’s aggregate exposure to the
liabilities are offset and the net and for which an impairment loss is customer;
amount presented in the Statement or continues to be recognised are not y The viability of the customer’s
of Financial Position only when the included in a collective assessment of business model and their capacity to
Group has a legal right to set off the impairment. trade successfully out of financial
recognised amounts and it intends difficulties and generate sufficient
either to settle on a net basis or to 3.3.8 (a) (i) Individually Assessed Financial cash flows to service debt obligations;
realise the asset and settle the liability Assets
simultaneously. Income and expenses y The amount and timing of expected
The criteria used to determine
are presented on a net basis only receipts and recoveries;
whether there is objective evidence of
when permitted under LKASs / SLFRSs impairment include and not limited to: y The extent of other creditors’
or for gains and losses arising from a commitments ranking ahead of, or
group of similar transactions such as y Known cash flow difficulties pari-passu with the Bank and the
in the Group’s trading activity. experienced by the borrower; likelihood of other creditors continuing
to support the company;
3.3.8 Impairment of Financial Assets y Past due contractual payments of
either principal or interest; y The complexity of determining the
The Group assesses at each reporting
aggregate amount and ranking of
date, whether there is any objective y Breach of loan covenants or
all creditor claims and the extent
evidence that a financial asset or a conditions;
to which legal and insurance
group of financial assets not carried
y The probability that the borrower will uncertainties are evident;
at fair value through profit or loss
enter bankruptcy or other financial
is impaired. A financial asset or a y The realisable value of security (or
reorganisation; and
other credit mitigants) and likelihood
of successful repossession;
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y The likely deduction of any costs y Management’s experienced judgment stages of delinquency and ultimately
involved in recovery of amounts as to whether current economic and prove irrecoverable.
outstanding; credit conditions are such that the
actual level of inherent losses at the Current economic conditions
y The ability of the borrower to obtain
reporting date is like to be greater or and portfolio risk factors are also
and make payments in the currency
less than that suggested by historical evaluated when calculating the
of the loan if not denominated in local
experience. appropriate level of allowance
currency; and
required to cover inherent loss. These
y The likely dividend available on Homogeneous groups of financial additional macro and portfolio risk
liquidation or bankruptcy assets factors may include:
Statistical methods are used to
3.3.8 (a) (ii) Collectively Assessed Financial determine impairment losses on a y Recent loan portfolio growth and
Assets collective basis for homogeneous product mix
Impairment is assessed on a collective groups of financial assets. Losses in y Unemployment rates
basis in two circumstances: these groups of financial assets are
recorded on an individual basis when y Gross Domestic Production (GDP)
y To cover losses which have been individual financial assets are written growth
incurred but have not yet been off, at which point they are removed y Inflation
identified on loans subject to from the group.
individual assessment; and y Exchange rates
Two alternative methods are used to y Interest rates
y For homogeneous groups of loans
calculate historical loss experience on
that are not considered individually y Changes in government laws and
a collective basis:
significant. regulations
y When the group of financial assets
Incurred but not yet identified 3.3.8 (a) (iii) Reversal of Impairment
by nature long term, the Group uses
impairment
migration analysis method. Under If the amount of an impairment loss
Individually assessed financial assets this methodology the movements decreases in a subsequent period
for which no evidence of loss has been in number of customers into bad and the decrease can be related
specifically identified on an individual categories over the periods are used objectively to an event occurring after
basis are grouped together according to estimate the amount of financial the impairment was recognised, the
to their credit risk characteristics assets that will eventually be written excess is written back by reducing the
for the purpose of calculating an off as a result of the events occurring financial asset impairment allowance
estimated collective loss. This reflects before the reporting date which the account accordingly. The write-back is
impairment losses that the Group Group is not able to identify on an recognised in the Statement of Profit
has incurred as a result of events individual financial asset basis and or Loss.
occurring before the reporting date, that can be reliably estimated.
which the Group is not able to identify 3.3.8 (a) (iv) Write-off of Financial Assets
on an individual loan basis and that y When the group of financial assets Carried at Amortised Cost
can be reliably estimated. by nature short term, the Group uses Financial assets (and the related
net flow rate method. Under this impairment allowance accounts) are
These losses will only be individually methodology the movement in the normally written off either partially
identified in the future. As soon as outstanding balance of customers or in full, when there is no realistic
information becomes available which into bad categories over the periods prospect of recovery. Where financial
identifies losses on individual financial are used to estimate the amount of assets are secured, this is generally
assets within the group, those financial assets that will eventually be after receipt of any proceeds from the
financial assets are removed from the written off as a result of the events realisation of security.
group and assessed on an individual occurring before the reporting date
basis for impairment. which the Group is not able to identify 3.3.8 (a) (v) Impairment of Rescheduled
on an individual loan basis and that Loans and Advances
The collective impairment allowance is can be reliably estimated.
determined after taking into account: Where possible, the Group seeks
to reschedule loans rather than to
Under both methodologies, loans take possession of collateral. This
y Historical loss experience in portfolios are grouped into ranges according
of similar credit risk; and may involve extending the payment
to the number of days in arrears and arrangements and the agreement
statistical analysis is used to estimate of new loan conditions. Once the
the likelihood that loans in each range
terms have been renegotiated, any
will progress through the various
214 SAMPATH BANK PLC ANNUAL REPORT 2017
impairment is measured using the there is objective evidence that an 3.3.9 Hedge Accounting
original effective interest rate as investment is impaired. In the case The Group designates certain
calculated before the modification of debt instruments classified as derivatives as either:
of terms and the loan is no longer available for sale, the Group assesses
considered past due. Management individually whether there is objective y Hedges of the fair value of recognised
continually reviews renegotiated loans evidence of impairment based assets, liabilities or firm commitments
to ensure that all criteria are met on the same criteria as financial (fair value hedge);
and that future payments are likely assets carried at amortised cost. y Hedges of highly probable future cash
to occur. The loans continue to be However, the amount recorded for flows attributable to a recognised
subjected to individual or collective impairment is the cumulative loss asset or liability, or a forecast
impairment assessment, calculated measured as the difference between transaction (cash flow hedge); or
using the loan’s original effective the amortised cost and the current
interest rate. fair value, less any impairment y Hedges of the net investment of a
loss on that investment previously foreign operation (net investment
3.3.8 (a) (vi) Collateral Valuation recognised in the Statement of Profit hedges)
The Group seeks to use collateral, or Loss. Future interest income
is based on the reduced carrying Hedge accounting is used for
where possible, to mitigate its risks
amount and is accrued using the derivatives designated in this way
on financial assets. The collateral
rate of interest used to discount the provided certain criteria are met. The
comes in various forms such as cash,
future cash flows for the purpose of Group documents, at the inception
gold, securities, letters of credit/
measuring the impairment loss. If, in of the transaction, the relationship
guarantees, real estate, receivables,
a subsequent period, the fair value of between hedging instruments
inventories, other non-financial assets
a debt instrument increases and the and hedged items, as well as its
and credit enhancements such as
increase can be objectively related risk management objective and
netting agreements. The fair value of
to a credit event occurring after the strategy for undertaking various
collateral is generally assessed, at a
impairment loss was recognised, the hedge transactions. The Group also
minimum, at inception and based on
impairment loss is reversed through documents its assessment, both at
the guidelines issued by the Central
the Statement of Profit or Loss. hedge inception and on an ongoing
Bank of Sri Lanka.
basis, of whether the derivatives that
In the case of equity investments are used in hedging transactions are
To the extent possible, the Group uses
classified as available for sale, highly effective in offsetting changes
active market data for valuing financial
objective evidence would also include in fair values or cash flows of hedged
assets, held as collateral. Other
a ‘significant’ or ‘prolonged’ decline items.
financial assets which do not have
readily determinable market value are in the fair value of the investment
below its cost. The determination The Group did not designate any
valued using models. Non-financial
of ‘significant’ and ‘prolonged’ is derivative as a hedging instrument
collateral, such as real estate, is
explained in Note 2.10.3. Where during the year ended 31st December
valued based on data provided by third
there is evidence of impairment, the 2017.
parties such as independent valuers,
Audited Financial Statements and cumulative loss measured as the
difference between the acquisition 3.3.10 Amortised Cost Measurement
other independent sources.
cost and the current fair value, The amortised cost of a financial
3.3.8 (a) (vii) Collateral Repossessed less any impairment loss on that asset or liability is the amount at
investment previously recognised in which the financial asset or liability is
The Group’s policy is to determine
profit or Loss is removed from equity measured at initial recognition, minus
whether a repossessed asset is best
and recognised in the Statement principal repayments, plus or minus
used for its internal operations or
of Profit or Loss. However, any the cumulative amortisation using
should be sold. Assets determined to
subsequent increase in the fair value the effective interest method of any
be useful for the internal operations
of an impaired available for sale difference between the initial amount
are transferred to the relevant
equity security is recognised in other recognised and the maturity amount,
asset category at the lower of the
comprehensive income. minus any reduction for impairment.
repossessed value or the carrying
value of the original secured asset.
The Group writes-off certain available 3.3.11 Fair Value Measurement
for sale financial investments ‘Fair value’ is the price that would be
3.3.8 (b) Impairment of Financial Assets -
when they are determined to be received to sell an asset or paid to
Available for Sale
uncollectible. transfer a liability (exit price) in an
For available for sale financial
orderly transaction between market
investments, the Group assesses
participants at the measurement date
at each reporting date whether
in the principal or, in its absence, the
INTRODUCTORY INFORMATION | MANAGING OUR BUSINESS | MANAGEMENT DISCUSSION & ANALYSIS | RISK & GOVERNANCE FINANCIAL INFORMATION SUPPLEMENTARY INFORMATION 215
most advantageous market to which liquidity risk or model uncertainties; When the Group is a lessee under
the Group has access at that date. to the extent that the Group believes a finance leases, the leased assets are
The fair value of a liability reflects its third-party market participant would capitalised and included in ‘Property,
non-performance risk. When available, take them into account in pricing a plant and equipment’ and the
the Group measures the fair value of transaction. corresponding liability to the lessor is
an instrument using the quoted price included in ‘Other liabilities’. A finance
in an active market for that instrument The fair value of a demand deposit is lease and its corresponding liability
(Level 01 valuation). A market is not less than the amount payable on are recognised initially at the fair value
regarded as active if transactions for demand, discounted from the first of the asset or if lower, the present
the asset or liability take place with date on which the amount could be value of the minimum lease payments.
sufficient frequency and volume to required to be paid. Finance charges payable are
provide pricing information on an recognised in ‘Interest expenses’ over
ongoing basis. A fair value measurement of a non- the period of the lease based on the
financial asset takes into account a interest rate implicit in the lease so as
If there is no quoted price in an market participant’s ability to generate to give a constant rate of interest on
active market, then the Group uses economic benefits by using the asset the remaining balance of the liability.
valuation techniques that maximise in its highest and best use or by
the use of relevant observable selling it to another market participant 3.4.2 Operating Lease
inputs and minimise the use of that would use the asset in its highest All other leases are classified as
unobservable inputs. The chosen and best use. operating leases. When acting
valuation technique incorporates all of as lessor, the Group includes the
the factors that market participants The Group recognises transfers assets subject to operating leases
would take into account in pricing a between levels of the fair value in ‘Property, plant and equipment’
transaction. hierarchy as of the end of the and accounts for them accordingly.
reporting period during which the Impairment losses are recognised
The best evidence of the fair value change has occurred. to the extent that residual values
of a financial instrument at initial are not fully recoverable and the
recognition is normally the transaction 3.4 Finance and Operating Leases carrying value of the assets is thereby
price - i.e. the fair value of the The determination of whether an impaired.
consideration given or received. If the arrangement is a lease, or it contains
Group determines that the fair value a lease, is based on the substance When the Group is the lessee, leased
at initial recognition differs from the of the arrangement and requires an assets are not recognised on the
transaction price and the fair value is assessment of whether the fulfilment Statement of Financial Position.
evidenced neither by a quoted price of the arrangement is dependent on
in an active market for an identical the use of a specific asset or assets Rentals payable and receivable under
asset or liability (Level 01 valuation) and the arrangement conveys a right operating leases are accounted for on
nor based on a valuation technique to use the asset. a straight-line basis over the periods
that uses only data from observable of the leases and are included in
markets (Level 02 valuation), then 3.4.1 Finance Lease ‘Other operating expenses’ and ‘Other
the financial instrument is initially operating income’, respectively.
Agreements which transfer to
measured at fair value, adjusted to
counterparties substantially all
defer the difference between the fair 3.5 Fiduciary Assets
the risks and rewards incidental to
value at initial recognition and the
the ownership of assets, but not The Group provides fiduciary services
transaction price. Subsequently, that
necessarily legal title, are classified that result in the holding of assets on
difference is recognised in profit or
as finance leases. When the Group behalf of its customers. Assets held in
loss on an appropriate basis over the
is the lessor under finance leases fiduciary capacity are not reported in
life of the instrument but not later
the amounts due under the leases, the Financial Statements, as they are
than when the valuation is wholly
after deduction of unearned interest not assets of the Group.
supported by observable market data
income, are included in Note 26,
or the transaction is closed out.
‘Loans to & receivables from banks 3.6 Provisions
and Note 27, ‘Loans to & receivables A provision is recognised if, as a
Fair values reflect the credit risk of the
from other customers’, as appropriate. result of a past event, the Group
instrument and include adjustments
Interest income receivable is has a present legal or constructive
to take account of the credit risk of
recognised in ‘Net interest income’ obligation that can be estimated
the Group entity and the counterparty
over the periods of the leases so as to reliably, and it is probable that an
where appropriate. Fair value
give a constant rate of return on the outflow of economic benefits will
estimates obtained from models are
net investment in the leases. be required to settle the obligation.
adjusted for any other factors, such as
216 SAMPATH BANK PLC ANNUAL REPORT 2017
The amount recognised is the best 3.9 Other Taxes c) deposit liabilities to Directors, key
estimate of the consideration required 3.9.1 Withholding Tax (WHT) on Dividend management personnel and other
to settle the present obligation related parties as defined in Banking
Dividend distributed out of taxable
at the reporting date, taking in to Act Direction No. 11 of 2007 on
profit of the local Subsidiaries attracts
account the risks and uncertainties Corporate Governance of Licensed
WHT at source and is not available
surrounding the obligation at that Commercial Banks
to set off against the tax liability of
date. Where a provision is measured
the Bank. Thus, the WHT deducted at d) deposit liabilities held as collateral
using the cash flows estimated to
source, on the dividends distributed against any accommodation granted
settle the present obligation, its
by the Subsidiaries is charged to the
carrying amount is determined e) deposit liabilities falling within the
Consolidated Statement of Profit or
based on the present value of those meaning of abandoned property in
Loss as a consolidation adjustment.
cash flows. A provision for onerous terms of the Banking Act and dormant
contracts is recognised when the deposits in terms of the Finance
WHT that arise from the distribution
expected benefits to be derived by the Business Act, funds of which have
of dividend by the Bank are recognised
Group from a contract are lower than been transferred to Central Bank of Sri
at the same time as the liability to pay
the unavoidable cost of meeting its Lanka.
the related dividend is recognised.
obligations under the contract. The
provision is measured as the present Licensed Commercial Banks are
3.9.2 Economic Service Charge (ESC)
value of the lower of the expected cost required to pay a premium of 0.10%
of terminating the contract and the As per provisions of the Economic on eligible deposit liabilities if the Bank
expected net cost of continuing with Service Charge (ESC) Act No. 13 of maintains a capital adequacy ratio
the contract. 2006 and subsequent amendments of 14% or above as at the end of the
thereto, ESC is payable on liable gross immediately preceding financial year
Before a provision is established, the turnover of the Bank at 0.5% and is and a premium of 0.125% on eligible
Group recognises any impairment deductible from income tax payable. deposit liabilities for all other Licensed
loss on the assets associated with Commercial Banks calculated on the
that contract. The expense relating 3.10 Regulatory Provisions total amount of eligible deposits as at
to any provision is presented in the 3.10.1 Deposit Insurance and Liquidity the end of the quarter within a period
Statement of Profit or Loss net of any Support Scheme of 15 days from the end of the quarter.
reimbursement. In terms of the Banking Act Direction
No. 5 of 2010 “Insurance of Deposit 3.10.2 Crop Insurance Levy
3.7 Operational Risk Events Liabilities” issued on 27th September In terms of the Finance Act No. 12
Provisions for operational risk events 2010 and subsequent amendments of 2013, all institutions under the
are recognised for losses incurred by there to, all Licensed Commercial purview of Banking Act No. 30 of 1988,
the Bank which do not relate directly Banks are required to insure their Finance Business Act No. 42 of 2011
to amounts of principal outstanding deposit liabilities in the Deposit and Regulation of Insurance Industry
for loans and advances. The amount Insurance Scheme operated by Act No. 43 of 2000 are required to
recognised as a provision is the the Monetary Board in terms of Sri pay 1% of the profit after tax as
best estimate of the expenditure Lanka Deposit Insurance Scheme Crop Insurance Levy to the National
required to settle the present Regulations No. 1 of 2010 issued Insurance Trust Fund effective from
obligation as at the reporting date, under Sections 32A to 32E of the 01st April 2013.
taking into account the risks and Monetary Law Act with effect from 1st
uncertainties that surround the events October 2010. The said scheme was 4 STANDARDS ISSUED BUT NOT YET
and circumstances that affect the renamed as the “Sri Lanka Deposit EFFECTIVE AS AT 31ST DECEMBER 2017
provision. Insurance and Liquidity Support The following Sri Lanka Accounting
Scheme” as per the Sri Lanka Deposit Standards have been issued by the
3.8 Recognition of Income Insurance and Liquidity Support Institute of Chartered Accountants
Revenue is recognised to the extent Scheme Regulation No. 1 of 2013. of Sri Lanka which are not yet
that it is probable that the economic effective as at 31st December
benefits will flow to the Group and the Deposits to be insured include 2017. Accordingly these accounting
revenue can be reliably measured. demand, time and savings deposit standards have not been applied
Specific recognition criteria that must liabilities and exclude the following; in the preparation of the Financial
be met before revenue is recognised Statements for the year ended 31st
is discussed under Note 7 -Net a) deposit liabilities to member December 2017.
Interest Income, Note 8 - Net Fee and institutions
Commission Income, Note 9 - Net b) deposit liabilities to government of Sri
Trading Gain / Loss and Note 10 - Net Lanka
Gain from Financial Investments.
INTRODUCTORY INFORMATION | MANAGING OUR BUSINESS | MANAGEMENT DISCUSSION & ANALYSIS | RISK & GOVERNANCE FINANCIAL INFORMATION SUPPLEMENTARY INFORMATION 217
4.1 SLFRS 9- Financial Instruments In contrast, contractual exposures According to the diagnostic findings,
SLFRS 9 - Financial Instruments that introduce a more than classification and measurement
will replace LKAS 39 for annual de minimis exposure to risk or outcomes are similar to LKAS 39
periods on or after 1 January 2018 volatility in the contractual cash flows in many instances. However, the
with early adoption permitted. that are unrelated to basic lending combined effect of the application
The improvements introduced by arrangement, do not give rise to of the business model and the
SLFRS 9 includes a logical model for contractual cash flows that are solely contractual cash flow characteristic
classification and measurement, a the payment of principal and interest tests has resulted in some differences
single, forward-looking ‘expected loss’ on the amount outstanding. In such in the population of financial assets
impairment model and a substantially cases the financial asset is required to measured at amortised cost and
reformed approach to hedge be measured at FVPL. fair value compared to LKAS 39. The
accounting which are detailed under classification of financial liabilities
Note 4.1.1 to Note 4.1.3. 4.1.1 (b) Business Model Assessment remains unchanged.
The Group determines its business
4.1.1 Classification & Measurement model at the level that best reflects The Bank / Group does not have
how it manages the financial a material impact from the new
From a classification and
assets to achieve its objectives. classification and measurement
measurement perspective, the new
The Group’s business model principles introduced by SLFRS 9.
Standard will require all financial
assets, except equity instruments and is not assessed on an instrument by
instrument basis, but at a higher level 4.1.2 Impairment of Financial Assets
derivatives, to be assessed based on
a combination of the entity’s business of aggregated portfolios and is based 4.1.2 (a) Overview of Expected Credit Loss
model for managing the assets and on observable factors such as: Principle (ECL)
the instruments’ contractual cash SLFRS 9 will principally change
flow characteristics. Accordingly, y How the performance of the business the Group’s loan loss provision
financial assets are measured at model and the financial assets held method by replacing LKAS 39
amortised cost, fair value through within that business model are (Financial Instrument Recognition &
other comprehensive income (‘FVOCI’) evaluated and reported to the entity’s Measurement) incurred loss approach,
or fair value through profit or loss key management personnel. with a forward looking ECL approach.
(‘FVPL’). y The risks that affects the performance
of the business model (and the ECL allowance will be based on credit
4.1.1 (a) Contractual Cash flow financial assets held within that losses expected to arise over the life
Characteristic Test business model) and, in particular, the of the asset (Lifetime Expected Credit
The Group assesses the contractual way those risks are managed. Loss (LTECL), unless there has been
terms of the financial assets to no significant increase in credit risk
y How managers of the business are since origination, in which case the
identify whether they meet the
compensated (for example, whether loss allowance will be based on a 12
condition of Solely the Payment of
the compensation is based on the fair month expected credit loss (12mECL).
Principal & Interest (SPPI).
value of the assets managed or on the
contractual cash flows collected). 12mECL is the portion of LTECL
‘Principal’, for the purpose of this
test is defined as the fair value of the y The expected frequency, value and that represents the ECL that results
financial asset at initial recognition timing of sales are also important from default events on a financial
and may change over the life of aspects of the Group’s assessment. instrument that are possible within 12
the financial asset (for example, if months after the reporting date.
there are repayments of principal The business model assessment
or amortisation of the premium/ is based on reasonably expected The Group has established a policy to
discount). scenarios without taking ‘Worst perform an assessment, at the end
Case’ or ‘Stress Case’ scenarios in of each reporting period, whether a
The most significant elements of to account. If cash flows after initial financial instrument’s credit risk has
interest within a lending arrangement recognition are realised in a way increased significantly since initial
are typically the consideration for that is different from the Group’s recognition. Based on the assessment
the time value of money and credit original expectation, the Group does process, loans are grouped in to stage
risk. To make SPPI assessment, not change the classification of the 1, stage 2, stage 3 as described below:
the Group applies judgment and remaining financial assets held in
considers relevant factors such as that business model, but incorporates y Stage 1 : When loans are first
currency in which the financial asset is such information when assessing recognised, the Bank recognises an
denominated and the period for which newly originated or newly purchased allowance based on 12mECL. Stage
the interest rate is set. financial assets. 1 loans also include the facilities
where the credit risk has improved
218 SAMPATH BANK PLC ANNUAL REPORT 2017
and have been reclassified from Stage y Re-structured facilities y Other information such as changes
2. Assessment of Stage 1 will be in the price of the borrower’s debt /
y Secondary / qualitative indicators
performed collectively. equity instruments.
triggering a significant increase in
y Stage 2 : When a loan has shown credit risk of an asset.
4.1.2 (e) Grouping Financial Assets Measured
a significant increase in credit risk
on a Collective Basis
since origination, the Bank records an 4.1.2 (d) Individually Significant Assessment
allowance for the LTECL. Stage 2 loans and Not Impaired Individually As explained above, the Group
also include facilities where the credit calculates ECL either on a collective
Loans which are individually significant
risk has improved and have been or individual basis. Asset classes
but not impaired will be assessed
reclassified from stage 3. Assessment where the Group calculates ECL on an
collectively for impairment either
of stage 2 will be performed individual basis includes all individually
under Stage 1 or Stage 2 based on
collectively. significant assets which are
the criteria whether there have been
categorised in to stage 3. All assets
y Stage 3 : Loans considered to be significant credit deterioration since
which belong to stage 1, 2 & 3 (which
credit impaired/contains objective origination.
are not impaired under individually
evidence of incurred losses are significant category) will be assessed
grouped in to stage 3. Assessment While establishing significant credit
collectively for impairment.
of stage 3 loans are performed both deterioration the Bank will consider
individually and on collective basis. An the following factors:
The exposures assessed for collective
allowance is recognised for such loans impairment are categorised in to
based on the LTECL. y Significant changes in external market
smaller homogeneous groups based
indicators of credit risk for a particular
on a combination of internal &
4.1.2 (b) Definition of Default financial instrument or similar
external characteristics described
financial instruments.
Under SLFRS 9, Group considers below.
financial assets to be in default when: y An actual / expected internal credit
y Product type
rating downgrade of the borrower or
y Borrower is unlikely to pay it’s credit decrease in behavioural score used to y Type of collateral
obligation to the Group in full, without assess credit risk internally.
y Days past due
recourse by the Group to action such
y Existing or forecast adverse changes
as realising security (if any is held) or y Industry
in business, financial or economic
y Borrower is more than 90 days past conditions that are expected to cause
4.1.2 (f) The Calculation of ECL
due on any material credit obligation a significant change in the borrower’s
to the Group ability to meet its obligation. When estimating the ECL, the Group
considers 3 scenarios (Base Case,
y An actual or expected significant Best Case & Worst Case). Each of
In assessing whether a borrower is in
change in the operating results of these scenarios are associated with
default, the Group considers similar
the borrower, for example; actual different loss rates. The maximum
indicators to those which have been
/ expected decline in revenue, period of which the credit losses are to
reported under Note 3.3.8.(a).(i).
increase in operational risk, working be determined is the contractual life
capital deficiency, decrease in asset of the financial instrument.
4.1.2 (c) Significant Increase in Credit Risk
quality, increase in gearing, liquidity
The Group continuously monitors management problems etc. The key elements of the ECL
all assets subject to ECL, in order to
y Significant increase in credit risk on calculation are outlined below:
determine whether an instrument or
a portfolio of instruments is subject other financial instruments of the
same borrower. y PD: The Probability of Default is an
to 12mECL or LTECL. (i.e. whether
estimate of the likelihood of default
there has been a significant increase y An actual or expected significant over a given time horizon. A default
in credit risk since initial recognition). adverse change in the regulatory, may only happen at a certain time
The Group considers an exposure to economic or technological over the assessed period, if the facility
have a significantly increased credit environment of the borrower that has not been previously derecognised
risk, when either of the following result in a significant change in the and is still in the portfolio.
criteria are met: borrower’s ability to meet the debt
y Facilities exceeding 30 days past due obligation. y EAD: Exposure At Default is the
y Counterparties / facilities are coded to y Rates or terms of an existing financial estimate of the exposure at a future
any of the elevated risk industries as instrument that would be significantly default date, taking in to account
per the assessment performed by the different if the instrument was newly expected changes in the exposure
Credit Risk Management Team originated. after the reporting date, including
INTRODUCTORY INFORMATION | MANAGING OUR BUSINESS | MANAGEMENT DISCUSSION & ANALYSIS | RISK & GOVERNANCE FINANCIAL INFORMATION SUPPLEMENTARY INFORMATION 219
repayment of the principal and implementation of hedge accounting The Bank intends to perform a parallel
interest, whether scheduled by under SLFRS 9 does not have an run during the year 2018 to gain a
contract or otherwise, expected draw impact on the Consolidated / Separate better understanding of the potential
downs on committed facilities. Financial Statements of the Group / effect of the new standard and for
Bank respectively. the governance framework to gain
y LGD: Loss Given Default is an estimate experience. The Bank may publicly
of the loss arising in the event of a 4.1.4 Transition Process of the Bank disclose the potential impact, when
default, occurs at a given time. It In 2016, the Bank set up a it is practicable to provide reliable
is based on the difference between multidisciplinary implementation team estimates.
the contractual cash flows due and (‘the Team’) with members from its
those that the lenders would expect Finance, Credit, Risk and Operations Although the SLFRS 9 is effective from
to receive, including realisation of any teams to prepare for SLFRS 9 01st January 2018, the Institute of
collateral. It is usually expressed as a implementation (‘the Project’). The Chartered Accountants of Sri Lanka
% of the EAD. Project is sponsored by the Group has granted an exemption from
Chief Financial Officer. The Project has preparation of the interim Financial
4.1.2 (g) Forward Looking Information clear individual work streams within Statements for 2018, applying
In its ECL model, the Group relies two sub-teams for classification & LKAS 39 - Financial Instruments:
on a broad range of qualitative measurement and impairment. Recognition & Measurement instead
/ quantitative forward looking of SLFRS 9. Accordingly the Bank
information as economic input such The Bank performed the Diagnostic will be better placed to provide the
as: Phase (Preliminary Impact required disclosures by the second
Assessment) of SLFRS 9 in 2016, half of the ensuing financial year, for
Quantitative Qualitative with the assistance of an External which all required steps are being
Consultant. Working committees were taken.
GDP Growth
y Government
y
Policies formed under each of the two main
sub teams referred to above, covering 4.2 SLFRS 15 - Revenue from Contracts
Inflation
y Status of the
y all significant aspects of SLFRS 9, with Customers
Industry / prior to the commencement of the The objective of this Standard is
Business Implementation Phase. to establish the principles that an
Unemployment
y Regulatory
y entity shall apply to report useful
Impact The committees have regularly met information to users of Financial
during 2017 to select appropriate Statements about the nature, amount,
Interest Rates
y
classifications, develop suitable timing and uncertainty of revenue and
Exchange Rates
y models which fit to the Bank and to cash flows arising from contracts with
fine tune the models based on the test customers.
4.1.3 Hedge Accounting calculations.
SLFRS 9 introduces a substantially SLFRS 15 introduces a five step
reformed model for hedge accounting The two sub teams, driving the approach for revenue recognition
with enhanced disclosures about classification & measurement and the from contracts with customers and
risk management activity. The new impairment respectively, have already replaces all other currently applicable
model represents a substantial taken accounting policy decisions at revenue Standards and related
overhaul of hedge accounting that a broader level, some of which are interpretations.
aligns the accounting treatment disclosed under Note 4.1.2.
with risk management activities, SLFRS 15 will become effective on 1st
enabling entities to better reflect The Bank has performed a provisional January 2018. The Bank carried out an
these activities in their Financial SLFRS 9 calculation as at 31st impact analysis with the assistance
Statements. In addition, as a result December 2016 & 31st December of an external consultant during the
of these changes, users of the 2017 and has a directional idea of the year ended 31st December 2016. The
Financial Statements will be provided potential impact of SLFRS 9. Currently Bank performed a further analysis for
with better information about risk the risk modelling methodologies used the year 2017 as well. The analysis
management and the effect of for impairment computations are basically focused on the material fee
hedge accounting on the Financial being further tested and fine-tuned & commission income categories
Statements. by the Bank with the inputs from the such as credit cards, operation
Consultant and the management. related, e-remittance, electronic
The Bank is not presently banking and Bancassurance. The
following hedge accounting for its
derivatives portfolio and hence the
220 SAMPATH BANK PLC ANNUAL REPORT 2017
relevant agreements were analysed 5. AMENDMENTS TO EXISTING in combination with all of its other
and compared the current accounting ACCOUNTING STANDARDS EFFECTIVE deductible temporary differences.
treatment with the requirements of FROM 1ST JANUARY 2017 However, if tax law restricts the
SLFRS 15. According to the above 5.1 LKAS 7 - Statement of Cash Flows utilisation of losses to deduction
analysis the Bank does not have any against income of a specific type,
The amendment requires an entity
material impact from the adoption of a deductible temporary difference
to disclose information that enables
SLFRS 15 in the year 2018. is assessed in combination only
users of financial statements to
with other deductible temporary
evaluate changes in liabilities arising
4.3 SLFRS 16 – Leases differences of the appropriate type.
from financing activities, including
SLFRS 16 sets out the principles both changes arising from cash
for the recognition, measurement, Further the amendment requires
flows and non-cash changes.
presentation and disclosure of leases an entity to compare the deductible
for both parties to a contract, i.e. the temporary differences with future
Accordingly an entity shall disclose
customer (‘Lessee’] and the supplier taxable profit that excludes tax
the following changes in liabilities
(‘Lessor’]. SLFRS 16 will replace Sri deductions resulting from the
arising from financing activities:
Lanka Accounting Standard – LKAS 17 reversal of those deductible
(Leases) and related interpretations. temporary differences, when
y changes from financing cash flows
SLFRS 16 introduces a single evaluating whether the entity will
accounting model for the lessee, y changes arising from obtaining or have sufficient taxable profit in
eliminating the present classification losing control of subsidiaries or other future periods. This comparison
of leases in LKAS 17 as either businesses shows the extent to which the
operating leases or finance leases. future taxable profit is sufficient for
y the effect of changes in foreign
the entity to deduct the amounts
exchange rates
The new Standard requires a lessee to: resulting from the reversal of those
y changes in fair values and deductible temporary differences.
y recognise assets and liabilities for all
leases with a term of more than 12 y other changes
According to the amendment
months, unless the underlying asset is introduced, the estimate of probable
of low value Necessary disclosures have been
future taxable profit may include
given under Note 56 to the Financial
y present depreciation of lease assets the recovery of some of an entity’s
Statements.
separately, from interest on lease assets for more than their carrying
liabilities in the income statement. 5.2 LKAS 12 - Income Taxes amount if there is sufficient evidence
that it is probable that the entity will
When an entity assesses whether
SLFRS – 16 substantially carries achieve this. For example, when an
taxable profits will be available
forward the lessor accounting asset is measured at fair value, the
against which it can utilise a
requirement in LKAS – 17. Accordingly, entity shall consider whether there
deductible temporary difference,
a lessor continues to classify its is sufficient evidence to conclude
the entity shall consider whether tax
leases as operating lease or finance that it is probable that the entity will
law restricts the sources of taxable
lease, and to account for those two recover the asset for more than its
profits against which it may make
types of leases differently. carrying amount.
deductions on the reversal of that
deductible temporary difference. The Bank did not have a material
SLFRS -16 will become effective on
1st January 2019. The impact on the impact from the above amendment
If tax law imposes no such
implementation of the above Standard during the year ended 31st
restrictions, entity may assess the
has not been quantified yet. December 2017.
deductible temporary difference
INTRODUCTORY INFORMATION | MANAGING OUR BUSINESS | MANAGEMENT DISCUSSION & ANALYSIS | RISK & GOVERNANCE FINANCIAL INFORMATION SUPPLEMENTARY INFORMATION 221
6 GROSS INCOME
Bank Group
For the year ended 31st December 2017 2016 2017 2016
Rs 000 Rs 000 Rs 000 Rs 000
ACCOUNTING POLICY
The calculation of effective interest rate takes into account all contractual terms of the financial instrument (for example,
prepayment options) and includes any fees or incremental costs that are directly attributable to the instrument and are an
integral part of the effective interest rate, but not future credit losses.
The carrying amount of the financial asset or financial liability is adjusted if the Group revises its estimates of payments or
receipts. The adjusted carrying amount is calculated based on the original effective interest rate and the change in carrying
amount is recorded as interest income for financial assets and interest expense for financial liabilities. However, for a
reclassified financial asset for which the Group subsequently increases its estimates of future cash receipts as a result of
increased recoverability of those cash receipts, the effect of that increase is recognised as an adjustment to the effective
interest rate from the date of the change in estimate.
Once the recorded value of a financial asset or a group of similar financial assets has been reduced due to an impairment loss,
interest income continues to be recognised using the rate of interest used to discount the future cash flows for the purpose of
measuring the impairment loss.
7.4 Notional Tax Credit for Withholding Tax on Government Securities on Secondary Market Transactions
Section 137 of the Inland Revenue Act No. 10 of 2006 provides that a company which derives interest income from the secondary
market transactions in government securities be entitled to a notional tax credit (being one ninth of the net interest income)
provided such interest income forms part of the statutory income of the company for that year of assessment.
Accordingly, net interest income earned from secondary market transactions in government securities for the year by the Bank &
it’s subsidiaries has been grossed up in the Financial Statements and the resulting notional tax credit amounted to Rs 233.18 Mn
(2016: Rs 110.88 Mn) and Rs 247.24 Mn (2016: Rs 119.08 Mn) for the Bank and the Group respectively.
ACCOUNTING POLICY
Fee Income Earned from Services that are Provided over a Certain Period of Time
Fees earned for the provision of services over a period of time are accrued over that period. These fees include professional fees,
trade service fees, commission income and asset management fees etc. Loan commitment fees for loans that are likely to be
drawn down and other credit related fees are deferred (together with any incremental costs) and recognised as an adjustment
to the effective interest rate of the loan. When it is unlikely that a loan will be drawn down, the loan commitment fees are
recognised over the commitment period on a straight line basis.
ACCOUNTING POLICY
Net trading gain / loss includes all gains and losses from changes in fair value, related capital gains / losses and dividend from
financial assets ‘Held for trading’. Dividend income is recognised when the Group’s right to receive the payment is established.
This category also includes foreign exchange differences arising from derivative contracts which are not designated as hedging
instruments.
ACCOUNTING POLICY
Net gain from financial investments include capital gain / loss and dividend income from available for sale financial assets and
financial assets classified as other loans & receivables. Dividend income is recognised when the Group’s right to receive the
payment is established.
Bank Group
For the year ended 31st December 2017 2016 2017 2016
Rs 000 Rs 000 Rs 000 Rs 000
Dividend income from available for sale financial assets 145,012 125,052 145,192 125,117
Capital gain - Available for sale financial assets - 3,376 - 3,376
Capital gain - Other loans & receivables - 878 - 878
145,012 129,306 145,192 129,371
Exchange income
Inter bank 902,571 457,736 902,571 457,736
Others 1,883,095 1,947,391 1,878,231 1,947,391
Dividend income from subsidiaries 90,977 82,575 - -
(Loss) / profit on disposal of property, plant & equipment (9,829) (42) (8,128) 298
Rental & other income 108,249 155,444 496,050 497,469
2,975,063 2,643,104 3,268,724 2,902,894
11.1 Exchange income represents both revaluation gain / (loss) on the Bank’s net open position and realised exchange gain / (loss) on
foreign exchange contracts including the Bank’s currency notes operation. Gain on forward exchange contracts amounting to
Rs 346.7 Mn (2016 : gain of Rs 183.9 Mn) is reported under Note 9, ‘Net trading gain / (loss)’ as required by the Sri Lanka
Accounting Standard LKAS 39 (Financial Instruments - Recognition and Measurement). Accordingly total exchange income of the
Bank / Group for the year ended 31st December 2017 amounted to Rs 3,132.4 Mn and Rs 3,127.5 Mn respectively
(2016 : Rs 2,589.0 Mn).
Banks - - - -
Other customers
Individually significant customer loan impairment (Note 27.2.1) 1,357,566 930,035 1,429,271 949,745
Collective loan impairment (Note 27.2.2) 955,267 500,311 1,122,605 559,790
Property plant & equipment (Note 33.3) 161 (2,036) 161 (2,036)
Investment in subsidiary (Note 32.1) 62,799 4,000 - -
Financial assets - available for sale (Note 29.4) - 27,515 - 27,515
Others - - 81,636 -
2,375,793 1,459,825 2,633,673 1,535,014
INTRODUCTORY INFORMATION | MANAGING OUR BUSINESS | MANAGEMENT DISCUSSION & ANALYSIS | RISK & GOVERNANCE FINANCIAL INFORMATION SUPPLEMENTARY INFORMATION 225
13 PERSONNEL EXPENSES
ACCOUNTING POLICY
The contribution payable by the employer to a defined contribution plan is in proportion to the services rendered to the Group by
the employees and is recorded as an expense under ‘Personnel expenses’ as and when they become due. Unpaid contributions
are recorded as a liability under ‘Other liabilities’ in Note 41.
The Group contributes 3% of the salary of each employee to the Employees’ Trust Fund. Further, the Subsidiary companies
contribute 12% on the salary of each employee to the Employees’ Provident Fund. The above expenses are identified as
contributions to “Defined Contribution Plans” as defined in the Sri Lanka Accounting Standard - LKAS 19 (Employee Benefits).
Pension Fund
The Bank has a pension fund for all members who joined the Bank for permanent employment before 1st June 2003. A member
is eligible for a monthly pension after attainment of 55 years of age and completion of 10 years uninterrupted service. The
Bank measures the present value of the pension obligation, which is a defined benefit plan with the advice of an independent
professional actuary using the Projected Unit Credit (PUC) method as required by Sri Lanka Accounting Standard - LKAS 19
(Employee Benefits).
An actuarial valuation is carried out at every year end to ascertain the full liability under the Fund.
The Bank’s obligation in respect of defined benefit pension plan is calculated by estimating the amount of future benefit that
employees have earned in return for their service in the current and prior periods and discounting that benefit to determine its
present value, then deducting the fair value of any plan assets to determine the net amount to be shown in the Statement of
Financial Position. The value of any defined benefit asset is restricted to the present value of any economic benefits available in
the form of refunds from the plan or reductions in the future contributions to the plan. In order to calculate the present value of
economic benefits, consideration is given to any minimum funding requirements that apply to any plan in the Bank. An economic
benefit is available to the Bank if it is realisable during the life of the plan, or on settlement of the plan liabilities.
The Bank determines the net interest expense / (income) on the net defined benefit liability / (asset) by applying the discount
rate used to measure the defined benefit obligation at the beginning of the annual period to the net defined benefit liability
/ (asset) at the beginning of the annual period. The discount rate is the yield at the reporting date on government bonds (30
years) that have maturity dates approximating to the terms of the Bank’s obligations.
The increase in the pension fund liabilities attributable to the services provided by employees, who are members of the Fund,
during the year ended 31st December 2017 (current service cost) has been recognised in the Statement of Profit or Loss under
‘Personnel expenses’ together with the net interest income / expense.
226 SAMPATH BANK PLC ANNUAL REPORT 2017
The Bank recognises the total actuarial gain / loss that arise in calculating the Bank’s obligation in respect of a plan in other
comprehensive income during the period in which it occurs.
The demographic assumptions underlying the valuation are retirement age (55 yrs), early withdrawals from service and
retirement on medical grounds, death before and after retirement etc.
The assets of the fund are held separately from those of the Bank’s assets and are administered independently.
Gratuity
In compliance with the Gratuity Act No. 12 of 1983, provision is made in the accounts from the first year of service, for gratuity
payable to employees who joined the Bank on or after 1st June 2003, as they are not in pensionable service of the Bank.
Provision is not made in the accounts for gratuity payable to employees who joined prior to 1st June 2003 and completed five or
more years of continuous service, as the Bank has its own non-contributory pension scheme in force. However, if employees who
are eligible for pension resign before retirement age, the Bank is liable to pay gratuity to such employees.
An actuarial valuation is carried out at every year end to ascertain the full liability under gratuity.
The gratuity liability is not externally funded. All Subsidiary companies too carry out actuarial valuations to ascertain their
respective gratuity liabilities.
The Group determines the interest expense on the defined benefit liability by applying the discount rate used to measure the
defined benefit liability at the beginning of the annual period to the defined benefit liability at the beginning of the annual period.
The discount rate is the yield at the reporting date on government bonds (10 years) that have maturity dates approximating to
the terms of the Group’s obligations.
The increase in gratuity liabilities attributable to the services provided by employees during the year ended 31st December 2017
(current service cost) has been recognised in the Statement of Profit or Loss under ‘Personnel expenses’ together with the net
interest expense. The Group recognises the total actuarial gain / loss that arise in calculating the Group’s obligation in respect of
gratuity in other comprehensive income during the period in which it occurs.
The demographic assumptions underlying the valuation are retirement age (55 yrs), early withdrawals from service and
retirement on medical grounds etc.
The Group’s net obligation to pension fund, gratuity, EPF interest guarantee and unutilised accumulated annual leave is
disclosed under Note 42 to the Financial Statements.
Bank Group
For the year ended 31st December 2017 2016 2017 2016
Rs 000 Rs 000 Rs 000 Rs 000
ACCOUNTING POLICY
Leased assets are depreciated over the shorter of the lease term and their useful lives unless it is reasonably certain that the
Group will obtain ownership by the end of the lease term.
Depreciation of an asset ceases at the earlier of the date that the asset is classified as held for sale or the date that the asset
is derecognised. Depreciation does not cease when the asset becomes idle or is retired from active use unless the asset is fully
depreciated.
Changes in Estimates
Depreciation / amortisation methods, useful lives and residual values are reassessed at each reporting date and adjusted if
appropriate. During the year ended 31st December 2017, the Group conducted an operational efficiency review and estimates
were revised accordingly.
Bank Group
For the year ended 31st December 2017 2016 2017 2016
Rs 000 Rs 000 Rs 000 Rs 000
14.2 Other expenses include advertising and business promotion expenses, credit card related expenses and other overhead expenses
incurred on day to day operations of the Bank / Group.
15 VALUE ADDED TAX (VAT) AND NATION BUILDING TAX (NBT) ON FINANCIAL SERVICES
ACCOUNTING POLICY
Bank Group
For the year ended 31st December 2017 2016 2017 2016
Rs 000 Rs 000 Rs 000 Rs 000
ACCOUNTING POLICY
As per Sri Lanka Accounting Standard - LKAS 12 (Income Taxes), tax expense is the aggregate amount included in
determination of profit or loss for the period in respect of current and deferred taxation. Income tax expense is recognised in the
Statement of Profit or Loss, except to the extent it relates to items recognised directly in equity or other comprehensive income
in which case it is recognised in equity or in other comprehensive income.
Current Taxation
Current tax assets and liabilities consist of amounts expected to be recovered from or paid to the Commissioner General of
Inland Revenue in respect of the current year, using the tax rates and tax laws enacted or substantively enacted on the reporting
date and any adjustment to tax payable in respect of prior years.
Accordingly, provision for taxation is based on the profit for the year adjusted for taxation purposes in accordance with the
provisions of the Inland Revenue Act No. 10 of 2006 and the amendments thereto at the rates specified in Note 16.1.1 & 16.1.2
to the Financial Statements.
Deferred Taxation
Deferred tax is provided on temporary differences at the reporting date between the tax bases of assets and liabilities and their
carrying amounts for financial reporting purposes for all Group entities. Deferred tax liabilities are recognised for all taxable
temporary differences, except:
y Where the deferred tax liability arises from the initial recognition of goodwill or of an asset or liability in a transaction that
is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or
loss.
y In respect of taxable temporary differences associated with investments in Subsidiaries, where the timing of the reversal
of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the
foreseeable future.
Deferred tax assets are recognised for all deductible temporary differences, carried forward unused tax credits and unused
tax losses (if any), to the extent that it is probable that taxable profit will be available against which the deductible temporary
differences, carried forward unused tax credits and unused tax losses can be utilised except:
y Where the deferred tax asset relating to the deductible temporary differences arising from the initial recognition of an
asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the
accounting profit nor taxable profit or loss.
y In respect of deductible temporary differences associated with investments in Subsidiaries, deferred tax assets are
recognised only to the extent that it is probable that the temporary differences will reverse in the foreseeable future and
taxable profit will be available against which the temporary differences can be utilised.
230 SAMPATH BANK PLC ANNUAL REPORT 2017
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the year when the asset is realised
or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the reporting
date.
Current and deferred tax assets and liabilities are offset only to the extent that they relate to income taxes imposed by the same
taxation authority, there is a legal right and intentions to settle on a net basis and it is allowed under the tax law of the relevant
jurisdiction. Details of current tax liabilities / (receivables) and deferred tax liabilities / (assets) are given in Note 40 and Note 35
to the Financial Statements respectively.
Bank Group
For the year ended 31st December 2017 2016 2017 2016
Rs 000 Rs 000 Rs 000 Rs 000
Tax effect on
Disallowable expenses 17.0 2,826,602 11.8 1,484,362 17.0 2,979,576 12.0 1,580,894
Tax deductible expenses (6.2) (1,033,391) (5.0) (628,249) (7.1) (1,236,274) (5.5) (723,789)
Exempt income (5.1) (846,002) (5.5) (693,059) (4.8) (846,002) (5.2) (693,059)
Income from other sources - - - - - 2,058 - 362
Elimination of profit liable for turnover
based tax - - - - (0.2) (31,530) (0.3) (44,256)
Tax losses - - - - - (720) - (121)
Taxation based on profit for the year 33.7 5,596,868 29.3 3,691,014 33.0 5,775,580 29.0 3,825,441
Over provision in respect of previous
years (Note 40.1) (5.6) (935,121) (4.6) (573,114) (5.4) (937,061) (4.4) (577,485)
28.1 4,661,747 24.7 3,117,900 27.6 4,838,519 24.6 3,247,956
INTRODUCTORY INFORMATION | MANAGING OUR BUSINESS | MANAGEMENT DISCUSSION & ANALYSIS | RISK & GOVERNANCE FINANCIAL INFORMATION SUPPLEMENTARY INFORMATION 231
ACCOUNTING POLICY
The Group presents basic and diluted Earnings per Share (EPS) data for its ordinary shares. Basic EPS is calculated by dividing
the profit or loss attributable to ordinary equity share holders of the Bank by the weighted average number of ordinary shares
outstanding during the period. Diluted EPS is determined by adjusting both the profit attributable to the ordinary equity share
holders and the weighted average number of ordinary shares outstanding, for the effects of all dilutive potential ordinary shares,
if any.
17.1.1 Weighted Average Number of Ordinary Shares for Basic / Diluted EPS
Bank & Group
Outstanding No. of Shares Weighted Average No. of Shares
2017 2016 2017 2016
ACCOUNTING POLICY
Provision for final dividend and interim dividend (scrip) are recognised at the time the dividend is recommended and declared
by the Board of Directors, and approved by the shareholders. However, interim cash dividend is recognised when the Board
approves such dividend in accordance with Companies Act No. 7 of 2007.
2017 2016
Gross Dividend Net Gross Dividend Net
Dividend Tax Dividend Dividend Tax Dividend
Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000
Total dividend per Ordinary Share (Rs) 17.20 14.80 18.75 16.90
Note 18.1
The Directors of the Bank have recommended a first and final scrip dividend of Rs 17.20 per share for the financial year ended 31st
December 2017, a distribution of approximately Rs 4,598.4 Mn. The right to receive the dividend will also apply to the increased
number of shares allotted pursuant to the Rights Issue 2018 announced on 19th December 2017. The entitlement date for the
dividend will be notified subsequently.
Note 18.2
In accordance with Sri Lanka Accounting Standard - LKAS 10 (Events after the Reporting Period), above proposed final dividend
has not been recognised as a liability as at the year end. Necessary disclosures have been made under Note 51 to the Financial
Statements, “Events after reporting period” as required by the said Standard.
INTRODUCTORY INFORMATION | MANAGING OUR BUSINESS | MANAGEMENT DISCUSSION & ANALYSIS | RISK & GOVERNANCE FINANCIAL INFORMATION SUPPLEMENTARY INFORMATION 233
Financial Assets
Cash & cash equivalents 20 - 22,334,315 - - 22,334,315
Balances with Central Bank of Sri Lanka 21 - 41,100,364 - - 41,100,364
Placements with banks 22 - 3,159,326 - - 3,159,326
Reverse repurchase agreements - 1,200,762 - - 1,200,762
Derivative financial instruments 23 496,918 - - - 496,918
Financial assets - held for trading 24 19,910,621 - - - 19,910,621
Financial assets - held for trading pledged as
collaterals 25 591,886 - - - 591,886
Loans to & receivables from banks 26 - 2,084,507 - - 2,084,507
Loans to & receivables from other customers 27 - 560,798,940 - - 560,798,940
Other loans & receivables 28 - 49,352,443 - - 49,352,443
Financial assets - available for sale 29 - - - 72,911,447 72,911,447
Financial assets - available for sale pledged as
collaterals 30 - - - 4,184,272 4,184,272
Financial assets - held to maturity 31 - - - - -
Other assets - 4,123,185 - - 4,123,185
Total Financial Assets 20,999,425 684,153,842 - 77,095,719 782,248,986
Financial Liabilities
Due to banks 37 - 4,743,748 4,743,748
Derivative financial instruments 23 103,947 - 103,947
Securities sold under repurchase agreements - 4,386,335 4,386,335
Due to other customers 38 - 625,814,313 625,814,313
Debt issued & other borrowed funds 39 - 76,098,240 76,098,240
Dividend payable - 99,259 99,259
Other liabilities - 8,262,267 8,262,267
Total Financial Liabilities 103,947 719,404,162 719,508,109
234 SAMPATH BANK PLC ANNUAL REPORT 2017
Financial Assets
Cash & cash equivalents 20 - 17,064,013 - - 17,064,013
Balances with Central Bank of Sri Lanka 21 - 33,724,856 - - 33,724,856
Placements with banks 22 - 8,749,763 - - 8,749,763
Reverse repurchase agreements - 33,860,083 - - 33,860,083
Derivative financial instruments 23 109,872 - - - 109,872
Financial assets - held for trading 24 28,109,193 - - - 28,109,193
Financial assets - held for trading pledged as
collaterals 25 10,380,213 - - - 10,380,213
Loans to & receivables from banks 26 - 2,641,733 - - 2,641,733
Loans to & receivables from other customers 27 - 456,189,052 - - 456,189,052
Other loans & receivables 28 - 38,708,440 - - 38,708,440
Financial assets - available for sale 29 - - - 14,270,190 14,270,190
Financial assets - available for sale pledged as
collaterals 30 - - - 657,903 657,903
Financial assets - held to maturity 31 - - - - -
Other assets - 3,257,948 - - 3,257,948
Total Financial Assets 38,599,278 594,195,888 - 14,928,093 647,723,259
Financial Liabilities
Due to banks 37 - 6,907,354 6,907,354
Derivative financial instruments 23 63,611 - 63,611
Securities sold under repurchase agreements - 10,159,225 10,159,225
Due to other customers 38 - 509,683,233 509,683,233
Debt issued & other borrowed funds 39 - 72,128,237 72,128,237
Dividend payable - 84,860 84,860
Other liabilities - 5,817,157 5,817,157
Total Financial Liabilities 63,611 604,780,066 604,843,677
INTRODUCTORY INFORMATION | MANAGING OUR BUSINESS | MANAGEMENT DISCUSSION & ANALYSIS | RISK & GOVERNANCE FINANCIAL INFORMATION SUPPLEMENTARY INFORMATION 235
Financial Assets
Cash & cash equivalents 20 - 22,612,939 - - 22,612,939
Balances with Central Bank of Sri Lanka 21 - 41,100,364 - - 41,100,364
Placements with banks 22 - 3,225,025 - - 3,225,025
Reverse repurchase agreements - 2,392,852 - - 2,392,852
Derivative financial instruments 23 496,918 - - - 496,918
Financial assets - held for trading 24 19,977,657 - - - 19,977,657
Financial assets - held for trading pledged as
collaterals 25 524,850 - - - 524,850
Loans to & receivables from banks 26 - 2,084,507 - - 2,084,507
Loans to & receivables from other customers 27 - 586,370,704 - - 586,370,704
Other loans & receivables 28 - 49,352,443 - - 49,352,443
Financial assets - available for sale 29 - - - 73,013,072 73,013,072
Financial assets - available for sale pledged as
collaterals 30 - - - 4,082,703 4,082,703
Financial assets - held to maturity 31 - - 12,428 - 12,428
Other assets - 4,285,587 - - 4,285,587
Total Financial Assets 20,999,425 711,424,421 12,428 77,095,775 809,532,049
Financial Liabilities
Due to banks 37 - 4,820,287 4,820,287
Derivative financial instruments 23 103,947 - 103,947
Securities sold under repurchase agreements - 4,231,946 4,231,946
Due to other customers 38 - 634,641,381 634,641,381
Debt issued & other borrowed funds 39 - 91,257,152 91,257,152
Dividend payable - 99,259 99,259
Other liabilities - 8,780,888 8,780,888
Total Financial Liabilities 103,947 743,830,913 743,934,860
236 SAMPATH BANK PLC ANNUAL REPORT 2017
Financial Assets
Cash & cash equivalents 20 - 17,221,809 - - 17,221,809
Balances with Central Bank of Sri Lanka 21 - 33,724,856 - - 33,724,856
Placements with banks 22 - 8,749,763 - - 8,749,763
Reverse repurchase agreements - 34,629,422 - - 34,629,422
Derivative financial instruments 23 109,872 - - - 109,872
Financial assets - held for trading 24 28,117,789 - - - 28,117,789
Financial assets - held for trading pledged as
collaterals 25 10,371,617 - - - 10,371,617
Loans to & receivables from banks 26 - 2,641,733 - - 2,641,733
Loans to & receivables from other customers 27 - 472,754,947 - - 472,754,947
Other loans & receivables 28 - 38,708,440 - - 38,708,440
Financial assets - available for sale 29 - - - 14,329,468 14,329,468
Financial assets - available for sale pledged as
collaterals 30 - - - 598,681 598,681
Financial assets - held to maturity 31 - - 16,933 - 16,933
Other assets - 3,507,676 - - 3,507,676
Total Financial Assets 38,599,278 611,938,646 16,933 14,928,149 665,483,006
Financial Liabilities
Due to banks 37 - 6,954,618 6,954,618
Derivative financial instruments 23 63,611 - 63,611
Securities sold under repurchase agreements - 10,095,117 10,095,117
Due to other customers 38 - 512,550,404 512,550,404
Debt issued & other borrowed funds 39 - 84,179,232 84,179,232
Dividend payable - 84,860 84,860
Other liabilities - 6,681,111 6,681,111
Total Financial Liabilities 63,611 620,545,342 620,608,953
INTRODUCTORY INFORMATION | MANAGING OUR BUSINESS | MANAGEMENT DISCUSSION & ANALYSIS | RISK & GOVERNANCE FINANCIAL INFORMATION SUPPLEMENTARY INFORMATION 237
ACCOUNTING POLICY
Cash and cash equivalents comprise cash in hand, balances with banks, money at call and short notice that are subject to an
insignificant risk of changes in their value. Cash and cash equivalents are carried at amortised cost in the Statement of Financial
Position.
For the purpose of the Statement of Cash Flows, cash and cash equivalents consist of cash and short term deposits as defined
above, placements with banks (less than 3 months), net of unfavourable balances with local & foreign banks.
Bank Group
As at 31st December 2017 2016 2017 2016
Rs 000 Rs 000 Rs 000 Rs 000
ACCOUNTING POLICY
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 2017, the minimum cash reserve requirement was 7.5% (2016: 7.5%) of the rupee deposit liabilities.
There is no reserve requirement for foreign currency deposit liabilities of the Domestic Banking Unit (DBU) and the deposit
liabilities of the Foreign Currency Banking Unit (FCBU).
Balances with Central Bank of Sri Lanka are carried at amortised cost in the Statement of Financial Position.
ACCOUNTING POLICY
Derivatives are financial instruments that derive their value in response to changes in interest rates, financial instrument
prices, commodity prices, foreign exchange rates, credit risk and indices. Derivatives are categorised as trading unless they are
designated as hedging instruments.
All derivatives are initially recognised and subsequently measured at fair value, with all revaluation gains recognised in the
Statement of Profit or Loss (except where cash flow or net investment hedging has been achieved, in which case the effective
portion of changes in fair value is recognised within other comprehensive income). Fair values may be obtained from quoted
market prices in active markets, recent market transactions, and valuation techniques, including discounted cash flow models
and option pricing models, as appropriate. Where the initially recognised fair value of a derivative contract is based on a
valuation model that uses inputs that are not observable in the market, it follows the same initial recognition accounting policy
as for other financial assets and liabilities. All derivatives are carried as assets when fair value is positive and as liabilities when
fair value is negative.
Certain derivatives embedded in other financial instruments, such as the conversion option in a convertible bond held, are valued
as separate derivatives when their economic characteristics and risks are not closely related to those of the host contract and
the host contract is not carried at fair value through profit or loss. These embedded derivatives are measured at fair value, with
changes in fair value recognised in the Statement of Profit or Loss. Embedded derivatives continue to be presented with the host
contract and are not separately disclosed or included within derivatives. The Group did not have separated embedded derivatives
as at 31st December 2017.
The table below shows the fair values of derivative financial instruments of the Bank / Group, 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.
Government securities - treasury bills (Note 24.1) 19,821,312 28,011,024 19,888,348 28,019,620
Quoted equity securities (Note 24.2) 89,309 98,169 89,309 98,169
19,910,621 28,109,193 19,977,657 28,117,789
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Gain / (loss) from mark to market valuation as at 1st January 39,108 (205) 39,119 (203)
Movement during the year (9,682) 39,313 (9,687) 39,322
Gain from mark to market valuation as at 31st December 29,426 39,108 29,432 39,119
Market value 19,821,312 28,011,024 19,888,348 28,019,620
Diversified Holdings
Vallibel One PLC 245,600 6,140 4,348 245,600 6,140 4,569
6,140 4,348 6,140 4,569
Total 117,577 89,309 114,083 98,169
Bank Group
As at 31st December 2017 2016 2017 2016
Rs 000 Rs 000 Rs 000 Rs 000
Gain from mark to market valuation as at 1st January 15,464 450 15,453 448
Movement during the year (14,773) 15,014 (14,768) 15,005
Gain from mark to market valuation as at 31st December 691 15,464 685 15,453
Market value 591,886 10,380,213 524,850 10,371,617
240 SAMPATH BANK PLC ANNUAL REPORT 2017
Bills of exchange 3,240,461 0.57 3,630,345 0.78 3,240,461 0.54 3,630,345 0.75
Leasing (Note 27.4) 20,890,560 3.65 19,214,862 4.12 41,141,068 6.88 33,314,624 6.90
Housing loans 32,275,877 5.64 25,374,582 5.45 32,275,877 5.40 25,374,582 5.25
Export loans 24,237,483 4.24 19,809,405 4.25 24,237,483 4.05 19,809,405 4.10
Import loans 59,859,744 10.47 50,853,973 10.92 59,830,438 10.00 50,839,778 10.53
Refinance loans 8,162,888 1.43 9,016,678 1.94 8,162,888 1.36 9,016,678 1.87
Term loans 265,959,814 46.51 205,751,571 44.16 269,431,823 45.05 205,841,301 42.63
Hire purchases (Note 27.5) 208,596 0.04 499,323 0.11 530,795 0.09 1,408,369 0.29
Loans against investment fund
account (IFA) 400,026 0.07 742,281 0.16 400,417 0.07 744,922 0.15
Overdraft 103,118,503 18.03 85,032,667 18.26 103,047,002 17.23 84,700,187 17.54
Staff loans 8,528,002 1.49 7,140,851 1.53 8,635,805 1.44 7,222,750 1.50
Pawning 19,665,969 3.44 15,479,487 3.32 19,665,969 3.29 15,479,487 3.21
Credit cards 11,050,973 1.93 9,468,068 2.03 11,050,973 1.85 9,468,068 1.96
Money market loans 10,186,376 1.78 11,042,976 2.37 10,186,376 1.70 11,042,976 2.29
Factoring 3,911,169 0.68 2,564,273 0.55 5,970,574 1.00 4,635,379 0.96
Others 178,855 0.03 254,366 0.05 325,284 0.05 354,529 0.07
571,875,296 100.00 465,875,708 100.00 598,133,233 100.00 482,883,380 100.00
Staff loan fair value adjustment
(Note 36.1) (2,433,049) (1,960,290) (2,446,286) (1,966,756)
569,442,247 463,915,418 595,686,947 480,916,624
Provision for impairment losses
(Note 27.2) (8,643,307) (7,726,366) (9,316,243) (8,161,677)
560,798,940 456,189,052 586,370,704 472,754,947
Individually significant customer loan impairment (Note 27.2.1) 3,421,074 3,385,046 3,579,835 3,473,520
Collective loan impairment (Note 27.2.2) 5,222,233 4,341,320 5,736,408 4,688,157
Total impairment (Note 27.3) 8,643,307 7,726,366 9,316,243 8,161,677
Group
Leasing & Hire Loans & 2017 2016
Purchase Receivables Total Total
Rs 000 Rs 000 Rs 000 Rs 000
27.4 Leasing
Bank Group
As at 31st December 2017 2016 2017 2016
Rs 000 Rs 000 Rs 000 Rs 000
Gross lease receivable within one year (Note 27.4.1) 7,614,872 6,506,345 14,078,786 10,493,297
Gross lease receivable after one year (Note 27.4.2) 13,275,688 12,708,517 27,062,282 22,821,327
20,890,560 19,214,862 41,141,068 33,314,624
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Total lease rentals receivable within one year from reporting date 9,827,350 8,363,553 19,388,045 14,333,611
Unearned lease interest income (2,212,478) (1,857,208) (5,309,259) (3,840,314)
Gross lease receivable within one year (Note 27.4) 7,614,872 6,506,345 14,078,786 10,493,297
Impairment allowance for lease receivable (139,053) (128,041) (331,080) (272,211)
Net lease receivable within one year 7,475,819 6,378,304 13,747,706 10,221,086
Total lease rentals receivable after one year from reporting date 15,509,081 14,612,160 33,086,692 27,169,092
Unearned lease interest income (2,233,393) (1,903,643) (6,024,410) (4,347,765)
Gross lease receivable after one year (Note 27.4) 13,275,688 12,708,517 27,062,282 22,821,327
Impairment allowance for lease receivable (233,333) (250,096) (418,478) (356,439)
Net lease receivable after one year 13,042,355 12,458,421 26,643,804 22,464,888
Gross hire purchase receivable within one year (Note 27.5.1) 125,696 235,539 386,000 721,919
Gross hire purchase receivable after one year (Note 27.5.2) 82,900 263,784 144,795 686,450
208,596 499,323 530,795 1,408,369
By Product - LKR
Bills of exchange 583,061 0.10 910,851 0.20 583,061 0.10 910,851 0.19
Leasing 20,890,560 3.65 19,214,862 4.12 41,141,068 6.88 33,314,624 6.90
Housing loans 31,665,910 5.53 25,071,539 5.38 31,665,910 5.30 25,071,539 5.19
Export loans 970,206 0.17 994,794 0.21 970,206 0.16 994,794 0.20
Import loans 55,112,266 9.64 47,175,388 10.13 55,082,960 9.21 47,161,193 9.77
Refinance loans 8,162,888 1.43 9,016,678 1.94 8,162,888 1.36 9,016,678 1.87
Term loans 228,209,145 39.91 175,744,276 37.72 231,681,154 38.74 175,834,006 36.42
Hire purchase 208,596 0.04 499,323 0.11 530,795 0.09 1,408,369 0.29
Loans against investment fund
account (IFA) 400,026 0.07 742,281 0.16 400,417 0.07 744,922 0.15
Overdraft 100,361,862 17.55 82,285,004 17.67 100,290,361 16.77 81,952,524 16.97
Staff loans 8,528,002 1.49 7,140,851 1.53 8,635,805 1.44 7,222,750 1.50
Pawning 19,665,969 3.44 15,479,487 3.32 19,665,969 3.29 15,479,487 3.21
Credit cards 11,050,973 1.93 9,468,068 2.03 11,050,973 1.85 9,468,068 1.96
Money market loans 10,186,376 1.78 11,042,976 2.37 10,186,376 1.70 11,042,976 2.29
Factoring 3,911,169 0.68 2,564,273 0.55 5,970,574 1.00 4,635,379 0.96
Others 92,900 0.01 65,728 0.01 239,329 0.04 165,891 0.03
Sub total 499,999,909 87.42 407,416,379 87.45 526,257,846 88.00 424,424,051 87.90
Agriculture & related (Note 27.8.1) 45,989,887 8.04 43,832,852 9.41 47,743,634 7.98 45,202,464 9.36
Manufacturing 92,609,937 16.19 68,034,295 14.60 94,763,251 15.84 69,391,132 14.37
Tourism 43,942,733 7.68 36,269,354 7.79 44,566,727 7.45 36,628,630 7.59
Transport 8,515,303 1.49 6,099,152 1.31 8,612,594 1.44 6,121,094 1.27
Construction 93,925,607 16.42 72,751,253 15.62 95,055,918 15.89 73,621,495 15.25
Traders 138,835,049 24.28 113,974,071 24.46 144,031,352 24.08 117,633,201 24.36
Financial and business services
(Note 27.8.2) 31,529,987 5.51 35,245,615 7.57 30,527,001 5.10 32,991,815 6.83
Government 9,778,500 1.71 617,236 0.13 9,778,500 1.63 617,236 0.13
Infrastructure 23,562,392 4.12 18,853,554 4.05 23,562,392 3.94 19,702,294 4.08
Other services 20,627,761 3.62 19,465,960 4.17 34,350,664 5.74 28,460,268 5.88
Consumers 62,558,140 10.94 50,732,366 10.89 65,141,200 10.91 52,513,751 10.88
571,875,296 100.00 465,875,708 100.00 598,133,233 100.00 482,883,380 100.00
27.8.1 As per the Central Bank of Sri Lanka (CBSL) requirement, a minimum of 10% of the loans and receivables shall be granted to the
agriculture sector. The Bank has complied with the said requirement as at 31st December 2017 and 31st December 2016. The
computation method used to derive the industry-wise exposure in Note 27.8 above is different from the method used for CBSL
minimum lending requirement calculation to agriculture sector.
27.8.2 Loans granted to government banks have been classified under “Financial and business services”.
Diversified Holdings
Abans PLC 277,669 604,886
Hayleys PLC 507,685 507,911
Hemas Holdings PLC 12,662 12,662
Singer Sri Lanka PLC 617,378 754,621
1,415,394 1,880,080
Others
Kotagala Plantations PLC 78,146 78,131
Lion Brewery Ceylon PLC 509,893 509,894
588,039 588,025
Government securities - treasury bills (Note 29.1) 69,411,143 7,723,232 69,512,712 7,782,454
Government securities - treasury bonds (Note 29.2) 809,874 4,786,690 809,874 4,786,690
Quoted equity security (Note 29.3) 2,659,822 1,729,560 2,659,822 1,729,560
Unquoted equity securities (Note 29.4) 30,608 30,708 30,664 30,764
72,911,447 14,270,190 73,013,072 14,329,468
Gain / (loss) from mark to market valuation as at 1st January 12,396 (3,637) 12,526 (4,184)
Movement during the year 89,200 18,237 89,170 18,914
Transfer of gain from available for sale financial assets to profit or
loss - (2,204) - (2,204)
Gain from mark to market valuation as at 31st December 101,596 12,396 101,696 12,526
Market value 69,411,143 7,723,232 69,512,712 7,782,454
INTRODUCTORY INFORMATION | MANAGING OUR BUSINESS | MANAGEMENT DISCUSSION & ANALYSIS | RISK & GOVERNANCE FINANCIAL INFORMATION SUPPLEMENTARY INFORMATION 249
Bank
Name of the Company
LankaBangla Securities Ltd 293,485 45,641 1,007 266,805 44,600 1,107
Credit Information Bureau 1,700 170 170 1,700 170 170
SWIFT 26 6,556 6,556 26 6,556 6,556
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
Lanka Rating Agency Ltd 1,241,263 15,516 - 1,241,263 15,516 -
Total 90,758 30,608 89,717 30,708
Group
Name of the Company
LankaBangla Securities Ltd 293,485 45,641 1,007 266,805 44,600 1,107
Credit Information Bureau 1,800 226 226 1,800 226 226
SWIFT 26 6,556 6,556 26 6,556 6,556
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
Lanka Rating Agency Ltd 1,241,263 15,516 - 1,241,263 15,516 -
Total 90,814 30,664 89,773 30,764
Directors of the Bank carried out an impairment assessment of the unquoted share investments held by the Bank as at 31st
December 2017 and concluded that there is no further impairment required for any of the investments.
Unquoted available for sale equity securities are recorded at cost less accumulated impairment losses, since it is the most
reasonable value available to represent the market value of these investments as at the reporting date.
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Government securities - treasury bills (Note 30.1) 4,184,272 657,903 4,082,703 598,681
Government securities - treasury bonds (Note 30.2) - - - -
4,184,272 657,903 4,082,703 598,681
Gain / (loss) from mark to market valuation as at 1st January 1,157 (869) 1,027 (322)
Movement during the year 2,588 2,026 2,618 1,349
Gain from mark to market valuation as at 31st December 3,745 1,157 3,645 1,027
Market value 4,184,272 657,903 4,082,703 598,681
Amortised cost - -
32 INVESTMENT IN SUBSIDIARIES
ACCOUNTING POLICY
Subsidiaries are entities that are controlled by the Bank. The Bank is presumed to control an investee when it is exposed or has
rights to variable returns from its involvement with the investee and has the ability to affect those returns through its power over
the investee. At each reporting date, the Bank reassesses whether it controls an investee, if facts and circumstances indicate
that there are changes to one or more elements of control mentioned above.
The Financial Statements of Subsidiaries are fully consolidated from the date on which control is transferred to the Bank and
continue to be consolidated until the date when such control ceases. The Financial Statements of the Bank’s Subsidiaries are
prepared for the same reporting year as per the Bank, using consistent accounting policies.
The cost of acquisition of a Subsidiary is measured as the fair value of the consideration, including contingent consideration,
given on the date of transfer of title. The acquired identifiable assets, liabilities and contingent liabilities are measured at their
fair values at the date of acquisition. Subsequent to the initial measurement, the Bank continues to recognise the investments
in Subsidiaries at cost.
The total assets and liabilities of the Subsidiaries as at the reporting date are included in the Consolidated Statement of
Financial Position. The total profit or loss for the year of the Subsidiaries is included in the Consolidated Statement of Profit or
Loss. The non-controlling interest is presented in the Consolidated Statement of Financial Position within equity, separately
from the equity attributable to the equity holders of the Bank. Non-controlling interest in the profit or loss of the Group is
disclosed in the Consolidated Statement of Comprehensive Income. Total comprehensive income is allocated to the owners of
the parent and to the non-controlling interest even if this results in non- controlling interest having a deficit balance.
Intra-group balances and any income and expenses arising from intra-group transactions are eliminated in preparing the
Consolidated Financial Statements. Unrealised losses are eliminated in the same way as unrealised gains, except that they are
only eliminated to the extent that there is no evidence of impairment. When a Subsidiary is acquired or sold during the year,
operating results of such Subsidiary is included from the date of acquisition or to the date of disposal. Upon the loss of control,
the Group derecognises the assets and liabilities of the Subsidiary, any non-controlling interests and the other components of
equity related to the Subsidiary. Any surplus or deficit arising on the loss of control is recognised in the Statement of Changes in
Equity.
If the Group retains any interest in the previous Subsidiary, then such interest is measured at fair value at the date that control
is lost. Subsequently it is accounted for as an equity-accounted investee or in accordance with the Group’s accounting policy for
financial instruments depending on the level of influence retained.
The Group did not acquire / dispose any Subsidiaries during the year ended 31st December 2017.
There are no significant restrictions on the ability of the Subsidiaries to transfer funds to the Bank in the form of cash dividends
or repayment of loans and advances.
32.1 Bank
As at 31st December 2017 2016
Subsidiary Principal Activities Ownership Cost Directors’ Ownership Cost Directors’
Valuation Valuation
Rs 000 Rs 000 Rs 000 Rs 000
Siyapatha Finance PLC Granting leasing, hire 100% 635,917 2,490,561 100% 576,975 1,930,355
purchase, factoring &
other loans facilities
& accepting deposits
Sampath Centre Ltd Renting of 100% 579,036 3,880,909 100% 547,000 4,357,835
commercial property
S C Securities (Pvt) Ltd Stock broking 100% 178,921 112,947 100% 78,921 75,154
Sampath Information Software 100% 29,000 120,670 100% 29,000 105,068
Technology Solutions development, renting
Ltd of IT equipments, IT
services outsourcing
and document
management services
1,422,874 1,231,896
Impairment provision as
at 1st January (4,000) -
Movement during the
year (Note 12) (62,799) (4,000)
Impairment provision as
at 31st December (66,799) (4,000)
Net investment in
subsidiaries 1,356,075 1,227,896
Subsidiaries are not quoted in the Colombo Stock Exchange except Siyapatha Finance PLC.
The Directors’ valuation of investments in Subsidiaries has been carried out on net asset basis as at 31st December 2017 and
accordingly the Bank has recognised a further impairment charge of Rs 62.8 Mn (2016 : Rs 4.0 Mn) against the investment in SC
Securities (Pvt) Ltd during the year.
ACCOUNTING POLICY
Recognition
Property, plant and equipment are tangible items that are held for use in the production or supply of services, for rental to others
or for administrative purposes and are expected to be used during more than one period. The Group applies the requirements
of the Sri Lanka Accounting Standard - LKAS 16 (Property, Plant and Equipment) in accounting for these assets. Property, plant
and equipment are recognised if it is probable that future economic benefits associated with the asset will flow to the Group and
the cost of the asset can be reliably measured.
Measurement
An item of property, plant and equipment that qualifies for recognition as an asset is initially measured at its cost. Cost includes
expenditure that is directly attributable to the acquisition of the asset and cost incurred subsequently to add to, replace part of
an item of property, plant & equipment. The cost of self-constructed assets includes the cost of materials and direct labour, any
other costs directly attributable to bringing the asset to a working condition for its intended use and the costs of dismantling
and removing the items and restoring the site on which they are located. Purchased software that is integral to the functionality
of the related equipment is capitalised as part of computer equipment. When parts of an item of property or equipment have
different useful lives, they are accounted for as separate items (major components) of property, plant and equipment.
254 SAMPATH BANK PLC ANNUAL REPORT 2017
Cost Model
The Group applies cost model to property, plant and equipment except for freehold land and buildings and records at cost of
purchase or construction together with any incidental expenses thereon less accumulated depreciation and any accumulated
impairment losses.
Revaluation Model
The Group applies the revaluation model to the entire class of freehold land and buildings. Such properties are carried at a
revalued amount, being their fair value at the date of revaluation less any subsequent accumulated depreciation and subsequent
accumulated impairment losses. Freehold land and buildings of the Group are revalued by independent professional valuers
every three years or more frequently if the fair values are substantially different from carrying amounts, to ensure that the
carrying amounts do not differ from the fair values as at the reporting date. The Group revalued its freehold lands and buildings
as at 31st December 2017, the details of which are given in Note 33.3.
On revaluation of an asset, any increase in the carrying amount is recognised in ‘Other comprehensive income’ and accumulated
in equity, under revaluation reserve or used to reverse a previous revaluation decrease relating to the same asset, which was
charged to the Statement of Profit or Loss. In this circumstance, the increase is recognised as income to the extent of the
previous write down. Any decrease in the carrying amount is recognised as an expense in the Statement of Profit or Loss or
debited to the other comprehensive income to the extent of any credit balance existing in the revaluation reserve in respect of
that asset.
The decrease recognised in other comprehensive income reduces the amount accumulated in equity under revaluation reserves.
Any balance remaining in the revaluation reserve in respect of an asset is transferred directly to retained earnings on retirement
or disposal of the asset.
Subsequent Cost
The subsequent cost of replacing a component of an item of property, plant and equipment is recognised in the carrying amount
of the item if it is probable that the future economic benefits embodied within that part will flow to the Group and its cost can be
reliably measured. The costs of day to day servicing of property, plant and equipment are charged to the Statement of Profit or
Loss as incurred.
Derecognition
The carrying amount of an item of property, plant and equipment is derecognised on disposal or when no future economic
benefits are expected from its use. The gain or loss arising from de-recognition of an item of property, plant and equipment
is included in the Statement of Profit or Loss when the item is derecognised. When replacement costs are recognised in
the carrying amount of an item of property, plant and equipment, the remaining carrying amount of the replaced part is
derecognised. Major inspection costs are capitalised. At each such capitalisation, the remaining carrying amount of the previous
cost of inspection is derecognised.
Borrowing Costs
Borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset have been
capitalised as part of the cost of the asset in accordance with Sri Lanka Accounting Standard - LKAS 23 (Borrowing Costs). A
qualifying asset is an asset which takes substantial period of time to get ready for its intended use or sale. Capitalisation of
borrowing costs ceases when substantially all the activities necessary to prepare the qualifying asset for its intended use are
completed. Other borrowing costs are recognised in profit or loss in the period in which they are incurred.
There were no capitalised borrowing costs related to the acquisition of property, plant and equipment during the year.
Rates of depreciation for each category of property, plant and equipment is given in Note 14, ‘Other operating expenses’.
INTRODUCTORY INFORMATION | MANAGING OUR BUSINESS | MANAGEMENT DISCUSSION & ANALYSIS | RISK & GOVERNANCE FINANCIAL INFORMATION SUPPLEMENTARY INFORMATION 255
33.1 Bank
Freehold Improvements Computer Office Fixtures Motor Leased Capital 2017 2016
Land to Leasehold Equipment Equipment & Vehicles Assets Work-in Total Total
& Buildings Properties Fittings Progress
Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000
Cost / Valuation
Balance as at 1st January 4,109,225 1,114,903 2,568,632 1,986,896 210,295 249,887 - 37,403 10,277,241 9,119,522
Additions & improvements 8,666 54,627 415,239 168,555 56,039 9,491 484,175 29,596 1,226,388 657,344
Disposals during the year - (1,947) (89,231) (19,650) (4,984) (38,481) - - (154,293) (27,584)
Written off during the year - - (4,543) (42,384) (4,498) - - - (51,425) (1,547)
Revaluation adjustment on
accumulated depreciation (10,915) - - - - - - - (10,915) (75,015)
Revaluation surplus 822,480 - - - - - - - 822,480 604,243
Transfers / adjustments - - - - - - - - - 278
Cost / valuation as at 31st
December 4,929,456 1,167,583 2,890,097 2,093,417 256,852 220,897 484,175 66,999 12,109,476 10,277,241
Accumulated Depreciation
Balance as at 1st January 3,005 908,090 1,794,516 1,326,240 142,837 131,036 - - 4,305,724 3,806,031
Charge for the year 35,688 82,115 236,055 195,738 28,399 24,255 117,298 - 719,548 599,081
Disposals during the year - (1,453) (87,531) (17,600) (4,775) (25,451) - - (136,810) (23,284)
Written off during the year - - (3,480) (31,211) (3,322) - - - (38,013) (1,484)
Revaluation adjustment on
accumulated depreciation (10,915) - - - - - - - (10,915) (75,015)
Transfers / adjustments - - - - - - - - - 395
Accumulated depreciation
as at 31st December 27,778 988,752 1,939,560 1,473,167 163,139 129,840 117,298 - 4,839,534 4,305,724
Net book value as at 31st
December 2017 4,901,678 178,831 950,537 620,250 93,713 91,057 366,877 66,999 7,269,942
Net book value as at 31st
December 2016 4,106,220 206,813 774,116 660,656 67,458 118,851 - 37,403 5,971,517
33.1 (a) The carrying amount of Bank’s revalued freehold land and buildings, if they were carried at cost less accumulated depreciation,
would be as follows:
As at 31st December 2017 2016
Cost Accumulated Carrying Cost Accumulated Carrying
Depreciation Value Depreciation Value
Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000
Cost / Valuation
Balance as at 1st January 8,066,913 1,114,903 3,520,904 2,146,216 324,751 280,465 37,403 15,491,555 12,877,356
Additions & improvements 9,101 54,627 943,253 194,559 75,050 9,491 354,536 1,640,617 1,361,503
Disposals during the year - (1,947) (97,581) (19,832) (4,984) (53,450) - (177,794) (31,919)
Written off during the year - - (4,543) (42,384) (4,498) - - (51,425) (1,547)
Revaluation adjustment on
accumulated depreciation (93,033) - - - - - - (93,033) (216,936)
Revaluation surplus 1,330,585 - - - - - - 1,330,585 1,502,820
Transfers / adjustments - - - - - - - - 278
Cost / valuation as at 31st December 9,313,566 1,167,583 4,362,033 2,278,559 390,319 236,506 391,939 18,140,505 15,491,555
Accumulated Depreciation
Balance as at 1st January 11,475 908,090 2,146,521 1,381,144 183,767 151,351 - 4,782,348 4,180,779
Charge for the year 119,246 82,115 519,325 214,178 52,214 27,455 - 1,014,533 845,172
Disposals during the year - (1,453) (95,503) (17,697) (4,775) (37,344) - (156,772) (25,578)
Written off during the year - - (3,480) (31,211) (3,322) - - (38,013) (1,484)
Revaluation adjustment on
accumulated depreciation (93,033) - - - - - - (93,033) (216,936)
Transfers / adjustments - - - - - - - - 395
Accumulated depreciation as at 31st
December 37,688 988,752 2,566,863 1,546,414 227,884 141,462 - 5,509,063 4,782,348
Net book value as at 31st December
2017 9,275,878 178,831 1,795,170 732,145 162,435 95,044 391,939 12,631,442
Net book value as at 31st December
2016 8,055,438 206,813 1,374,383 765,072 140,984 129,114 37,403 10,709,207
33.2 (a) The carrying amount of Group’s revalued freehold land and buildings, if they were carried at cost less accumulated depreciation,
would be as follows:
As at 31st December 2017 2016
Cost Accumulated Carrying Cost Accumulated Carrying
Depreciation Value Depreciation Value
Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000
33.3 Details of the Bank’s / Group’s Land and Buildings Stated at Valuation
Freehold land and buildings of the Group are revalued by independent professional valuers every three years or more frequently,
to ensure that the carrying amount does not differ materially from that which would be determined using the fair value at the end
of the reporting period. The Group revalued its entire class of freehold land and buildings as of 31st December 2016, the details of
which are given in Note 33.3 (b).
The Group reassessed the fair values of its entire class of freehold land and buildings as of 31st December 2017 using
professionally qualified independent valuers and determined that fair values of freehold land and buildings do not materially differ
from the carrying values as of 31st December 2017, except for the properties given in Note 33.3 (a).
Accordingly, the Bank / Group recognised a revaluation surplus amounting to Rs 822.6 Mn and Rs 1,330.8 Mn respectively in the
revaluation reserves, on account of the properties referred to in Note 33.3 (a). Further, a net impairment charge of Rs 0.16 Mn had
been recognised in the Income Statement.
Bank
Valuer -M/S Prathap Chartered Valuation
& Consultancy (Pvt) Ltd
No. 1022, Maradana Road, Borella 28.12.2017 Market Comparable Method 255.00 97.01 246.80 95.26 (8.20) (1.75) (9.95) - (9.95)
"Nuwarawewakele", Maithreepala
Senanayake Mw, Anuradhapura 29.12.2017 Market Comparable Method 164.97 67.13 171.70 66.97 6.73 (0.16) 6.57 (0.16) 6.73
No. 29, Cross Street, Kandy 29.12.2017 Market Comparable Method 240.00 94.48 257.00 98.68 17.00 4.20 21.20 - 21.20
No. 05, Hakmana Road, Matara 27.12.2017 Market Comparable Method 166.91 36.76 173.74 40.66 6.83 3.90 10.73 - 10.73
Valuer - G W G Abeygunawaradana
No. 103, Dharmapala Mawatha,
Hunupitiya, Colombo 7 28.12.2017 Market Comparable Method 700.00 67.55 1,492.50 68.98 792.50 1.43 793.93 - 793.93
Total - Bank 1,526.88 362.93 2,341.74 370.55 814.86 7.62 822.48 (0.16) 822.64
Subsidiaries
Valuer - P B Kalugalagedara
Sampath Centre - No. 110, Sir James
Peiris Mawatha, Colombo 2 31.12.2017 Income Basis 1,972.00 1,642.31 2,367.00 1,676.50 395.00 34.19 429.19 - 429.19
Valuer - C Wellappili
Siyapatha Finance PLC - No. 534,
Bauddhaloka Mawatha, Colombo 08 31.12.2017 Market Comparable Method 204.08 - 283.00 - 78.92 - 78.92 - 78.92
Total - Group 3,702.96 2,005.24 4,991.74 2,047.05 1,288.78 41.81 1,330.59 (0.16) 1,330.75
258 SAMPATH BANK PLC ANNUAL REPORT 2017
Bank
Valuer - P B Kalugalagedara
No. 261, Galle Road, Ratmalana 30.11.2016 Market Comparable Method 22.00 20.05 30.00 23.00 8.00 2.95 10.95 - 10.95
Valuer - C Wellappili
No. 1022, Maradana Road, Borella 29.11.2016 Market Comparable Method 140.25 65.44 255.00 100.11 114.75 34.67 149.42 - 149.42
No. 05, Wakwella Road, Galle 01.12.2016 Market Comparable Method 78.66 20.42 104.88 29.84 26.22 9.42 35.64 - 35.64
No. 42, Anguruwatota Road, Horana 12.11.2016 Market Comparable Method 31.00 - 41.50 - 10.50 - 10.50 - 10.50
No. 81 & 81 A, High Level Road,
Maharagama 29.11.2016 Market Comparable Method 46.35 24.65 67.30 35.89 20.95 11.24 32.19 - 32.19
Valuer - E M Wimalasena
"Nuwarawewakele", Maithreepala
Senanayake Mw, Anuradhapura 30.11.2016 Market Comparable Method 123.85 69.21 165.00 69.00 41.15 (0.21) 40.94 (0.21) 41.15
Valuer - G M Gamage
No. 69, Main Street, Deniyaya 01.12.2016 Market Comparable Method 16.64 26.74 21.90 25.78 5.26 (0.96) 4.29 (0.96) 5.26
No. 117, Hapugahawalawatta,Ihalagama
Road, Deniyaya 01.12.2016 Market Comparable Method 6.00 - 0.60 - (5.40) - (5.40) (0.33) (5.07)
No. 05, Hakmana Road, Matara 01.12.2016 Market Comparable Method 131.15 29.00 166.92 37.59 35.77 8.59 44.36 - 44.36
No. 25-27, Main Street, Thissamaharama. 01.12.2016 Market Comparable Method 14.43 26.93 17.76 33.49 3.33 6.56 9.89 - 9.89
Subsidiaries
Valuer - P B Kalugalagedara
Sampath Centre - No. 110, Sir James
Peiris Mawatha, Colombo 2 31.12.2016 Income basis 1,265.00 1,532.42 1,972.00 1,724.00 707.00 191.58 898.58 - 898.58
Valuer - C Wellappili
Siyapatha Finance PLC - No. 534,
Bauddhaloka Mawatha, Colombo 8 31.12.2016 Market Comparable Method 204.08 - 204.08 - - - - - -
Total Group 3,929.86 2,576.62 5,080.79 2,928.53 1,150.94 351.92 1,502.85 2.05 1,500.81
INTRODUCTORY INFORMATION | MANAGING OUR BUSINESS | MANAGEMENT DISCUSSION & ANALYSIS | RISK & GOVERNANCE FINANCIAL INFORMATION SUPPLEMENTARY INFORMATION 259
Bank
1 Pettah - 5,124 - 69,891 69,891 3,033 66,858 0.7% 69,655
No. 180 (part), Bodiraja Mawatha, Pettah
2 Borella 24.7 15,876 246,800 95,256 342,056 - 342,056 3.7% 354,870
No. 1022, Maradana Road, Borella
3 Kurunegala 37.4 16,202 130,500 97,098 227,598 3,039 224,559 2.4% 221,279
No. 31 & 33, Negombo Road, Kurunegala
4 Wattala 42.5 5,314 89,000 41,000 130,000 1,112 128,888 1.4% 129,913
No. 256/1, Negombo Road, Wattala
5 Matara 47.6 11,431 173,740 40,660 214,400 - 214,400 2.3% 204,420
No. 05, Hakmana Road, Matara
6 Maharagama 13.5 6,310 67,300 36,081 103,381 1,115 102,266 1.1% 103,101
No. 81 & 81 A, High Level Road,
Maharagama
7 Deniyaya 17.5 5,325 21,900 25,780 47,680 699 46,981 0.5% 47,625
No. 69, Main Street, Deniyaya
8 Deniyaya 40.0 BareLand 600 - 600 - 600 0.0% 600
No. 117, Hapugahawalawatta, Ihalagama
Road, Deniyaya
9 Ratmalana 10.9 5,520 30,000 23,000 53,000 657 52,343 0.6% 52,949
No. 261, Galle Road, Ratmalana
10 Piliyandala 37.5 8,138 65,000 34,000 99,000 1,057 97,943 1.1% 98,917
No. 61A, Moratuwa Road, Piliyandala
11 Anuradhapura 40.4 8,929 171,700 66,968 238,668 - 238,668 2.6% 233,853
"Nuwarawewakele", Maithreepala
Senanayake Mw, Anuradhapura
12 Panadura 27.3 6,020 61,500 52,500 114,000 1,627 112,373 1.2% 113,873
No. 373 A, Galle Road, Panadura
13 Old Moor Street 24.0 10,180 132,000 28,000 160,000 2,025 157,975 1.7% 159,841
No. 371, Old Moor St, Masangasweediya,
Colombo 12
14 Tissamaharama 22.2 10,815 17,760 33,485 51,245 908 50,337 0.5% 51,174
No. 25-27, Main Street, Tissamaharama
15 Katugastota 23.2 7,811 69,600 66,700 136,300 1,809 134,491 1.4% 136,158
No. 187, Madawala Road, Katugastota
16 Galle 17.5 5,400 104,880 29,835 134,715 925 133,790 1.4% 134,643
No. 05, Wakwella Road, Galle
17 Wellawatte 21.5 7,776 118,000 60,000 178,000 1,713 176,287 1.9% 177,866
No. 591, Galle Road, Wellawatta
18 Narahenpita 18.9 9,600 94,000 63,000 157,000 1,799 155,201 1.7% 156,859
No. 475, Elvitigala Mawatha, Narahenpita
19 Kalutara 30.0 8,715 75,000 68,781 143,781 1,948 141,833 1.5% 142,848
No. 312/A, Galle Road, Kalutara
20 Alawwa 20.7 8,190 20,500 26,500 47,000 1,438 45,562 0.5% 46,887
No. 7/5, Giriulla Road, Alawwa
21 Horana 20.8 BareLand 41,500 - 41,500 - 41,500 0.4% 41,500
No. 42, Anguruwatota Road, Horana
22 Kandy Metro 25.7 17,398 257,000 98,679 355,679 - 355,679 3.8% 337,263
No. 29, Cross Street, Kandy
260 SAMPATH BANK PLC ANNUAL REPORT 2017
Bank
23 Dharmapala Mawatha 119.4 7,300 1,492,500 68,970 1,561,470 - 1,561,470 16.8% 767,856
No. 103, Dharmapala Mawatha,
Hunupitya, Colombo 7
24 Gampaha 25.0 5,680 62,000 41,000 103,000 1,112 101,888 1.1% 102,913
No. 150, Colombo Road, Gampaha
25 Victoria Range 20.1 2,320 7,000 10,800 17,800 335 17,465 0.3% 17,774
No. 1/87, Victoria Range, Digana, Kandy
26 Panchikawatta 9.8 7,020 66,000 31,940 97,940 1,427 96,513 1.1% 97,833
No. 85/87, Panchikawatta Road,
Colombo 10
27 Negombo 41.5 WIP 103,750 - 103,750 - 103,750 1.1% 103,750
No. 408, Main Street, Negombo
Total - Bank 779.4 202,394 3,719,530 1,209,926 4,929,456 27,778 4,901,678 52.8% 4,106,220
Subsidiaries
Sampath Centre
28 Slave island
No. 110, Sir James Peiris Mawatha,
157.8 220,301 2,367,000 1,734,110 4,101,110 9,910 4,091,200 44.1% 3,745,139
Colombo 2
Total - Group 966.3 422,695 6,369,530 2,944,036 9,313,566 37,688 9,275,878 100.0% 8,055,438
Bank Group
As at 31st December 2017 2016 2017 2016
Rs 000 Rs 000 Rs 000 Rs 000
Asset class
Improvements to leasehold properties 767,465 672,383 767,465 672,383
Computer equipment & software 2,079,202 1,842,189 2,249,309 1,882,420
Office equipment 764,423 541,405 782,071 551,869
Fixtures & fittings 102,071 92,333 111,185 95,856
Motor vehicles 60,518 44,592 66,657 53,034
Total 3,773,679 3,192,902 3,976,687 3,255,562
33.5 (c) Temporarily Idle Property, Plant and Equipment - Bank & Group
The Bank holds Horana land worth of Rs 41.5 Mn with the intention of constructing a branch in the near future. The Bank does not
intend to construct a branch in Deniyaya land as it was severely earth slipped. Any future construction on this land is subjected to
NBRO (National Building Research Organisation) certification.
33.5 (d) Property, Plant and Equipment Retired from Active Use - Bank & Group
There were no property, plant and equipment retired from active use as at the reporting date (2016: NIL)
33.5 (e) Title Restriction on Property, Plant and Equipment - Bank & Group
There were no restriction on the title of property, plant and equipment as at 31st December 2017 (2016: NIL).
33.5 (f) Property, Plant and Equipment Pledged as Security for Liabilities - Bank & Group
There were no items of property, plant and equipment pledged as securities for liabilities.
33.5 (g) Compensation from Third Parties for Items of Property, Plant and Equipment - Bank & Group
There were no compensation received during the year from third parties for items of property, plant and equipment that were
impaired, lost or given up (2016: Nil).
262 SAMPATH BANK PLC ANNUAL REPORT 2017
34 INTANGIBLE ASSETS
ACCOUNTING POLICY
Recognition
An intangible asset is an identifiable non-monetary asset without physical substance, held for use in the production or supply
of goods or services, for rental to others or for administrative purposes. An intangible asset is recognised if it is probable that
the future economic benefits that are attributable to the asset will flow to the entity and the cost of the asset can be measured
reliably. An intangible asset is initially measured at cost. Expenditure incurred on an intangible item that was initially recognised
as an expense by the Group in previous annual Financial Statements or interim Financial Statements are not recognised as part
of the cost of an intangible asset at a later date.
Computer Software
Cost of purchased licenses and all computer software costs incurred, licensed for use by the Group, which are not integrally
related to associated hardware, which can be clearly identified, reliably measured and it’s probable that they will lead to future
economic benefits, are included in the Statement of Financial Position under the category ‘Intangible assets’ and carried at cost
less accumulated amortisation and any accumulated impairment losses.
Goodwill
Goodwill, if any, that arises upon the acquisition of Subsidiaries is included in intangible assets. Goodwill is measured at initial
recognition in accordance with Note 3.1.1.
Subsequent Expenditure
Expenditure incurred on software is capitalised only when it is probable that this expenditure will enable the asset to generate
future economic benefits in excess of its originally assessed standard of performance and this expenditure can be measured
and attributed to the asset reliably. All other expenditure is expensed as incurred.
There were no restrictions on the title of the intangible assets as at the reporting date. Further, there were no items pledged as
securities for liabilities.
Intangible assets reported below only include computer software and cost of licenses. Rates of amortisation for computer
software and licenses are given in Note 14, ‘Other operating expenses’.
INTRODUCTORY INFORMATION | MANAGING OUR BUSINESS | MANAGEMENT DISCUSSION & ANALYSIS | RISK & GOVERNANCE FINANCIAL INFORMATION SUPPLEMENTARY INFORMATION 263
Bank Group
2017 2016 2017 2016
Rs 000 Rs 000 Rs 000 Rs 000
Cost
Balance as at 1st January 1,294,959 1,189,795 1,359,300 1,251,289
Additions & improvements 782,912 105,164 846,889 108,011
Disposal / write off during the year - - (38) -
Cost as at 31st December 2,077,871 1,294,959 2,206,151 1,359,300
Net deferred tax (assets) / liabilities of one entity cannot be set-off against another entity’s (assets) / liabilities since there is no
legally enforceable right to set-off. Therefore net deferred tax assets and liabilities of different entities are separately recognised in
the Statement of Financial Position.
264 SAMPATH BANK PLC ANNUAL REPORT 2017
Group
Accelerated Depreciation Provision Revaluation Retirement Tax Losses Others Total
for Tax Purposes for Loan on Land & Benefit on Leasing
Property, Leased Losses Buildings Obligation Operation
Plant & Assets
Equipment
Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000
36 OTHER ASSETS
Bank Group
As at 31st December 2017 2016 2017 2016
Rs 000 Rs 000 Rs 000 Rs 000
37 DUE TO BANKS
Bank Group
As at 31st December 2017 2016 2017 2016
Rs 000 Rs 000 Rs 000 Rs 000
Unfavourable balances with local & foreign banks 116,412 317,500 192,951 364,764
4,743,748 6,907,354 4,820,287 6,954,618
CASA
Local currency deposits 198,024,352 177,833,530 197,823,899 177,701,214
Foreign currency deposits 22,018,601 20,400,212 22,018,560 20,400,172
220,042,953 198,233,742 219,842,459 198,101,386
Total Deposits
Due to other customers 625,814,313 509,683,233 634,641,381 512,550,404
Due to banks - Demand, savings & term deposits (Note 37) 4,627,336 6,589,854 4,627,336 6,589,854
630,441,649 516,273,087 639,268,717 519,140,258
The Bank / Group has not had any default of principal, interest or other breaches with regard to any liability during 2016 and 2017.
The Bank has redeemed the above debentures on 11th October 2017.
INTRODUCTORY INFORMATION | MANAGING OUR BUSINESS | MANAGEMENT DISCUSSION & ANALYSIS | RISK & GOVERNANCE FINANCIAL INFORMATION SUPPLEMENTARY INFORMATION 269
15,541,900 1,554,190 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 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 5,000,000
31,765,500 3,176,550 3,176,550 3,176,550 15-Dec-14 14-Dec-19 Fixed - 8.25% per annum
payable annually
38,234,500 3,823,450 3,823,450 3,823,450 15-Dec-14 14-Dec-19 Fixed - 8.10% per annum
payable semi annually
70,000,000 7,000,000 7,000,000 7,000,000
67,412,700 6,741,270 6,821,722 6,821,502 18-Nov-15 18-Nov-20 Fixed - 9.90% per annum
payable semi annually
2,587,300 258,730 261,905 262,092 18-Nov-15 18-Nov-20 Floating rate is equivalent to the
six months treasury bill rate
(net) plus 1.25 % per annum
payable semi-annually
70,000,000 7,000,000 7,083,627 7,083,594
270 SAMPATH BANK PLC ANNUAL REPORT 2017
59,526,500 5,952,650 6,378,917 6,377,752 10-Jun-16 10-Jun-21 Fixed - 12.75% per annum
payable annually
473,500 47,350 47,656 47,681 10-Jun-16 10-Jun-21 Floating rate is equivalent to
the six months treasury bill
rate (gross) plus 1 % per annum
payable semi-annually
60,000,000 6,000,000 6,426,573 6,425,433
10,000,000 1,000,000 1,035,555 1,022,027 24-Dec-14 24-Dec-19 Fixed - 8.90% per annum
payable annually
10,000,000 1,000,000 1,035,555 1,022,027
14,219,900 1,421,990 1,474,156 1,474,156 20-Sep-16 20-Sep-19 Fixed - 13.00% per annum
payable annually
10,780,100 1,078,010 1,119,077 1,119,077 20-Sep-16 20-Sep-21 Fixed - 13.50% per annum
payable annually
25,000,000 2,500,000 2,593,233 2,593,233
INTRODUCTORY INFORMATION | MANAGING OUR BUSINESS | MANAGEMENT DISCUSSION & ANALYSIS | RISK & GOVERNANCE FINANCIAL INFORMATION SUPPLEMENTARY INFORMATION 271
41 OTHER LIABILITIES
Bank Group
As at 31st December 2017 2016 2017 2016
Rs 000 Rs 000 Rs 000 Rs 000
42 OTHER PROVISIONS
Bank Group
As at 31st December 2017 2016 2017 2016
Rs 000 Rs 000 Rs 000 Rs 000
*Significant assumptions used for the actuarial valuation are given in Note 42.1.3
An Actuarial valuation of the gratuity fund of the Bank was carried out as at 31st December 2017 by Mr. Piyal S Goonetilleke (Fellow
of the Society of Actuaries - USA) of 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
Standard - LKAS 19 (Employee Benefits).
Financial assumptions
Discount rate 10.29% 11.90%
Future salary increment rate 9.82% 11.30%
Demographic assumptions
Mortality RP 2000 Mortality Table RP 2000 Mortality Table
Retirement age 55 years 55 years
Expected average future working life of the active participants is 11.1 years.
274 SAMPATH BANK PLC ANNUAL REPORT 2017
All Subsidiaries of the Group carry out actuarial valuations to ascertain their respective gratuity liabilities. However assumptions and
the sensitivity of the assumptions have been given only for the gratuity fund of the Bank since Subsidiary gratuity liabilities do not
have a material impact on the Group Financial Statements.
* Significant assumptions used for the actuarial valuation are given in Note 42.3.5
42.3.4 Movement of the Net Liability Recognised in the Statement of Financial Position
Bank & Group
2017 2016
Rs 000 Rs 000
Financial assumptions
Discount rate 10.29% 11.90%
Future salary increment rate 9.82% 11.30%
Return from EPF investments 9.87% 10.75%
Long term guaranteed EPF interest rate (net of tax) 10.12% 11.00%
Demographic assumptions
Mortality RP 2000 Mortality Table RP 2000 Mortality Table
Expected average future working life of the active participants is 11.1 years.
276 SAMPATH BANK PLC ANNUAL REPORT 2017
*Significant assumptions used for the actuarial valuation are given in Note 42.4.6
An actuarial valuation of the Pension Fund was carried out as at 31st December 2017 by Mr. Piyal S Goonetilleke (Fellow of the
Society of Actuaries - USA) of 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 Standard - LKAS 19
(Employee Benefits).
278 SAMPATH BANK PLC ANNUAL REPORT 2017
Financial assumptions
Discount rate 10.82% 12.30%
Future salary increment rate 9.82% 11.30%
Expected return on assets 10.82% 12.30%
Demographic assumptions
Mortality RP 2000 Mortality Table RP 2000 Mortality Table
Retirement age Normal retirement age or age Normal retirement age or age
on valuation date, if greater on valuation date, if greater
y The plan assets consists of term deposits, repurchase agreements , investments in listed debentures and listed equity.
y Expected average future working life of the active participants is 8.5 years.
yExpected average future life of the active & retired participants is 34.4 years.
43 STATED CAPITAL
Bank & Group
2017 2016
Rs 000 Rs 000
2017 2016
The statutory reserve fund is maintained as required by the section 20 (1) of the Banking Act No. 30 of 1988. A sum equivalent
to not less than 5% of the profit after tax before any dividend is declared or any profits are transferred to elsewhere, should be
transferred to above reserve until the reserve is equal to 50% of the Bank’s stated capital. Thereafter a further sum equivalent to
2% of such profits should be transferred to the statutory reserve fund until the amount of the said reserve fund is equal to the
stated capital of the Bank.
45 OTHER RESERVES
Bank Group
As at 31st December 2017 2016 2017 2016
Rs 000 Rs 000 Rs 000 Rs 000
2017 2016
Rs 000 Rs 000
Bank Group
2017 2016 2017 2016
Rs 000 Rs 000 Rs 000 Rs 000
46 RETAINED EARNINGS
Bank Group
2017 2016 2017 2016
Rs 000 Rs 000 Rs 000 Rs 000
Group
2017 2016
Rs 000 Rs 000
ACCOUNTING POLICY
Contingent liabilities are possible obligations whose existence will be confirmed only by uncertain future events or present
obligations where the transfer of economic benefits is not probable or cannot be reliably measured as defined in the Sri Lanka
Accounting Standard – LKAS 37 (Provisions, Contingent Liabilities and Contingent Assets).
To meet the financial needs of customers, the Bank enters into various irrevocable commitments and contingent liabilities.
These consist of financial guarantees, letters of credit and other undrawn commitments to lend. Letters of credit, guarantees
and acceptances 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. They carry a similar credit risk to loans. Operating lease commitments of the Bank (as a lessor
and as a lessee) and pending legal claims against the Bank too form part of commitments of the Bank. Contingent liabilities are
not recognised in the Statement of Financial Position but are disclosed unless they are remote. Contingent liabilities do contain
credit risk and are therefore form part of the overall risk of the Bank.
Financial guarantees are initially recognised in the Statement of Financial Position (within ‘other liabilities’) at fair value, being
the premium received. Subsequent to initial recognition, the Bank’s liability under each guarantee is measured at the higher
of the amount initially recognised less cumulative amortisation recognised in the Statement of Profit or Loss, and the best
estimate of expenditure required to settle any financial obligation arising as a result of the guarantee.
Any increase in the liability relating to financial guarantees is recorded in the Statement of Profit or Loss under ‘Impairment
charge for loans & other losses’. The premium received is recognised in the Statement of Profit or Loss under ‘Net fee and
commission income’ on a straight line basis over the life of the guarantee.
Commitments
Commitment for unutilised facilities - Direct credit facilities 161,377,222 170,943,636 161,059,499 171,144,119
- Indirect credit facilities 66,325,717 54,074,330 66,325,717 54,074,330
Capital commitments (Note 48.3) 708,532 391,732 2,241,858 1,591,962
Operating lease commitments - as the lessee (Note 48.4) 3,614,072 3,447,346 2,954,872 3,148,053
232,025,543 228,857,044 232,581,946 229,958,464
Contingent Liabilities
Acceptances 19,182,917 16,092,406 19,182,917 16,092,406
Documentary credit 19,796,716 21,855,180 19,796,716 21,855,180
Guarantees 51,292,097 46,496,574 51,292,697 46,530,474
90,271,730 84,444,160 90,272,330 84,478,060
Forward exchange contracts 15,421,830 11,248,558 15,421,830 11,248,558
Currency SWAPs 45,786,984 19,430,545 45,786,984 19,430,545
61,208,814 30,679,103 61,208,814 30,679,103
Total commitment & contingencies 383,506,087 343,980,307 384,063,090 345,115,627
INTRODUCTORY INFORMATION | MANAGING OUR BUSINESS | MANAGEMENT DISCUSSION & ANALYSIS | RISK & GOVERNANCE FINANCIAL INFORMATION SUPPLEMENTARY INFORMATION 283
ii. Following cases are filed against the Bank in order to recover damages.
(a) Case No. - DMR 5787 / 10
The Plaintiff’s action against the Bank has been dismissed by the District Court. The Plaintiff has preferred an appeal against the
judgment to the Civil Appellate Courts. Appeal is pending.
Over Rs 3 Mn is due to the Bank from the said customer on a charge back created through the payment gateway, which was utilised
by the customer and the Bank is defending this action on the right of set off recognised by law relating to banking facilities.
284 SAMPATH BANK PLC ANNUAL REPORT 2017
Over Rs 3 Mn is due to the Bank from the said customer on a charge back created through the payment gateway, which was
utilised by the customer and the Bank is defending this action on the right of set off recognised by law relating to banking facilities.
Since there is no merit of the case, Bank is confident that the Bank can defend and safeguard it’s position in court.
iii. The following cases are filed against the Bank in order to prevent the Bank from enforcing the mortgages to recover its dues:
(a) Seven actions have been filed in Supreme Court in Case Nos. SC 19 / 10, SC 57 / 12, SC 196 /11, SC 5 / 10, SC 14 / 11, 24 /
2008 SC, SC 234 / 16.
(b) Two actions have been filed in Court of Appeal in Case Nos. CALA / 320 / 2001, 401 / 13 CA.
(c ) Two actions have been filed in Civil Appeal in Case Nos. 53 / 11 CALA, CALA - 172 / 12 LA.
(d) Twenty actions have been filed in Commercial High Court in Case Nos. 440 / 13 / MR, 12 / 2014 MR, 224 / 14 MR, 588 / 2014
/ MR, 153 / 11 MR, 427 / 15 / MR, 169 / 16 / MR, 270 / 16 / MR, 269 / 16 / MR, 278 / 16 / MR, 305 / 16 / MR, 477 / 16 / MR,
492/16/MR, 68/2017/MR, 194/2017/MR, 266/2017/MR, 470/17/MR, 531/17/MR, 532/17MR, 553/17/MR.
(e) Sixteen actions have been filed in District Court of Colombo in Case Nos. 173 / 2012 DSP, 05 / 10 DLM, 222 / 13 MR, 38 /
2014 DSP, 84 / 14 / DSP, 146 / 15 DSP, 721 / 15 MR, 11 / 15 DSP, 151 / 16 / DLM, 127 / 16 / DSP, 9 / 16 / Claim, 189 / 16
DLM, 2920/16/DMR, 50/17/DLM, 47/2017/DLM, 49/2017/DLM One in District Court of Kurunegala in Case No. 8660 / SP,
Three in District Court of Marawila in Case Nos. 1613 / L, 1070 / S, 1747 / L, Six in District Court of Kandy in Case Nos. 228 /
10 DPA, 36599 / MR, 401 / 14 DMR, 1365 / 16 / MR, 33/17/DSP, 78/17/DSP One in District Court of Monaragala in Case No.
1691 / SPL, One in District Court of Minuwangoda in Case No. 12 / SPL, One in District Court of Chilaw in Case No. 4127 / 11
/ L, One in District Court of Kalutara in Case No. 4369 / SPL, One in District Court of Ratnapura in Case No. 30132 / M, Two
in District Court of Matale in Case Nos. 6257 / L, 6048 / L, Three in District Court of Galle in Case Nos. 3480 / SP, 3589 / SP,
3625 / SP Three in District Court of Gampaha in Case Nos. 1885 / L, 735 / L, 3066 / L, One in District Court of Batticaloa in
Case No. 5487 / L / 11, One in District Court of Anuradhapura in Case No. 28736 / L One in District Court of Bandarawela in
Case No. 302 / SPL, Two in District Court of Kegalle in Case Nos. 8031 / SPL, 8067 / SPL, One in District Court of Nikaweratiya
in Case No. 37 / SPL, Two in the District Court of Ruwanwella in Case Nos. 168 / P, 262 / P, Two in the District court of
Wariyapola in Case Nos. 16 / L, 248/P One in the District court of Nawalapitiya in Case No. 62 / 14 / P, One in the District court
of Homagama in Case No. 7948 / P, One in the District court of Polonnaruwa in Case No. 16139 / L, Two in the District Court
of Attanagalla in Case Nos. 1093 / L, 1204 / L, One in the District Court of Kalmunai in Case No. 3053 / L, One in the District
Court of Walasmulla in Case No. 193 / S, Two in the District Court of Mount Lavinia in Case Nos. 390 / 16 / Claim, 392 / 16 /
Claim, One in the District Court of Kesbewa in Case No. 90 / SP, Two in the District Court of Dambulla in Case Nos. 170 / L, 172
/ L, One in the District Court of Theldeniya in Case No. 58/16/SPL, One in the District Court of Kuliyapitiya in Case No. 177/P,
One in the District Court of Kaduwela in Case No. 378/SPL, One in the District Court of Negombo in Case No. 8071/L, One in
the District Court of Panadura in Case No. 3446 / SPL, One in the District Court of Matara in Case No. 957 / SPL.
Accordingly the Board of Directors of the Bank are considered as KMP of the Bank and the Group.
286 SAMPATH BANK PLC ANNUAL REPORT 2017
In addition to the above, the Bank has also paid non - cash benefits such as fuel, medical benefits to KMP who are employees of the
Bank in line with the approved benefit plans of the Bank.
* Termination benefits include, Ex-gratia payment of Rs 10 Mn paid to the former Managing Director of the Bank, Rs 7 Mn paid
to the former Group Finance Director and 50% of the net book values of the vehicles transferred to them, as approved by the
shareholders at the Annual General Meeting held on 31st March 2017.
49.3.2 Transactions with KMP and their Close Family Members (CFMs)
CFMs of the KMP are those family members who may be expected to influence the KMP or be influenced by that KMP in their
dealings with the entity. They may include KMP’s spouse, children, domestic partner, children of the KMP’s spouse / domestic
partner and dependents of the KMP. Aggregate value of the transactions with KMP and their CFMs are disclosed below.
No losses have been recorded against loan balances outstanding with KMP during the period and no provisions have been made for
impairment losses against such balances as at the reporting date.
INTRODUCTORY INFORMATION | MANAGING OUR BUSINESS | MANAGEMENT DISCUSSION & ANALYSIS | RISK & GOVERNANCE FINANCIAL INFORMATION SUPPLEMENTARY INFORMATION 287
The Directors’ valuation of investments in Subsidiaries has been carried out on net asset basis as at 31st December 2017 and
accordingly the Bank has recognised an impairment charge of Rs 62.8 Mn against the investment in SC Securities (Pvt) Ltd during
the year ended 31st December 2017 (2016: Rs 4 Mn). Apart from the above, no provisions have been made for impairment losses
against balances with Subsidiaries as at the reporting date.
288 SAMPATH BANK PLC ANNUAL REPORT 2017
In addition to the above, Siyapatha Finance PLC has paid Rs 173 Mn (2016 - Rs 18.1 Mn) to entities which are controlled / jointly
controlled by KMP / CFMs of KMP during their ordinary course of business.
No losses have been recorded against loan balances outstanding with the entities controlled / jointly controlled by KMP / CFMs of
KMP during the period and no provisions have been made for impairment losses against such balances as at the reporting date.
INTRODUCTORY INFORMATION | MANAGING OUR BUSINESS | MANAGEMENT DISCUSSION & ANALYSIS | RISK & GOVERNANCE FINANCIAL INFORMATION SUPPLEMENTARY INFORMATION 289
* The fund subscribed for the Rights issue of the Bank during the year ended 31st December 2017. Accordingly 430,000 new shares
were acquired by way of Rights at a total cost of Rs 105.35 Mn.
290 SAMPATH BANK PLC ANNUAL REPORT 2017
50 SEGMENT INFORMATION
ACCOUNTING POLICY
An operating segment is a component of the Group that engages in business activities from which it may earn revenue and
incur expenses, including revenue and expenses that relate to transactions with any of the Group’s other components, whose
operating results are reviewed regularly by the chief operating decision maker to make decisions about resources allocated to
each segment and assess its performance, and for which discrete financial information is available.
For management purposes, the Group has identified four operating segments based on products and services, as follows:
y Banking
y Leasing, hire purchase & factoring
y Dealing / Investment
y Others
Leasing, hire purchase & factoring represents the finance leasing, hire purchase & factoring businesses of the Bank as well
as the above activities of its subsidiary, Siyapatha Finance PLC. Dealing / Investment involves activities such as stock broking,
securities dealing, investment banking and foreign currency related services.
Management monitors the operating results of its business units separately for the purpose of making decisions about resource
allocation and performance assessment. Segment performance is evaluated based on operating profits or losses which, in
certain respects, are measured differently from operating profits or losses in the Consolidated Financial Statements. Income
taxes are managed on a group basis and are not allocated to operating segments.
Interest income is reported net as management primarily relies on net interest income as a performance measure, not the
gross income and expense. Transfer prices between operating segments are on an arm’s length basis in a manner similar to
transactions with third parties.
Revenue from transactions with a single external customer or counterparty did not exceed 10% or more of the Bank’s total
revenue in 2017 or 2016.
The following table presents income, profit, total assets, total liabilities & cash flow information of the Group’s operating
segments.
50 SEGMENT INFORMATION CONTD.
Banking Leasing, Hire Purchase & Dealing / Investment Other Eliminations/Unallocated Total
Factoring
For the year ended 31st December 2017 2016 2017 2016 2017 2016 2017 2016 2017 2016 2017 2016
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 23,501,967 18,643,540 2,782,366 2,112,606 4,012,908 3,212,946 - (13,727) - - 30,297,241 23,955,365
Dividend income - - - - 151,135 127,412 - - - - 151,135 127,412
Net fee & commission income 8,009,147 6,485,136 385,061 234,862 27,410 16,416 - (1,036) - - 8,421,618 6,735,378
Foreign exchange profit 694,929 768,460 - - 2,437,447 1,820,525 (4,864) - - - 3,127,512 2,588,985
Other income 96,871 153,649 222,504 175,406 (11,260) 51,443 167,116 169,220 - - 475,231 549,718
Total revenue from external customers 32,302,914 26,050,785 3,389,931 2,522,874 6,617,640 5,228,742 162,252 154,457 - - 42,472,737 33,956,858
Inter segment revenue 130,955 86,179 - - - 3,300 519,101 401,689 (650,056) (491,168) - -
Total operating income 32,433,869 26,136,964 3,389,931 2,522,874 6,617,640 5,232,042 681,353 556,146 (650,056) (491,168) 42,472,737 33,956,858
Less: Impairment charge for loans & other losses 2,321,209 1,185,307 230,828 326,192 - 23,515 81,636 - - - 2,633,673 1,535,014
Net operating income 30,112,660 24,951,657 3,159,103 2,196,682 6,617,640 5,208,527 599,717 556,146 (650,056) (491,168) 39,839,064 32,421,844
Less : Total operating expenses 14,006,631 12,771,374 1,602,405 1,169,160 2,623,011 2,398,408 399,169 330,268 (611,769) (403,418) 18,019,447 16,265,792
Segment result 16,106,029 12,180,283 1,556,698 1,027,522 3,994,629 2,810,119 200,548 225,878 (38,287) (87,750) 21,819,617 16,156,052
Less: VAT & NBT on financial services 4,309,389 2,942,523
Less: Income tax expenses 4,827,728 3,712,283
Profit for the year 12,682,500 9,501,246
Non - controlling interest - (5,173)
Profit attributable to equity holders of the Bank 12,682,500 9,496,073
As at 31st December 2017 2016 2017 2016 2017 2016 2017 2016 2017 2016 2017 2016
Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000
Segment assets 592,023,659 489,717,010 50,527,973 40,117,244 151,980,498 126,302,687 6,273,320 5,340,408 (4,639,883) (4,751,726) 796,165,567 656,725,623
Unallocated assets - - - - - - - - 30,551,102 23,372,878 30,551,102 23,372,878
Total assets 592,023,659 489,717,010 50,527,973 40,117,244 151,980,498 126,302,687 6,273,320 5,340,408 25,911,219 18,621,152 826,716,669 680,098,501
INTRODUCTORY INFORMATION | MANAGING OUR BUSINESS | MANAGEMENT DISCUSSION & ANALYSIS | RISK & GOVERNANCE
Segment liabilities 492,960,028 412,906,102 56,420,005 46,052,362 209,440,253 174,044,283 2,271,741 877,507 (3,283,808) (3,523,830) 757,808,219 630,356,424
Unallocated liabilities - - - - - - - - - - - -
Total liabilities 492,960,028 412,906,102 56,420,005 46,052,362 209,440,253 174,044,283 2,271,741 877,507 (3,283,808) (3,523,830) 757,808,219 630,356,424
For the year ended 31st December 2017 2016 2017 2016 2017 2016 2017 2016 2017 2016 2017 2016
FINANCIAL INFORMATION
Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000
Cash flows from operating activities 11,900,939 22,422,424 (7,142,738) (5,000,666) 28,785 (18,473) 340,908 367,910 5,071,623 2,313,307 10,199,517 20,084,502
Cash flows from investing activities (100,000) (69,400) (1,265,091) (277,013) (20,071,079) (29,763,064) (828,934) (427,655) (649,825) (1,507,328) (22,914,929) (32,044,460)
Cash flows from financing activities 10,655,575 14,236,746 7,837,191 5,195,790 100,000 - 164,140 (204,379) (5,024,430) (1,216,468) 13,732,476 18,011,689
Capital expenditure - - 74,443 279,002 323 349 830,610 427,655 1,525,125 762,508 2,430,501 1,469,514
SUPPLEMENTARY INFORMATION
291
292 SAMPATH BANK PLC ANNUAL REPORT 2017
ACCOUNTING POLICY
Events after the reporting period are those events, favourable and unfavourable, that occur between the reporting date and the
date when the Financial Statements are authorised for issue.
No circumstances have arisen since the reporting date which would require adjustments to, or disclosure in the financial statements, other
than those disclosed below.
51.1 Bank
51.1.1 Proposed Dividends
The Directors of the Bank have recommended a first and final scrip dividend of Rs 17.20 per share for the financial year ended 31st
December 2017. The right to receive the dividend will also apply to the increased number of shares allotted pursuant to the Rights Issue
2018 announced on 19th December 2017. The entitlement date for the dividend will be notified subsequently. Further in compliance with
the Bank’s Articles of Association this dividend is to be approved by the shareholders at the Annual General Meeting to be held on 29th
March 2018.
In accordance with Sri Lanka Accounting Standard - LKAS 10 (Event after the Reporting Period), this proposed final dividend has not been
recognised as a liability as at 31st December 2017. 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 External Auditors, prior to recommending the final dividend for the year.
Under the Inland Revenue Act No. 24 of 2017, a Withholding Tax of 14% will be imposed on the dividend declared.
Debenture Issue
Also the Bank has announced a debentures issue on 19th December 2017, to issue 50,000,000, listed, 5 year, rated, unsecured,
subordinated, redeemable, Basel III compliant convertible debentures at an issue price (par value) of Rs 100/- each. This issue includes an
option to issue up to a further 25,000,000 debentures in the event of over subscription. The debentures issue is subject to the approval of
the shareholders of the Bank at the Extraordinary General Meeting to be held on 26th February 2018.
Unquoted equity securities are carried at cost less accumulated impairment losses since it is the most reasonable value available
to represent the price of such securities.
Fair value of freehold land and buildings was determined by using Market Comparable Method or Income Basis. These valuations
performed by the valuers are based on active market prices, significantly adjusted for difference in the nature, location or condition
of the specific property. Management determined that freehold land and buildings constitute one class of asset under Sri Lanka
Accounting Standard - SLFRS 13 (Fair Value Measurement), based on the nature, characteristics and risks of the property.
Level 1 – Quoted market price (unadjusted): quoted prices for identical assets and liabilities in active markets.
Level 2 – Valuation technique using observable inputs: quoted prices for similar assets and liabilities in active markets or quoted
prices for identical or similar assets and liabilities in inactive markets and are valued using models where all significant
inputs are observable.
Level 3 – Valuation technique with significant unobservable inputs: assets and liabilities valued using valuation techniques where
one or more significant inputs are unobservable.
y A review and approval process involving the Board Audit Committee for significant judgement and assumptions, new models,
changes to existing judgements, assumptions and models.
y Periodic (at least quarterly) reviewing of fair value measurements against observable market data.
y Periodic (at least annually) reviewing of fair value measurement models against changes in market conditions, significant
judgments and assumptions.
y Use of sophisticated software for fair value measurements of trading and investment securities and derivatives.
y Independent analysis and investigation of significant daily valuation movements in trading and investment securities and
derivatives.
y A dual verification process for market data inputs to the fair value measurement software.
52.4 Assets & Liabilities Measured at Fair Value - Fair Value Hierarchy
The following table shows an analysis of assets and liabilities recorded at fair value by level of the fair value hierarchy into which the
fair value measurement is categorised. The amounts are based on the value recognised in the Statement of Financial Position.
52 FAIR VALUE OF ASSETS & LIABILITIES CONTD.
52.4.1 Bank
As at 31st December 2017 2016
Fair Value Measurement Using Fair Value Measurement Using
Date of Quoted Prices Significant Significant Total Quoted Prices Significant Significant Total
Valuation in Active Observable Unobservable in Active Observable Unobservable
Markets Inputs Inputs Markets Inputs Inputs
(Level 1) (Level 2) (Level 3) (Level 1) (Level 2) (Level 3)
Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000
There were no material transfers between levels of fair value hierarchy during 2017 and 2016.
* The fair values exist in the recent valuations less subsequent accumulated depreciation and impairment losses are considered as the fair values as at the reporting date (31st December 2017).
52 FAIR VALUE OF ASSETS AND LIABILITIES CONTD.
52.4.2 Group
As at 31st December 2017 2016
Fair Value Measurement Using Fair Value Measurement Using
Date of Quoted Prices Significant Significant Total Quoted Prices Significant Significant Total
Valuation in Active Observable Unobservable in Active Observable Unobservable
Markets Inputs Inputs Markets Inputs Inputs
(Level 1) (Level 2) (Level 3) (Level 1) (Level 2) (Level 3)
Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000
Total non-financial assets measured at fair value - - 9,275,878 9,275,878 - - 8,055,438 8,055,438
There were no material transfers between levels of fair value hierarchy during 2017 and 2016.
SUPPLEMENTARY INFORMATION
* The fair values exist in the recent valuations less subsequent accumulated depreciation and impairment losses are considered as the fair values as at the reporting date (31st December 2017).
295
296 SAMPATH BANK PLC ANNUAL REPORT 2017
Bank Group
Assets Measured at Level 3 Assets Measured at Level 3
Unquoted Freehold Unquoted Freehold
Equity Land and Equity Land and
Securities Buildings Securities Buildings
Rs 000 Rs 000 Rs 000 Rs 000
Type of Asset Bank Group Valuation Significant Weighted Average Fair Value
Fair Value Fair Value Technique Unobservable Range of Estimates for Measurement
as at 31st as at 31st Inputs Unobservable Inputs Sensitivity to
December December Unobservable
2017 2017 Inputs
Rs 000 Rs 000
Expected market
rental growth
Bank 1% *
Subsidiary 0% - 5% *
Discount rate
Bank 6.50% **
Subsidiary 5.75% **
* Significant increases / (decreases) in any of these inputs in isolation would result in a significantly higher / (lower) fair value.
** Significant increases / (decreases) in this input in isolation would result in a significantly (lower) / higher fair value.
52.6 Fair Value of Financial Assets and Liabilities Carried at Amortised Cost
The following describes the methodologies and assumptions used to determine fair values of those financial instruments which are
not already recorded at fair value in the Financial Statements.
Set out below is a comparison of the carrying amounts and fair values of the Bank’s financial instruments by classes 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.
52 FAIR VALUE OF ASSETS & LIABILITIES CONTD.
52.6 Fair Value of Financial Assets & Liabilities Carried at Amortised Cost
As at 31st December 2017 Bank Group
Fair Value Carrying Fair Value Carrying
Level 1 Level 2 Level 3 Total Value Level 1 Level 2 Level 3 Total Value
Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000
Financial Assets
Loans to & receivables from banks - 2,084,079 - 2,084,079 2,084,507 - 2,084,079 - 2,084,079 2,084,507
Loans to & receivables from other customers - 557,046,812 - 557,046,812 560,798,940 - 582,805,470 - 582,805,470 586,370,704
Other loans & receivables - 49,182,374 - 49,182,374 49,352,443 - 49,182,374 - 49,182,374 49,352,443
Financial assets - held to maturity - - - - - 12,336 - - 12,336 12,428
- 608,313,265 - 608,313,265 612,235,890 12,336 634,071,923 - 634,084,259 637,820,082
Financial Liabilities
298 SAMPATH BANK PLC ANNUAL REPORT 2017
The following table lists those financial instruments for which their carrying amounts are a reasonable approximation of fair values because, for example, they are short term in nature or re-priced to
Notes to the Financial Statements
Assets Liabilities
Financial assets
Loans to & receivables from banks - 2,641,050 - 2,641,050 2,641,733 - 2,641,050 - 2,641,050 2,641,733
Loans to & receivables from other customers - 453,175,076 - 453,175,076 456,189,052 - 469,472,893 - 469,472,893 472,754,947
Other loans & receivables - 38,150,120 - 38,150,120 38,708,440 - 38,150,120 - 38,150,120 38,708,440
Financial assets - held to maturity - - - - - 16,502 - - 16,502 16,933
- 493,966,246 - 493,966,246 497,539,225 16,502 510,264,063 - 510,280,565 514,122,053
Financial liabilities
Due to other customers - Call, fixed & certificate
of deposits - 311,092,171 - 311,092,171 311,138,389 - 317,187,722 - 314,187,722 314,139,666
Debt issued & other borrowed funds - 70,293,075 - 70,293,075 72,128,237 - 82,329,431 - 82,329,431 84,179,232
- 381,385,246 - 381,385,246 383,266,626 - 399,517,153 - 396,517,153 398,318,898
The following table lists those financial instruments for which their carrying amounts are a reasonable approximation of fair values because, for example, they are short term in nature or re-priced to current
market rates frequently.
Assets Liabilities
53 RISK MANAGEMENT
53.1 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 and Operational Risk which has been disclosed in this note as summarised below.
Page No
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.
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.
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.
For commercial lending : charges over real estate properties, inventory and trade receivables
For retail lending : mortgages over residential properties
302 SAMPATH BANK PLC ANNUAL REPORT 2017
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 repossessed properties in an orderly manner. The proceeds are used to recover the
outstanding claim.
The following table shows the maximum exposure and net exposure (Net of fair value of any collaterals held) to credit risk by class
of financial asset.
Bank
As at 31st December 2017 2016
Note Maximum Net Maximum Net
exposure to exposure exposure to exposure
credit risk credit risk
Rs 000 Rs 000 Rs 000 Rs 000
Financial Assets
Cash & cash equivalents 20 22,334,315 7,701,785 17,064,013 9,646,689
Placements with banks 22 3,159,326 3,159,326 8,749,763 8,749,763
Reverse repurchase agreements 1,200,762 - 33,860,083 -
Derivative financial instruments 23 496,918 496,918 109,872 109,872
Financial assets - held for trading 24 19,910,621 19,910,621 28,109,193 28,109,193
Financial assets - held for trading pledged as collaterals 25 591,886 591,886 10,380,213 10,380,213
Loans to & receivables from banks 26 2,084,507 1,536,253 2,641,733 1,819,516
Loans to & receivables from other customers 27 560,798,940 247,198,663 456,189,052 202,415,036
Other loans & receivables 28 49,352,443 45,952,577 38,708,440 34,722,921
Financial assets - available for sale 29 72,911,447 72,911,447 14,270,190 14,270,190
Financial assets - available for sale pledged as collaterals 30 4,184,272 4,184,272 657,903 657,903
Other assets 4,123,185 4,123,185 3,257,948 3,257,948
Total 741,148,622 407,766,933 613,998,403 314,139,244
Group
As at 31st December 2017 2016
Note Maximum Net Maximum Net
exposure to exposure exposure to exposure
credit risk credit risk
Rs 000 Rs 000 Rs 000 Rs 000
Financial Assets
Cash & cash equivalents 20 22,612,939 7,707,599 17,221,809 9,655,360
Placements with banks 22 3,225,025 3,225,025 8,749,763 8,749,763
Reverse repurchase agreements 2,392,852 - 34,629,422 -
Derivative financial instruments 23 496,918 496,918 109,872 109,872
Financial assets - held for trading 24 19,977,657 19,977,657 28,117,789 28,117,789
Financial assets - held for trading pledged as collaterals 25 524,850 524,850 10,371,617 10,371,617
Loans to & receivables from banks 26 2,084,507 1,536,253 2,641,733 1,819,516
Loans to & receivables from other customers 27 586,370,704 250,264,137 472,754,947 203,806,278
Other loans & receivables 28 49,352,443 45,952,577 38,708,440 34,722,921
Financial assets - available for sale 29 73,013,072 73,013,072 14,329,468 14,329,468
Financial assets - available for sale pledged as collaterals 30 4,082,703 4,082,703 598,681 598,681
Financial assets - held to maturity 31 12,428 12,428 16,933 16,933
Other assets 4,285,587 4,285,587 3,507,676 3,507,676
Total 768,431,685 411,078,806 631,758,150 315,805,874
INTRODUCTORY INFORMATION | MANAGING OUR BUSINESS | MANAGEMENT DISCUSSION & ANALYSIS | RISK & GOVERNANCE FINANCIAL INFORMATION SUPPLEMENTARY INFORMATION 303
The amount of the financial collateral received or pledged subject to netting arrangements but not qualified for offsetting are
disclosed below.
Bank
Financial Assets
Loans to & receivables from
other customers 61,426,422 39,586,513 21,839,909 51,850,212 34,472,696 17,377,516
Financial Liabilities
Securities sold under
repurchase agreements 4,386,335 4,386,335 - 10,159,225 10,159,225 -
Group
Financial Assets
Loans to & receivables from
other customers 62,917,895 40,361,767 22,556,128 51,850,212 34,472,696 17,377,516
Financial Liabilities
Securities sold under
repurchase agreements 4,231,946 4,231,946 - 10,095,117 10,095,117 -
53 RISK MANAGEMENT CONTD.
53.2.4 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.
53.2.4.1 Comparative information were restated due to the change in the data source for better presentation.
Neither Past Due nor Impaired Past Due but Individually Total
High Grade Standard Grade Sub Standard Unrated Exposures Not Impaired Impaired
Grade Not Subject to
304 SAMPATH BANK PLC ANNUAL REPORT 2017
Ratings
Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000
Financial Assets
Cash & cash equivalents 20,545,164 1,488,950 - 300,201 - - - 22,334,315
Balances with Central Bank of Sri Lanka 41,100,364 - - - - - - 41,100,364
Notes to the Financial Statements
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
1 - 30 Days 31 to 60 Days 61 to 90 Days More than 90 Days Total
Rs 000 Rs 000 Rs 000 Rs 000 Rs 000
Loans to & receivables from other customers 156,187,845 34,891,275 6,184,074 4,904,718 202,167,912
Other assets - - - - -
Total 156,187,845 34,891,275 6,184,074 4,904,718 202,167,912
(b) Bank - as at 31st December 2016
Neither Past Due nor Impaired Past Due but Individually Total
High Grade Standard Grade Sub Standard Unrated Exposures Not Impaired Impaired
Grade Not Subject to
Ratings
Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000
Financial Assets
Cash & cash equivalents 16,791,063 21,594 - 251,356 - - - 17,064,013
Balances with Central Bank of Sri Lanka 33,724,856 - - - - - - 33,724,856
Placements with banks 7,248,965 1,500,798 - - - - - 8,749,763
Reverse repurchase agreements 33,860,083 - - - - - - 33,860,083
Derivative financial instruments 101,100 1,281 - 7,491 - - - 109,872
Financial assets - held for trading 28,104,624 - - 4,569 - - - 28,109,193
Financial assets - held for trading pledged as collaterals 10,380,213 - - - - - - 10,380,213
Loans to & receivables from banks 1,422,978 1,218,755 - - - - - 2,641,733
Loans to & receivables from other customers 159,000,267 87,465,394 2,615,920 22,024,132 28,249,100 157,018,883 7,541,722 463,915,418
Other loans & receivables 36,065,910 2,642,530 - - - - - 38,708,440
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
1 - 30 Days 31 to 60 Days 61 to 90 Days More than 90 Days Total
Rs 000 Rs 000 Rs 000 Rs 000 Rs 000
Loans to & receivables from other customers 117,622,058 29,783,108 5,380,945 4,232,772 157,018,883
Other assets - - - - -
FINANCIAL INFORMATION
Neither Past Due nor Impaired Past Due but Individually Total
High Grade Standard Grade Sub Standard Unrated Exposures Not Impaired Impaired
Grade Not Subject to
Ratings
Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000
Financial Assets
Cash & cash equivalents 20,823,788 1,488,950 - 300,201 - - - 22,612,939
Balances with Central Bank of Sri Lanka 41,100,364 - - - - - - 41,100,364
Placements with banks 303,624 2,921,401 - - - - - 3,225,025
Reverse repurchase agreements 2,392,852 - - - - - - 2,392,852
Derivative financial instruments 412,616 49,015 - 35,287 - - - 496,918
Financial assets - held for trading 19,973,309 - - 4,348 - - - 19,977,657
306 SAMPATH BANK PLC ANNUAL REPORT 2017
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
1 - 30 Days 31 to 60 Days 61 to 90 Days More than 90 Days Total
Rs 000 Rs 000 Rs 000 Rs 000 Rs 000
Loans to & receivables from other customers 162,039,121 38,970,511 7,706,185 5,728,100 214,443,917
Other assets 4,881 3,684 14 92,768 101,347
Total 162,044,002 38,974,195 7,706,199 5,820,868 214,545,264
(d) Group - as at 31st December 2016
Neither Past Due nor Impaired Past Due but Individually Total
High Grade Standard Grade Sub Standard Unrated Exposures Not Impaired Impaired
Grade Not Subject to
Ratings
Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000
Financial Assets
Cash & cash equivalents 16,948,859 21,594 - 251,356 - - - 17,221,809
Balances with Central Bank of Sri Lanka 33,724,856 - - - - - - 33,724,856
Placements with banks 7,248,965 1,500,798 - - - - - 8,749,763
Reverse repurchase agreements 34,629,422 - - - - - - 34,629,422
Derivative financial instruments 101,100 1,282 - 7,490 - - - 109,872
Financial assets - held for trading 28,113,220 - - 4,569 - - - 28,117,789
Financial assets - held for trading pledged as collaterals 10,371,617 - - - - - - 10,371,617
Loans to & receivables from banks 1,422,978 1,218,755 - - - - - 2,641,733
Loans to & receivables from other customers 157,613,648 87,465,394 2,615,920 33,770,024 28,324,534 163,168,340 7,958,764 480,916,624
Other loans & receivables 36,065,910 2,642,530 - - - - - 38,708,440
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
1 - 30 Days 31 to 60 Days 61 to 90 Days More than 90 Days Total
Rs 000 Rs 000 Rs 000 Rs 000 Rs 000
Loans to & receivables from other customers 120,532,255 31,900,090 6,139,094 4,596,901 163,168,340
Other assets 13,657 7,742 11,004 79,824 112,227
FINANCIAL INFORMATION
Bank’s Internal Credit Rating Fitch Rating Historical Total Historical Total
Default Rate Default Rate
As at 31st December 2017 2017 2016 2016
% Rs 000 % Rs 000
308 SAMPATH BANK PLC ANNUAL REPORT 2017
High Grade
A+ AAA to AA+ 0.26 20,762,624 - 17,338,491
A AA to AA- 0.45 52,751,826 0.47 66,733,069
A- A+ to A 0.50 99,700,573 0.21 61,719,732
B+ A- to BBB+ 1.24 116,258,785 0.72 90,703,104
Notes to the Financial Statements
Standard Grade
B BBB to BBB- 1.29 96,172,081 0.85 74,790,220
B- BB+ to BB 1.61 70,193,220 1.07 54,506,464
C+ BB- to B+ 2.01 29,545,606 2.27 22,185,801
Impaired
D C to D 3.51 7,554,016 15.79 6,422,834
53.2.5.1 Comparative information were restated due to the change in the data source for better presentation.
53.2.6 Analysis of Risk Concentration
Risk concentrations: maximum exposure to credit risk without taking into account 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 14,500 Mn and Rs 15,502 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.
Financial Assets
Cash & cash equivalents 17,004,822 418,545 3,820,867 145,915 545,655 398,511 22,334,315
Balances with Central Bank of Sri Lanka 41,100,364 - - - - - 41,100,364
Placements with banks 76,764 - 779,774 - 2,302,788 - 3,159,326
Reverse repurchase agreements 1,200,762 - - - - - 1,200,762
Derivative financial instruments 468,599 28,319 - - - - 496,918
Financial assets - held for trading 19,910,621 - - - - - 19,910,621
Financial assets - held for trading pledged as collaterals 591,886 - - - - - 591,886
Loans to & receivables from banks 2,084,507 - - - - - 2,084,507
Loans to & receivables from other customers** 553,132,105 187,137 495,452 5,749,046 1,177,299 57,901 560,798,940
Other loans & receivables 49,352,443 - - - - - 49,352,443
Financial assets - available for sale 70,250,617 - - 2,660,830 - - 72,911,447
Financial assets - available for sale pledged as collaterals 4,184,272 - - - - - 4,184,272
Financial assets - held to maturity - - - - - - -
Other assets 3,587,081 165,236 116,268 616 5,933 248,051 4,123,185
INTRODUCTORY INFORMATION | MANAGING OUR BUSINESS | MANAGEMENT DISCUSSION & ANALYSIS | RISK & GOVERNANCE
** Provincial breakdown for loans to & receivables from other customers within Sri Lanka
Province Rs 000
Central 35,618,138
Eastern 11,093,394
FINANCIAL INFORMATION
Financial Assets
Cash & cash equivalents 14,354,732 257,865 1,283,008 350,377 486,374 331,657 17,064,013
Balances with Central Bank of Sri Lanka 33,724,856 - - - - - 33,724,856
Placements with banks 2,251,564 1,112,436 1,785,062 - 544 3,600,157 8,749,763
Reverse repurchase agreements 33,860,083 - - - - - 33,860,083
Derivative financial instruments 90,921 18,928 - - 23 - 109,872
Financial assets - held for trading 28,109,193 - - - - - 28,109,193
Financial assets - held for trading pledged as collaterals 10,380,213 - - - - - 10,380,213
310 SAMPATH BANK PLC ANNUAL REPORT 2017
** Provincial breakdown for loans to & receivables from other customers within Sri Lanka
Province Rs 000
Central 27,336,447
Eastern 8,423,743
North Central 11,880,457
North Western 18,997,846
Northern 6,900,437
Sabaragamuwa 9,344,517
Southern 21,988,342
Uva 8,563,024
Western 334,833,994
Total 448,268,807
(c) Group - as at 31st December 2017
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 17,283,446 418,545 3,820,867 145,915 545,655 398,511 22,612,939
Balances with Central Bank of Sri Lanka 41,100,364 - - - - - 41,100,364
Placements with banks 142,463 - 779,774 - 2,302,788 - 3,225,025
Reverse repurchase agreements 2,392,852 - - - - - 2,392,852
Derivative financial instruments 468,599 28,319 - - - - 496,918
Financial assets - held for trading 19,977,657 - - - - - 19,977,657
Financial assets - held for trading pledged as collaterals 524,850 - - - - - 524,850
Loans to & receivables from banks 2,084,507 - - - - - 2,084,507
Loans to & receivables from other customers** 578,703,872 187,137 495,452 5,749,045 1,177,298 57,900 586,370,704
Other loans & receivables 49,352,443 - - - - - 49,352,443
Financial assets - available for sale 70,352,244 - - 2,660,828 - - 73,013,072
Financial assets - available for sale pledged as collaterals 4,082,703 - - - - - 4,082,703
Financial assets - held to maturity 12,428 - - - - - 12,428
Other assets 3,749,482 165,236 116,269 616 5,933 248,051 4,285,587
Total 790,227,910 799,237 5,212,362 8,556,404 4,031,674 704,462 809,532,049
** Provincial breakdown for loans to & receivables from other customers within Sri Lanka
Province Rs 000
Central 38,768,934
Eastern 13,501,722
North Central 13,823,369
North Western 31,804,101
Northern 10,238,855
INTRODUCTORY INFORMATION | MANAGING OUR BUSINESS | MANAGEMENT DISCUSSION & ANALYSIS | RISK & GOVERNANCE
Sabaragamuwa 13,244,867
Southern 28,350,723
Uva 11,630,423
Western 417,340,878
Total 578,703,872
FINANCIAL INFORMATION
SUPPLEMENTARY INFORMATION
311
53 RISK MANAGEMENT CONTD.
(d) Group - as at 31st December 2016
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 14,512,528 257,865 1,283,008 350,377 486,374 331,657 17,221,809
Balances with Central Bank of Sri Lanka 33,724,856 - - - - - 33,724,856
Placements with banks 2,251,564 1,112,436 1,785,062 - 544 3,600,157 8,749,763
Reverse repurchase agreements 34,629,422 - - - - - 34,629,422
Derivative financial instruments 90,921 18,928 - - 23 - 109,872
Financial assets - held for trading 28,117,789 - - - - - 28,117,789
Financial assets - held for trading pledged as collaterals 10,371,617 - - - - - 10,371,617
312 SAMPATH BANK PLC ANNUAL REPORT 2017
** Provincial breakdown for loans to & receivables from other customers within Sri Lanka
Province Rs 000
Central 29,674,965
Eastern 9,986,819
North Central 12,604,130
North Western 21,187,600
Northern 7,093,710
Sabaragamuwa 10,324,742
Southern 23,052,378
Uva 8,764,463
Western 342,145,895
Total 464,834,702
53.2.6.2 Industry Analysis
The following tables show the risk concentration by industry for the components of the Statement of Financial Position.
Financial Assets
Cash & cash equivalents - - - - - - 22,334,315 - - - - 22,334,315
Balances with Central Bank of Sri Lanka - - - - - - - 41,100,364 - - - 41,100,364
Placements with banks - - - - - - 3,159,326 - - - - 3,159,326
Reverse repurchase agreements - - - - - - 1,200,762 - - - - 1,200,762
Derivative financial instruments - - - - - 34,257 462,661 - - - - 496,918
Financial assets - held for trading
Government securities - - - - - - - 19,821,312 - - - 19,821,312
Quoted equities - - - - - 4,348 84,961 - - - - 89,309
Financial assets - held for trading pledged as
collaterals - - - - - - - 591,886 - - - 591,886
Loans to & receivables from banks - - - - - - 2,084,507 - - - - 2,084,507
Loans to & receivables from other customers 44,638,250 91,455,200 43,039,520 8,304,092 90,745,885 136,249,276 31,359,360 9,710,813 23,279,064 20,419,452 61,598,028 560,798,940
Other loans & receivables 78,146 509,893 - - 816,128 1,415,394 5,644,116 40,888,766 - - - 49,352,443
Financial assets - available for sale
Government securities - - - - - - - 70,221,018 - - - 70,221,018
Other equity securities - - - - - - 2,659,822 - - 30,607 - 2,690,429
Financial assets - available for sale pledged as
collaterals - - - - - - - 4,184,272 - - - 4,184,272
Financial assets - held to maturity - - - - - - - - - - - -
INTRODUCTORY INFORMATION | MANAGING OUR BUSINESS | MANAGEMENT DISCUSSION & ANALYSIS | RISK & GOVERNANCE
Financial Assets
Cash & cash equivalents - - - - - - 14,663,090 2,400,923 - - - 17,064,013
Balances with Central Bank of Sri Lanka - - - - - - - 33,724,856 - - - 33,724,856
Placements with banks - - - - - - 8,749,763 - - - - 8,749,763
Reverse repurchase agreements - - - - - - 20,854,768 13,005,315 - - - 33,860,083
Derivative financial instruments - - - - - 7,491 102,381 - - - - 109,872
314 SAMPATH BANK PLC ANNUAL REPORT 2017
Loans to & receivables from other customers 42,767,078 66,905,338 35,711,497 6,018,945 70,312,523 111,463,491 34,878,742 608,225 18,414,722 19,260,714 49,847,777 456,189,052
Other loans & receivables 78,131 509,894 - - 816,128 1,880,080 7,034,282 28,389,925 - - - 38,708,440
Financial assets - available for sale
Government securities - - - - - - - 12,509,923 - - - 12,509,923
Other equity securities - - - - - - 1,729,560 - - 30,707 - 1,760,267
Financial assets - available for sale pledged as
collaterals - - - - - - - 657,903 - - - 657,903
Financial assets - held to maturity - - - - - - - - - - - -
Other assets - - - - - - 334,367 2,045,253 - 878,328 - 3,257,948
Total 42,845,209 67,415,232 35,711,497 6,018,945 71,128,651 113,355,631 91,082,286 131,733,560 18,414,722 20,169,749 49,847,777 647,723,259
(c) Group - as at 31st December 2017
Agriculture Manufac- Tourism Transport Construc- Traders Banks, Govt. Infra- Other Consumers Total
and Related turing tion Financial structure Services
and
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 - - - - - - 22,612,939 - - - - 22,612,939
Balances with Central Bank of Sri Lanka - - - - - - - 41,100,364 - - - 41,100,364
Placements with banks - - - - - - 3,225,025 - - - - 3,225,025
Reverse repurchase agreements - - - - - - 2,392,852 - - - - 2,392,852
Derivative financial instruments - - - - - 34,257 462,661 - - - - 496,918
Financial assets - held for trading
Government securities - - - - - - - 19,888,348 - - - 19,888,348
Quoted equities - - - - - 4,348 84,961 - - - - 89,309
Financial assets - held for trading pledged as
collaterals - - - - - - - 524,850 - - - 524,850
Loans to & receivables from banks - - - - - - 2,084,507 - - - - 2,084,507
Loans to & receivables from other customers 46,287,881 93,550,757 43,629,940 8,401,310 91,863,895 141,215,711 30,343,939 9,710,814 23,279,065 33,926,011 64,161,381 586,370,704
Other loans & receivables 78,146 509,893 - - 816,128 1,415,394 5,644,116 40,888,766 - - - 49,352,443
Financial assets - available for sale
Government securities - - - - - - - 70,322,586 - - - 70,322,586
Other equity securities - - - - - - 2,659,822 - - 30,664 - 2,690,486
Financial assets - available for sale pledged as
collaterals - - - - - - - 4,082,703 - - - 4,082,703
Financial assets - held to maturity - - - - - - - 12,428 - - - 12,428
Other assets - - - - - - 1,266,895 1,991,372 - 1,027,320 - 4,285,587
Total 46,366,027 94,060,650 43,629,940 8,401,310 92,680,023 142,669,710 70,777,717 188,522,231 23,279,065 34,983,995 64,161,381 809,532,049
INTRODUCTORY INFORMATION | MANAGING OUR BUSINESS | MANAGEMENT DISCUSSION & ANALYSIS | RISK & GOVERNANCE
FINANCIAL INFORMATION
SUPPLEMENTARY INFORMATION
315
53 RISK MANAGEMENT CONTD.
(d) Group - as at 31st December 2016
Agriculture Manufac- Tourism Transport Construc- Traders Banks, Govt. Infra- Other Consumers Total
and Related turing tion Financial structure Services
and
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 - - - - - - 14,820,886 2,400,923 - - - 17,221,809
Balances with Central Bank of Sri Lanka - - - - - - - 33,724,856 - - - 33,724,856
Placements with banks - - - - - - 8,749,763 - - - - 8,749,763
Reverse repurchase agreements - - - - - - 21,624,107 13,005,315 - - - 34,629,422
Derivative financial instruments - - - - - 7,491 102,381 - - - - 109,872
316 SAMPATH BANK PLC ANNUAL REPORT 2017
Loans to & receivables from other customers 44,049,080 68,233,095 36,037,089 6,040,887 71,095,470 115,018,122 32,624,943 608,225 19,257,121 28,174,216 51,616,699 472,754,947
Other loans & receivables 78,131 509,894 - - 816,128 1,880,080 7,034,282 28,389,925 - - - 38,708,440
Financial assets - available for sale
Government securities - - - - - - - 12,569,145 - - - 12,569,145
Other equity securities - - - - - - 1,729,560 - - 30,763 - 1,760,323
Financial assets - available for sale pledged as
collaterals - - - - - - - 598,681 - - - 598,681
Financial assets - held to maturity - - - - - - 4,288 12,645 - - - 16,933
Other assets - - - - - - 446,547 2,045,253 - 1,015,876 - 3,507,676
Total 44,127,211 68,742,989 36,037,089 6,040,887 71,911,598 116,910,262 89,872,090 131,746,205 19,257,121 29,220,855 51,616,699 665,483,006
INTRODUCTORY INFORMATION | MANAGING OUR BUSINESS | MANAGEMENT DISCUSSION & ANALYSIS | RISK & GOVERNANCE FINANCIAL INFORMATION SUPPLEMENTARY INFORMATION 317
The maximum exposure to credit risk relating to a financial guarantee is the maximum amount the Bank should have to pay
if the guaranteeis 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 grater than the amount recognised as a liability in the
Statement of Financial Position. The Bank’s maximum credit risk exposure for commitments and contingencies are disclosed in the
Note No. 48.1.
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 maintained a statutory deposit with the Central Bank of Sri Lanka equal to 7.5% of customer 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 this is to
maintain the required ratio of liquid assets to liabilities, to meet the regulatory requirement (20%) . 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 2017 is as follows.
53.3.2 Loans to & receivables from banks and other customers (Advances) to Due to banks and other customers (Deposits) Ratio
The Bank is aware of the importance of due to banks & other customers as a source of funds for its lending operations.
This is monitored using the following ratio, which compares loans to & receivables from banks and other customers (Advances) as
a percentage of due to banks & due to other customers (Deposits).
Loans to & receivables from banks and other customers (Advances) to Due to banks and other customers (Deposits) Ratio
As at 31st December 2017 : 90.65% (2016 : 90.37%)
318 SAMPATH BANK PLC ANNUAL REPORT 2017
Contractual Maturities of Undiscounted Cash Flows of Financial Assets and Financial Liabilities
(a) Bank - as at 31st December 2017
Up to 3 3 - 12 1-3 3-5 Over 5 Total
Months Months Years Years Years
Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000
Financial Assets
Cash & cash equivalents 22,346,640 - - - - 22,346,640
Balances with Central Bank of Sri Lanka 23,720,784 15,013,592 841,857 1,026,699 497,432 41,100,364
Placements with banks 3,159,526 - - - - 3,159,526
Reverse repurchase agreements 1,201,269 - - - - 1,201,269
Derivative financial instruments 317,442 178,576 900 - - 496,918
Financial assets - held for trading 19,910,621 - - - - 19,910,621
Financial assets - held for trading pledged as
collaterals 591,886 - - - - 591,886
Loans to & receivables from banks 230,880 651,790 1,338,701 325,491 - 2,546,862
Loans to & receivables from other customers 258,434,330 106,664,521 153,049,982 85,134,760 77,597,223 680,880,816
Other loans & receivables 8,054,707 9,049,778 27,492,162 11,726,774 - 56,323,421
Financial assets - available for sale 61,986,538 7,459,409 151,502 518,562 2,795,436 72,911,447
Financial assets - available for sale pledged as
collaterals 4,184,272 - - - - 4,184,272
Financial assets - held to maturity - - - - - -
Other assets 3,674,139 338,784 47,078 47,637 50,350 4,157,988
Total Financial Assets 407,813,034 139,356,450 182,922,182 98,779,923 80,940,441 909,812,030
Financial Liabilities
Due to banks 3,095,152 1,690,482 - - - 4,785,634
Derivative financial instruments 71,608 32,265 74 - - 103,947
Securities sold under repurchase agreements 4,046,691 359,868 - - - 4,406,559
Due to other customers 366,962,472 229,784,102 13,049,236 16,378,049 7,201,357 633,375,216
Debt issued & other borrowed funds 3,991,519 26,438,226 32,889,494 27,046,806 4,214,590 94,580,635
Dividend payable 99,259 - - - - 99,259
Other liabilities 4,290,457 2,672,234 705,130 124,119 256,608 8,048,548
Total Financial Liabilities 382,557,158 260,977,177 46,643,934 43,548,974 11,672,555 745,399,798
Total Net Financial Assets / (Liabilities) 25,255,876 (121,620,727) 136,278,248 55,230,949 69,267,886 164,412,232
INTRODUCTORY INFORMATION | MANAGING OUR BUSINESS | MANAGEMENT DISCUSSION & ANALYSIS | RISK & GOVERNANCE FINANCIAL INFORMATION SUPPLEMENTARY INFORMATION 319
Financial Assets
Cash & cash equivalents 17,067,680 - - - - 17,067,680
Balances with Central Bank of Sri Lanka 22,470,630 10,050,488 706,833 162,270 334,635 33,724,856
Placements with banks 7,772,998 984,483 - - - 8,757,481
Reverse repurchase agreements 33,883,972 - - - - 33,883,972
Derivative financial instruments 53,743 56,129 - - - 109,872
Financial assets - held for trading 28,109,193 - - - - 28,109,193
Financial assets - held for trading pledged as
collaterals 10,380,213 - - - - 10,380,213
Loans to & receivables from banks 592,899 657,832 1,410,373 617,378 - 3,278,482
Loans to & receivables from other customers 210,717,964 88,772,585 127,265,408 60,703,416 59,282,407 546,741,780
Other loans & receivables 12,686,789 15,058,902 12,572,383 2,071,751 - 42,389,825
Financial assets - available for sale 8,533,770 3,263,135 97,627 46,425 2,329,233 14,270,190
Financial assets - available for sale pledged as
collaterals - 657,903 - - - 657,903
Financial assets - held to maturity - - - - - -
Other assets 2,185,254 580,812 43,388 45,247 446,715 3,301,416
Total Financial Assets 354,455,105 120,082,269 142,096,012 63,646,487 62,392,990 742,672,863
Financial Liabilities
Due to banks 6,509,984 565,000 - - - 7,074,984
Derivative financial instruments 47,399 16,212 - - - 63,611
Securities sold under repurchase agreements 9,223,433 1,000,953 - - - 10,224,386
Due to other customers 340,631,555 156,379,351 11,156,190 2,451,057 4,686,795 515,304,948
Debt issued & other borrowed funds 11,127,711 23,018,505 30,234,315 16,969,308 3,699,328 85,049,167
Dividend payable 84,860 - - - - 84,860
Other liabilities 2,662,221 2,217,986 309,359 - 253,015 5,442,581
Total Financial Liabilities 370,287,163 183,198,007 41,699,864 19,420,365 8,639,138 623,244,537
Total Net Financial Assets / (Liabilities) (15,832,058) (63,115,738) 100,396,148 44,226,122 53,753,852 119,428,326
320 SAMPATH BANK PLC ANNUAL REPORT 2017
Financial Assets
Cash & cash equivalents 22,646,773 - - - - 22,646,773
Balances with Central Bank of Sri Lanka 23,720,784 15,013,592 841,857 1,026,699 497,432 41,100,364
Placements with banks 3,225,540 - - - - 3,225,540
Reverse repurchase agreements 1,819,603 597,599 - - - 2,417,202
Derivative financial instruments 317,442 178,576 900 - - 496,918
Financial assets - held for trading 19,977,657 - - - - 19,977,657
Financial assets - held for trading pledged as
collaterals 524,850 - - - - 524,850
Loans to & receivables from banks 230,880 651,790 1,338,701 325,491 - 2,546,862
Loans to & receivables from other customers 264,004,775 116,644,635 166,106,667 90,166,283 77,660,744 714,583,104
Other loans & receivables 8,054,707 9,049,778 27,492,162 11,726,774 - 56,323,421
Financial assets - available for sale 62,088,107 7,459,409 151,502 518,562 2,795,492 73,013,072
Financial assets - available for sale pledged as
collaterals 4,082,703 - - - - 4,082,703
Financial assets - held to maturity 2,403 5,967 - 4,300 - 12,670
Other assets 3,674,139 535,659 47,078 47,637 15,877 4,320,390
Total Financial Assets 414,370,363 150,137,005 195,978,867 103,815,746 80,969,545 945,271,526
Financial Liabilities
Due to banks 3,171,691 1,690,482 - - - 4,862,173
Derivative financial instruments 71,608 32,265 74 - - 103,947
Securities sold under repurchase agreements 3,962,622 286,648 - - - 4,249,270
Due to other customers 371,487,145 233,475,321 14,280,655 17,597,768 7,201,371 644,042,260
Debt issued & other borrowed funds 6,935,600 30,341,083 38,578,903 30,900,296 4,214,590 110,970,472
Dividend payable 99,259 - - - - 99,259
Other liabilities 5,452,674 2,492,258 291,624 13,495 248,199 8,498,250
Total Financial Liabilities 391,180,599 268,318,057 53,151,256 48,511,559 11,664,160 772,825,631
Total Net Financial Assets / (Liabilities) 23,189,764 (118,181,052) 142,827,611 55,304,187 69,305,385 172,445,895
INTRODUCTORY INFORMATION | MANAGING OUR BUSINESS | MANAGEMENT DISCUSSION & ANALYSIS | RISK & GOVERNANCE FINANCIAL INFORMATION SUPPLEMENTARY INFORMATION 321
Financial Assets
Cash & cash equivalents 17,225,477 - - - - 17,225,477
Balances with Central Bank of Sri Lanka 22,470,630 10,050,488 706,833 162,270 334,635 33,724,856
Placements with banks 8,542,336 984,483 - - - 9,526,819
Reverse repurchase agreements 34,653,311 - - - - 34,653,311
Derivative financial instruments 53,743 56,129 - - - 109,872
Financial assets - held for trading 28,117,789 - - - - 28,117,789
Financial assets - held for trading pledged as
collaterals 10,371,617 - - - - 10,371,617
Loans to & receivables from banks 592,899 657,832 1,410,373 617,378 - 3,278,482
Loans to & receivables from other customers 215,679,567 93,499,179 135,233,452 64,085,539 59,354,480 567,852,217
Other loans & receivables 12,686,789 15,058,902 12,572,383 2,071,751 - 42,389,825
Financial assets - available for sale 8,533,770 3,322,357 97,627 46,425 2,329,289 14,329,468
Financial assets - available for sale pledged as
collaterals - 598,681 - - - 598,681
Financial assets - held to maturity 2,400 11,077 - 4,300 - 17,777
Other assets 2,287,116 584,087 227,001 49,885 383,960 3,532,049
Total Financial Assets 361,217,444 124,823,215 150,247,669 67,037,548 62,402,364 765,728,240
Financial Liabilities
Due to banks 6,811,412 565,000 - - - 7,376,412
Derivative financial instruments 47,399 16,212 - - - 63,611
Securities sold under repurchase agreements 9,223,433 934,055 - - - 10,157,488
Due to other customers 342,328,781 157,767,267 11,373,146 2,718,067 4,686,795 518,874,056
Debt issued & other borrowed funds 13,423,126 25,779,460 37,462,085 19,180,658 3,699,328 99,544,657
Dividend payable 84,860 - - - - 84,860
Other liabilities 3,603,789 2,143,002 309,359 - 253,371 6,309,521
Total Financial Liabilities 375,522,800 187,204,996 49,144,590 21,898,725 8,639,494 642,410,605
Total Net Financial Assets / (Liabilities) (14,305,356) (62,381,781) 101,103,079 45,138,823 53,762,870 123,317,635
322 SAMPATH BANK PLC ANNUAL REPORT 2017
Contingencies
Guarantees 6,867,637 11,840,270 18,271,936 11,576,952 2,735,302 51,292,097
Acceptance 49,494 12,206,404 6,896,475 30,544 - 19,182,917
Forward contracts - 41,016,433 19,129,706 1,062,675 - 61,208,814
Documentary credit 1,686,058 13,892,514 4,028,991 175,609 13,544 19,796,716
Total Contingencies 8,603,189 78,955,621 48,327,108 12,845,780 2,748,846 151,480,544
Commitments
Undrawn - Direct credit facilities 161,377,222 - - - - 161,377,222
Undrawn - Indirect credit facilities 66,325,717 - - - - 66,325,717
Capital Commitments 708,532 - - - - 708,532
Operating lease commitments - Bank as lessee - 239,035 692,682 2,112,296 570,059 3,614,072
Total Commitments 228,411,471 239,035 692,682 2,112,296 570,059 232,025,543
Total Commitments & Contingencies 237,014,660 79,194,656 49,019,790 14,958,076 3,318,905 383,506,087
Contingencies
Guarantees 2,985,664 13,327,547 16,664,462 10,752,667 2,766,234 46,496,574
Acceptance 33,065 9,277,247 6,767,694 14,400 - 16,092,406
Forward contracts 10,119 20,101,293 10,567,691 - - 30,679,103
Documentary credit 2,688,732 15,129,792 3,840,939 195,717 - 21,855,180
Total Contingencies 5,717,580 57,835,879 37,840,786 10,962,784 2,766,234 115,123,263
Commitments
Undrawn - Direct credit facilities 170,943,636 - - - - 170,943,636
Undrawn - Indirect credit facilities 54,074,330 - - - - 54,074,330
Capital Commitments 391,732 - - - - 391,732
Operating lease commitments - Bank as lessee - 253,622 739,517 1,840,183 614,024 3,447,346
Total Commitments 225,409,698 253,622 739,517 1,840,183 614,024 228,857,044
Total Commitments & Contingencies 231,127,278 58,089,501 38,580,303 12,802,967 3,380,258 343,980,307
INTRODUCTORY INFORMATION | MANAGING OUR BUSINESS | MANAGEMENT DISCUSSION & ANALYSIS | RISK & GOVERNANCE FINANCIAL INFORMATION SUPPLEMENTARY INFORMATION 323
Contingencies
Guarantees 6,867,637 11,840,270 18,272,536 11,576,952 2,735,302 51,292,697
Acceptance 49,494 12,206,404 6,896,475 30,544 - 19,182,917
Forward contracts - 41,016,433 19,129,706 1,062,675 - 61,208,814
Documentary credit 1,686,058 13,892,514 4,028,991 175,609 13,544 19,796,716
Total Contingencies 8,603,189 78,955,621 48,327,708 12,845,780 2,748,846 151,481,144
Commitments
Undrawn - Direct credit facilities 161,059,499 - - - - 161,059,499
Undrawn - Indirect credit facilities 66,325,717 - - - - 66,325,717
Capital Commitments 1,015,471 251,918 767,292 207,177 - 2,241,858
Operating lease commitments - Bank as lessee - 182,761 522,166 1,570,196 679,749 2,954,872
Total Commitments 228,400,687 434,679 1,289,458 1,777,373 679,749 232,581,946
Total Commitments & Contingencies 237,003,876 79,390,300 49,617,166 14,623,153 3,428,595 384,063,090
Contingencies
Guarantees 2,985,664 13,327,547 16,698,362 10,752,667 2,766,234 46,530,474
Acceptance 33,065 9,277,247 6,767,694 14,400 - 16,092,406
Forward contracts 10,119 20,101,293 10,567,691 - - 30,679,103
Documentary credit 2,688,732 15,129,792 3,840,939 195,717 - 21,855,180
Total Contingencies 5,717,580 57,835,879 37,874,686 10,962,784 2,766,234 115,157,163
Commitments
Undrawn - Direct credit facilities 171,144,119 - - - - 171,144,119
Undrawn - Indirect credit facilities 54,074,330 - - - - 54,074,330
Capital Commitments 1,591,962 - - - - 1,591,962
Operating lease commitments - Bank as lessee - 188,041 542,469 1,742,542 675,001 3,148,053
Total Commitments 226,810,411 188,041 542,469 1,742,542 675,001 229,958,464
Total Commitments & Contingencies 232,527,991 58,023,920 38,417,155 12,705,326 3,441,235 345,115,627
324 SAMPATH BANK PLC ANNUAL REPORT 2017
The following tables demonstrate the sensitivity of the Bank’s Statement of Profit or Loss for the year ended 31st December 2017
and 31st December 2016 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
2017 2016
Rs 000 Rs 000
Impact on Statement of Profit or Loss due to Interest Rate Shocks as at 31st December
2017 2016
Rs 000 Rs 000
* The above computation is based on the rate sensitive assets and liabilities which are matured or repriced within one year.
Financial Assets
Cash & cash equivalents 2,052,687 - - - - 20,281,628 22,334,315
Balances with Central Bank of Sri Lanka - - - - - 41,100,364 41,100,364
Placements with banks 3,159,326 - - - - - 3,159,326
Reverse repurchase agreements 1,200,762 - - - - - 1,200,762
Derivative financial instruments - - - - - 496,918 496,918
Financial assets - held for trading 19,821,312 - - - - 89,309 19,910,621
Financial assets - held for trading pledged as collaterals 591,886 - - - - - 591,886
Loans to & receivables from banks 2,074,895 125 8,336 1,151 - - 2,084,507
Loans to & receivables from other customers 379,839,192 60,019,742 52,443,967 32,307,028 36,000,544 188,467 560,798,940
Other loans & receivables 40,693,392 5,117,789 3,523,067 18,195 - - 49,352,443
Financial assets - available for sale 61,986,538 7,459,409 151,502 518,562 105,006 2,690,430 72,911,447
Financial assets - available for sale pledged as collaterals 4,184,272 - - - - - 4,184,272
Financial assets - held to maturity - - - - - - -
Other assets - - - - - 4,123,185 4,123,185
Total Financial Assets 515,604,262 72,597,065 56,126,872 32,844,936 36,105,550 68,970,301 782,248,986
Financial Liabilities
Due to banks 2,083,540 1,662,264 - - - 997,944 4,743,748
Derivative financial instruments - - - - - 103,947 103,947
Securities sold under repurchase agreements 4,042,682 343,653 - - - - 4,386,335
INTRODUCTORY INFORMATION | MANAGING OUR BUSINESS | MANAGEMENT DISCUSSION & ANALYSIS | RISK & GOVERNANCE
Due to other customers 350,327,888 232,695,968 3,607,073 2,812,940 4,084 36,366,360 625,814,313
Debt issued & other borrowed funds 15,295,116 29,387,153 15,688,863 12,857,199 2,869,909 - 76,098,240
Dividend payable - - - - - 99,259 99,259
Other liabilities - - - - - 8,262,267 8,262,267
Total Financial Liabilities 371,749,226 264,089,038 19,295,936 15,670,139 2,873,993 45,829,777 719,508,109
FINANCIAL INFORMATION
Interest Rate Sensitivity Gap 143,855,036 (191,491,973) 36,830,936 17,174,797 33,231,557 23,140,524 62,740,877
SUPPLEMENTARY INFORMATION
325
53 RISK MANAGEMENT CONTD.
(b) Bank - as at 31st December 2016
Up to 3 3 - 12 1-3 Years 3 - 5 Years Over 5 Years Non Interest Total
Months Months Bearing
Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000
Financial Assets
Cash & cash equivalents 6,479,043 - - - - 10,584,970 17,064,013
Balances with Central Bank of Sri Lanka - - - - - 33,724,856 33,724,856
Placements with banks 7,770,903 978,860 - - - - 8,749,763
Reverse repurchase agreements 33,860,083 - - - - - 33,860,083
Derivative financial instruments - - - - - 109,872 109,872
Financial assets - held for trading 28,011,024 - - - - 98,169 28,109,193
326 SAMPATH BANK PLC ANNUAL REPORT 2017
Financial Liabilities
Due to banks 5,159,068 525,644 - - - 1,222,642 6,907,354
Derivative financial instruments - - - - - 63,611 63,611
Securities sold under repurchase agreements 9,196,078 963,147 - - - - 10,159,225
Due to other customers 314,972,370 150,025,590 8,695,429 760,917 25,009 35,203,918 509,683,233
Debt issued & other borrowed funds 32,729,428 9,304,218 13,970,131 13,850,623 2,273,837 - 72,128,237
Dividend payable - - - - - 84,860 84,860
Other liabilities - - - - - 5,817,157 5,817,157
Total Financial Liabilities 362,056,944 160,818,599 22,665,560 14,611,540 2,298,846 42,392,188 604,843,677
Interest Rate Sensitivity Gap 72,057,005 (96,640,411) 28,327,048 5,893,111 25,832,975 7,409,854 42,879,582
(c) Group - as at 31st December 2017
Up to 3 3 - 12 1-3 Years 3 - 5 Years Over 5 Years Non Interest Total
Months Months Bearing
Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000
Financial Assets
Cash & cash equivalents 2,052,687 - - - - 20,560,252 22,612,939
Balances with Central Bank of Sri Lanka - - - - - 41,100,364 41,100,364
Placements with banks 3,225,025 - - - - - 3,225,025
Reverse repurchase agreements 1,809,634 583,218 - - - - 2,392,852
Derivative financial instruments - - - - - 496,918 496,918
Financial assets - held for trading 19,888,348 - - - - 89,309 19,977,657
Financial assets - held for trading pledged as collaterals 524,850 - - - - - 524,850
Loans to & receivables from banks 2,074,897 125 8,336 1,149 - - 2,084,507
Loans to & receivables from other customers 384,201,786 67,397,057 61,935,812 36,590,299 36,057,283 188,467 586,370,704
Other loans & receivables 40,693,391 5,117,790 3,523,067 18,195 - - 49,352,443
Financial assets - available for sale 62,088,107 7,459,409 151,502 518,562 105,006 2,690,486 73,013,072
Financial assets - available for sale pledged as collaterals 4,082,703 - - - - - 4,082,703
Financial assets - held to maturity 2,400 5,725 - 4,303 - - 12,428
Other assets - - - - - 4,285,587 4,285,587
Total Financial Assets 520,643,828 80,563,324 65,618,717 37,132,508 36,162,289 69,411,383 809,532,049
Financial Liabilities
Due to banks 2,160,079 1,662,264 - - - 997,944 4,820,287
Derivative financial instruments - - - - - 103,947 103,947
Securities sold under repurchase agreements 3,958,682 273,264 - - - - 4,231,946
INTRODUCTORY INFORMATION | MANAGING OUR BUSINESS | MANAGEMENT DISCUSSION & ANALYSIS | RISK & GOVERNANCE
Due to other customers 354,139,223 235,927,949 4,441,425 3,779,486 4,098 36,349,200 634,641,381
Debt issued & other borrowed funds 24,416,331 30,321,230 18,714,473 14,935,209 2,869,909 - 91,257,152
Dividend payable - - - - - 99,259 99,259
Other liabilities - - - - - 8,780,888 8,780,888
Total Financial Liabilities 384,674,315 268,184,707 23,155,898 18,714,695 2,874,007 46,331,238 743,934,860
FINANCIAL INFORMATION
Interest Rate Sensitivity Gap 135,969,513 (187,621,383) 42,462,819 18,417,813 33,288,282 23,080,145 65,597,189
SUPPLEMENTARY INFORMATION
327
53 RISK MANAGEMENT CONTD.
(d) Group - as at 31st December 2016
Up to 3 3 - 12 1-3 Years 3 - 5 Years Over 5 Years Non Interest Total
Months Months Bearing
Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000
Financial Assets
Cash & cash equivalents 6,479,043 - - - - 10,742,766 17,221,809
Balances with Central Bank of Sri Lanka - - - - - 33,724,856 33,724,856
Placements with banks 7,770,903 978,860 - - - - 8,749,763
Reverse repurchase agreements 34,629,422 - - - - - 34,629,422
Derivative financial instruments - - - - - 109,872 109,872
Financial assets - held for trading 28,019,620 - - - - 98,169 28,117,789
328 SAMPATH BANK PLC ANNUAL REPORT 2017
Financial Liabilities
Due to banks 5,206,333 525,643 - - - 1,222,642 6,954,618
Derivative financial instruments - - - - - 63,611 63,611
Securities sold under repurchase agreements 9,196,078 899,039 - - - - 10,095,117
Due to other customers 316,253,600 151,279,046 8,868,474 926,225 25,009 35,198,050 512,550,404
Debt issued & other borrowed funds 40,626,413 9,569,328 16,791,721 14,917,933 2,273,837 - 84,179,232
Dividend payable - - - - - 84,860 84,860
Other liabilities - - - - - 6,681,111 6,681,111
Total Financial Liabilities 371,282,424 162,273,056 25,660,195 15,844,158 2,298,846 43,250,274 620,608,953
Interest Rate Sensitivity Gap 67,416,073 (94,564,947) 31,539,045 7,622,142 25,902,448 6,959,292 44,874,053
INTRODUCTORY INFORMATION | MANAGING OUR BUSINESS | MANAGEMENT DISCUSSION & ANALYSIS | RISK & GOVERNANCE FINANCIAL INFORMATION SUPPLEMENTARY INFORMATION 329
The tables below indicate the currencies to which the Bank had significant exposures as at 31st December 2017 and 31st
December 2016 and the effect to the gains/losses in case of a market exchange rates increase/decrease 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 Statement of Profit or Loss (due to the fair value of currency sensitive non trading monetary assets and liabilities)
and equity (due to change in fair value of currency swaps and forward exchange contracts used as cash flow hedges). A negative
amount in the “Impact on Statement of Profit or Loss “ column of the table reflects a potential net reduction in Statement of Profit
or Loss or equity, while a positive amount reflects a net potential increase.
Currency
USD 471,139 - 1,186,602 -
GBP - 1,249 11,892 -
EUR 39,917 - 33,192 -
JPY 16,112 - 7,917 -
AUD 23,062 - 15,048 -
CAD 5,164 - 22,601 -
CHF 9,321 - 24,779 -
SGD 16,001 - 4,066 -
HKD 8,097 - 7,245 -
Sub Total 588,813 1,249 1,313,342 -
Other Currencies 77,668 - 78,338 -
Grand Total 666,481 1,249 1,391,680 -
Higher of Long or Short 666,481 - 1,391,680 -
2017 2016
Impact on Statement of Profit or Loss due to Exchange Rate Net Open Impact on Net Open Impact on
Shocks Position Statement of Position Statement of
(after Rate Profit or Loss (after Rate Profit or Loss
Shocks) for the period Shocks) for the period
ended ended
31st 31st
December December
Rs 000 Rs 000 Rs 000 Rs 000
Regulatory Capital
The Bank manages its capital considering the regulatory capital requirements. The Central Bank of Sri Lanka (CBSL) sets and
monitors capital requirements for licensed commercial banks in Sri Lanka based on the Basel framework. Accordingly Domestic
Systemically Important Bank’s (D-SIB) in Sri Lanka need to maintain minimum Tier I capital adequacy ratio (including capital
buffers) of 7.75% and minimum Total capital adequacy ratio of 11.75% as at 31st December 2017. The Bank has always
maintained the Capital Adequacy Ratios above the minimum regulatory requirements.
INTRODUCTORY INFORMATION | MANAGING OUR BUSINESS | MANAGEMENT DISCUSSION & ANALYSIS | RISK & GOVERNANCE FINANCIAL INFORMATION SUPPLEMENTARY INFORMATION 331
54 MATURITY ANALYSIS
(a) Maturity Gap Analysis as at 31st December 2017
Bank Group
Within 12 After 12 Total Within 12 After 12 Total
Months Months Months Months
Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000
Assets
Cash & cash equivalents 22,334,315 - 22,334,315 22,612,939 - 22,612,939
Balances with Central Bank of Sri Lanka 38,734,375 2,365,989 41,100,364 38,734,375 2,365,989 41,100,364
Placements with banks 3,159,326 - 3,159,326 3,225,025 - 3,225,025
Reverse repurchase agreements 1,200,762 - 1,200,762 2,392,852 - 2,392,852
Derivative financial instruments 496,018 900 496,918 496,018 900 496,918
Financial assets - held for trading 19,910,621 - 19,910,621 19,977,657 - 19,977,657
Financial assets - held for trading pledged as
collaterals 591,886 - 591,886 524,850 - 524,850
Loans to & receivables from banks 654,592 1,429,915 2,084,507 654,592 1,429,915 2,084,507
Loans to & receivables from other customers 325,309,271 235,489,669 560,798,940 337,277,073 249,093,631 586,370,704
Other loans & receivables 10,958,210 38,394,233 49,352,443 10,958,210 38,394,233 49,352,443
Financial assets - available for sale 69,445,947 3,465,500 72,911,447 69,547,516 3,465,556 73,013,072
Financial assets - available for sale pledged as
collaterals 4,184,272 - 4,184,272 4,082,703 - 4,082,703
Financial assets - held to maturity - - - 8,125 4,303 12,428
Investment in subsidiaries - 1,356,075 1,356,075 - - -
Property, plant & equipment - 7,269,942 7,269,942 - 12,631,442 12,631,442
Intangible assets - 946,845 946,845 - 996,703 996,703
Current tax receivables - - - 6,425 - 6,425
Deferred tax assets - - - - 401 401
Other assets 4,738,072 2,665,391 7,403,463 5,210,659 2,624,577 7,835,236
Total Assets 501,717,667 293,384,459 795,102,126 515,709,019 311,007,650 826,716,669
Liabilities
Due to banks 4,743,748 - 4,743,748 4,820,287 - 4,820,287
Derivative financial instruments 103,873 74 103,947 103,873 74 103,947
Securities sold under repurchase agreements 4,386,335 - 4,386,335 4,231,946 - 4,231,946
Due to other customers 592,085,627 33,728,686 625,814,313 599,111,783 35,529,598 634,641,381
Debt issued & other borrowed funds 22,929,774 53,168,466 76,098,240 28,586,811 62,670,341 91,257,152
Dividend payable 99,259 - 99,259 99,259 - 99,259
Current tax liabilities 5,527,323 - 5,527,323 5,630,670 - 5,630,670
Deferred tax liabilities - 1,353,339 1,353,339 - 2,776,681 2,776,681
Other liabilities 10,681,306 1,060,841 11,742,147 11,870,502 742,027 12,612,529
Other provisions - 1,583,558 1,583,558 - 1,634,367 1,634,367
Total Liabilities 640,557,245 90,894,964 731,452,209 654,455,131 103,353,088 757,808,219
Assets
Cash & cash equivalents 17,064,013 - 17,064,013 17,221,809 - 17,221,809
Balances with Central Bank of Sri Lanka 32,521,118 1,203,738 33,724,856 32,521,118 1,203,738 33,724,856
Placements with banks 8,749,763 - 8,749,763 8,749,763 - 8,749,763
Reverse repurchase agreements 33,860,083 - 33,860,083 34,629,422 - 34,629,422
Derivative financial instruments 109,872 - 109,872 109,872 - 109,872
Financial assets - held for trading 28,109,193 - 28,109,193 28,117,789 - 28,117,789
Financial assets - held for trading pledged as
collaterals 10,380,213 - 10,380,213 10,371,617 - 10,371,617
Loans to & receivables from banks 979,426 1,662,307 2,641,733 979,426 1,662,307 2,641,733
Loans to & receivables from other customers 269,373,694 186,815,358 456,189,052 276,977,913 195,777,034 472,754,947
Other loans & receivables 27,047,545 11,660,895 38,708,440 27,047,545 11,660,895 38,708,440
Financial assets - available for sale 11,796,905 2,473,285 14,270,190 11,856,127 2,473,341 14,329,468
Financial assets - available for sale pledged as
collaterals 657,903 - 657,903 598,681 - 598,681
Financial assets - held to maturity - - - 12,645 4,288 16,933
Investment in subsidiaries - 1,227,896 1,227,896 - - -
Property, plant & equipment - 5,971,517 5,971,517 - 10,709,207 10,709,207
Intangible assets - 337,348 337,348 - 356,131 356,131
Current tax receivables - - - 10,365 - 10,365
Deferred tax assets - - - - 857 857
Other assets 3,880,939 2,629,275 6,510,214 4,278,320 2,768,291 7,046,611
Total Assets 444,530,667 213,981,619 658,512,286 453,482,412 226,616,089 680,098,501
Liabilities
Due to banks 6,907,354 - 6,907,354 6,954,618 - 6,954,618
Derivative financial instruments 63,611 - 63,611 63,611 - 63,611
Securities sold under repurchase agreements 10,159,225 - 10,159,225 10,095,117 - 10,095,117
Due to other customers 492,650,698 17,032,535 509,683,233 495,179,516 17,370,888 512,550,404
Debt issued & other borrowed funds 29,014,627 43,113,610 72,128,237 33,355,561 50,823,671 84,179,232
Dividend payable 84,860 - 84,860 84,860 - 84,860
Current tax liabilities 4,316,297 - 4,316,297 4,386,251 - 4,386,251
Deferred tax liabilities - 872,794 872,794 - 1,077,674 1,077,674
Other liabilities 7,995,942 1,063,459 9,059,401 9,119,124 1,063,458 10,182,582
Other provisions - 748,440 748,440 - 782,075 782,075
Total Liabilities 551,192,614 62,830,838 614,023,452 559,238,658 71,117,766 630,356,424
55 COMPARATIVE INFORMATION
The comparative information is reclassified wherever necessary to conform to the current year’s presentation and details are given
below.
55.2.1 Demand deposit balances which were reported under due to other customers have been reclassified under due to banks.
The funds borrowed by the Bank and the Group are given in Note 39.
Bank Group
Debentures Other Debentures Other
Borrowed Borrowed
Funds Funds
Rs 000 Rs 000 Rs 000 Rs 000
SUPPLEMENTARY INFORMATION
Statement of Profit or Loss in US$ ................336 Independent Assurance Report
Statement of Comprehensive to the Shareholders of
Income in US$.................................................337 Sampath Bank PLC ........................................359
Statement of Financial Glossary of Financial and
Position in US$ ...............................................338 Banking Terms ................................................360
Economic Value Addition ..................................339 Abbreviations .......................................................366
Ten Years at a Glance .........................................340 Notice of Annual General Meeting ..................368
Quarterly Statistics ............................................341 Notes......................................................................369
Capital Adequacy ................................................343 Stakeholder Feedback Form ............................371
BASEL III Disclosure Requirements ................344
GRI Content Index ...............................................353
336 SAMPATH BANK PLC ANNUAL REPORT 2017
Bank Group
For the year ended 31st December 2017 2016 2017 2016
US$ 000 US$ 000 US$ 000 US$ 000
Less: Net impairment charge for loans & other losses 15,477 9,732 17,157 10,233
Net operating income 244,974 205,897 259,539 216,146
Operating profit before value added tax (VAT) and nation building tax
134,756 102,759 142,148 107,707
(NBT) on financial services
Less: VAT & NBT on financial services 26,573 18,760 28,074 19,617
Profit before income tax 108,183 83,999 114,074 88,090
Attributable to:
Equity holders of the Bank 78,855 60,831 82,623 63,308
Non - controlling interest - 34
78,855 60,831 82,623 63,342
Earnings per share : Basic / Diluted (US$) 0.40 0.32 0.42 0.33
Exchange rate of US$ was Rs 153.50 as at 31st December 2017 (Rs 150.00 as at 31st December 2016)
* Calculated based on proposed dividend, which is to be approved at the Annual General Meeting.
INTRODUCTORY INFORMATION | MANAGING OUR BUSINESS | MANAGEMENT DISCUSSION & ANALYSIS | RISK & GOVERNANCE | FINANCIAL INFORMATION SUPPLEMENTARY INFORMATION 337
Bank Group
For the year ended 31st December 2017 2016 2017 2016
US$ 000 US$ 000 US$ 000 US$ 000
Gain arising on re-measuring available for sale financial assets 6,630 2,553 6,630 2,553
Transfer of gain from available for sale financial asset to profit or loss - (23) - (23)
Exchange difference in translation 70 107 70 107
Net other comprehensive income to be reclassified to profit or loss 6,700 2,637 6,700 2,637
Surplus from revaluation of property, plant & equipment 5,359 4,015 8,669 10,005
Deferred tax effect on above (5,330) (295) (12,320) (295)
29 3,720 (3,651) 9,710
Net other comprehensive income not to be reclassified to profit or loss (2,948) 6,430 (6,683) 12,427
Attributable to:
Equity holders of the Bank 82,607 69,898 82,640 78,200
Non - controlling interest - - - 206
82,607 69,898 82,640 78,406
Exchange rate of US$ was Rs 153.50 as at 31st December 2017 (Rs 150.00 as at 31st December 2016)
338 SAMPATH BANK PLC ANNUAL REPORT 2017
Bank Group
As at 31st December 2017 2016 2017 2016
US$ 000 US$ 000 US$ 000 US$ 000
ASSETS
Cash & cash equivalents 145,500 113,760 147,316 114,812
Balances with Central Bank of Sri Lanka 267,755 224,832 267,755 224,832
Placements with banks 20,582 58,332 21,010 58,332
Reverse repurchase agreements 7,823 225,734 15,589 230,863
Derivative financial instruments 3,237 732 3,237 732
Financial assets - held for trading 129,711 187,395 130,148 187,452
Financial assets - held for trading pledged as collaterals 3,856 69,201 3,419 69,144
Loans to & receivables from banks 13,580 17,612 13,580 17,612
Loans to & receivables from other customers 3,653,413 3,041,260 3,820,005 3,151,700
Other loans & receivables 321,514 258,056 321,514 258,056
Financial assets - available for sale 474,993 95,135 475,655 95,530
Financial assets - available for sale pledged as collaterals 27,259 4,386 26,597 3,991
Financial assets - held to maturity - - 81 113
Investment in subsidiaries 8,834 8,186 - -
Property, plant & equipment 47,361 39,810 82,290 71,395
Intangible assets 6,168 2,249 6,493 2,374
Current tax receivables - - 42 69
Deferred tax assets - - 3 6
Other assets 48,231 43,403 51,044 46,978
Total Assets 5,179,817 4,390,083 5,385,778 4,533,991
LIABILITIES
Due to banks 30,904 46,050 31,403 46,364
Derivative financial instruments 677 424 677 424
Securities sold under repurchase agreements 28,575 67,728 27,570 67,301
Due to other customers 4,076,966 3,397,888 4,134,472 3,417,003
Debt issued & other borrowed funds 495,754 480,855 594,509 561,195
Dividend payable 647 566 647 566
Current tax liabilities 36,009 28,775 36,682 29,242
Deferred tax liabilities 8,816 5,819 18,089 7,184
Other liabilities 76,495 60,396 82,167 67,884
Other provisions 10,316 4,990 10,647 5,214
Total Liabilities 4,765,159 4,093,491 4,936,863 4,202,377
EQUITY
Stated capital 106,239 43,141 106,239 43,141
Reserves
Statutory reserve 18,632 15,000 19,368 15,576
Other reserves 250,227 209,135 267,713 230,794
Retained earnings 39,560 29,316 55,595 42,103
Total equity attributable to equity holders of the Bank 414,658 296,592 448,915 331,614
Non - controlling interest - -
Total Equity 414,658 296,592 448,915 331,614
Exchange rate of US$ was Rs 153.50 as at 31st December 2017 (Rs 150.00 as at 31st December 2016)
INTRODUCTORY INFORMATION | MANAGING OUR BUSINESS | MANAGEMENT DISCUSSION & ANALYSIS | RISK & GOVERNANCE | FINANCIAL INFORMATION SUPPLEMENTARY INFORMATION 339
Economic cost (12 months average Treasury Bill rate plus 2% risk premium) 12.1% 11.9%
Economic cost 7,565 5,669
Economic value addition 5,799 4,307
The economic value created by the Bank to its shareholders during the period is reflected in the above analysis.
SLAS SLFRS
For the year ended 31st December 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
SLAS SLFRS
As at 31st December 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Investor Information
Dividend paid / proposed (Rs Mn) 275.6 473.6 1,235.8 1,427.0 1,954.1 1,342.6 1,847.0 2,240.0 3,362.1 4,598.4
Dividend cover (times) 5.1 4.4 2.7 2.4 2.6 2.6 2.6 2.7 2.7 2.6
Net asset value per share (Rs) 141.92 77.52 131.18 129.00 152.96 169.37 179.39 198.47 238.94 293.02
Market price per share (Rs) - High 120.00 205.00 550.00 307.00 216.00 242.00 252.00 279.90 268.70 352.20
Market price per share (Rs) - Low 65.00 65.00 201.00 191.00 148.50 161.60 164.20 235.20 210.00 253.50
Market price as at 31st December (Rs) 68.00 204.25 271.90 195.00 200.50 171.90 236.30 248.00 260.40 315.70
Other Information
Exchange rate (US $) 113.00 114.47 110.95 113.90 127.65 130.75 131.20 144.20 150.00 153.50
Number of staff as at 31st December 2,364 2,388 2,688 3,230 3,455 3,688 4,000 3,993 3,960 4,011
Number of branches as at 31st December 112 131 171 206 209 212 220 225 229 229
Ratios
Growth of income (%) 27.8 13.4 (3.5) 13.3 40.7 22.5 (6.1) 5.5 43.7 37.0
Cost to income ratio with VAT and NBT on financial
services (%) 59.6 57.0 55.8 61.5 58.2 55.5 62.0 60.3 56.5 52.5
Cost to income ratio without VAT and NBT on financial
services (%) 49.4 45.5 44.0 55.3 51.7 51.2 54.8 52.7 47.8 42.3
Growth of deposits (%) 8.1 17.5 19.4 27.8 24.3 24.2 13.1 19.7 26.1 22.1
Growth of advances (%) 2.4 3.2 30.3 37.1 22.9 24.4 16.3 24.8 21.6 22.7
Dividend per share (Rs) 4.00 6.25 8.09 9.00 12.00 8.00 11.00 13.00 18.75 17.20
Return on average assets (after tax) (%) 1.04 1.42 1.94 1.55 1.88 0.98 1.23 1.28 1.55 1.67
Return on average equity (after tax) (%) 15.41 19.41 24.59 16.17 22.26 12.88 16.35 18.42 23.47 23.35
Property plant & equipment to shareholders' fund (%) 33.6 28.9 20.4 21.2 17.8 18.1 16.6 15.1 13.4 11.4
Total assets to shareholders' fund (Times) 14.2 13.2 9.1 11.6 12.1 13.4 14.0 15.0 14.8 12.5
Liquid assets ratio (%) 29.5 30.5 26.3 25.0 22.4 27.6 24.5 22.1 21.8 22.4
(As specified in Banking Act No. 30 of 1988)
2017 2016
For the three months ended 31st December 30th September 30th June 31st March 31st December 30th September 30th June 31st March
Rs Mn Rs Mn Rs Mn Rs Mn Rs Mn Rs Mn Rs Mn Rs Mn
Net interest income 7,912 7,303 6,811 6,337 6,634 5,924 5,539 4,657
Net fee & commission income 2,285 2,078 1,854 1,939 1,880 1,702 1,539 1,464
Net trading gain / (loss) 49 251 46 (6) (59) 148 285 (140)
Net gain from financial investments 1 8 136 - 23 35 68 3
Other operating income 636 539 1,024 776 908 565 445 725
Total operating income 10,883 10,179 9,871 9,046 9,386 8,374 7,876 6,709
Less : Net impairment charge for loans & other
losses 261 760 655 700 553 346 345 216
Net operating income 10,622 9,419 9,216 8,346 8,833 8,028 7,531 6,493
Less: Total operating expenses 4,705 4,346 3,917 3,950 4,206 4,080 3,777 3,408
VAT & NBT on finance services 1,148 1,020 1,006 905 999 677 613 525
Income tax expenses 1,127 1,296 928 1,151 1,208 790 657 820
Profit for the period 3,642 2,757 3,365 2,340 2,420 2,481 2,484 1,740
Other comprehensive income for the period (1,045) 211 (14) 1,424 1,013 380 103 (136)
Total comprehensive income for the period 2,597 2,968 3,351 3,764 3,433 2,861 2,587 1,604
INTRODUCTORY INFORMATION | MANAGING OUR BUSINESS | MANAGEMENT DISCUSSION & ANALYSIS | RISK & GOVERNANCE | FINANCIAL INFORMATION
SUPPLEMENTARY INFORMATION
341
2017 2016
For the three months ended 31st December 30th September 30th June 31st March 31st December 30th September 30th June 31st March
2017 2016
As at 31st December 30th September 30th June 31st March 31st December 30th September 30th June 31st March
Quarterly Statistics
Profitability
Interest margin ( % ) 3.91 3.87 3.83 3.81 3.87 3.77 3.69 3.47
Return on assets (before tax) ( % ) 2.29 2.24 2.27 2.10 2.14 2.10 2.07 1.90
342 SAMPATH BANK PLC ANNUAL REPORT 2017
Return on equity (after tax) ( % ) 23.35 23.14 24.29 20.72 23.47 23.89 23.40 19.78
Basel III
Common Equity Tier I Capital Ratio ( % ) 10.26 8.46 N/A N/A N/A N/A N/A N/A
Tier I Capital Ratio ( % ) 10.26 8.46 N/A N/A N/A N/A N/A N/A
Total Capital Ratio ( % ) 14.41 11.85 N/A N/A N/A N/A N/A N/A
Basel II
Core Capital Adequacy Ratio ( % ) N/A N/A 8.21 7.68 8.31 7.68 7.97 7.36
Total Capital Adequacy Ratio ( % ) N/A N/A 12.17 11.93 12.87 11.92 12.35 11.46
Assets Quality
Gross NPA ratio ( % ) 1.64 1.74 1.77 1.73 1.61 1.67 1.80 1.67
Net NPA ratio ( % ) 0.75 0.84 0.88 0.73 0.62 0.62 0.69 0.51
Regulatory Liquidity
Domestic Banking Unit (%) 22.22 21.15 21.30 21.43 21.19 21.72 20.50 20.77
Off-Shore Banking Unit (%) 24.90 24.51 40.27 28.36 33.45 29.16 23.13 27.65
Liquidity Coverage Ratio (%) - Rupee 133.52 122.23 127.42 124.04 94.15 100.34 76.18 110.18
(Minimum Requirement - 2017 -80%,
2016 - 70%)
Liquidity Coverage Ratio (%) - All Currency 118.81 104.01 110.31 94.18 77.69 89.00 73.63 126.89
(Minimum Requirement - 2017 - 80%,
2016 - 70%)
CAPITAL ADEQUACY
Capital Adequacy is one of the key financial BASEL III TRANSITION PHASE-IN-ARRANGEMENT OF CAPITAL REQUIREMENT
indicators which illustrates the soundness
and the stability of a bank. The Capital The calibration of capital framework and transitional phased-in-arrangement of Basel III
Adequacy Ratio is a measure used to capital adequacy requirement for Domestic Systemically Important Banks in Sri Lanka is
determine if the Bank has sufficient capital tabulated below:
to withstand unexpected losses arising
from various risks during the course of Components of Capital Standard in Force
business, such as credit risk, market risk, 01.07.2017 01.01.2018 01.01.2019
operational risk etc. Thus the Capital Common Equity Tier I (CET I) Capital Ratio with 6.25% 7.375% 8.50%
Adequacy acts as a “cushion” or “buffer” Buffers ( CCB & D-SIBs )
in absorbing potential losses arising Total Tier I Capital Ratio with Buffers ( CCB & 7.75% 8.875% 10.00%
from these risks and safeguarding the D-SIBs )
depositors’ funds. Total Capital Ratio with Buffers ( CCB & D-SIBs ) 11.75% 12.875% 14.00%
At present, Capital Adequacy Ratios of the TIER I CAPITAL their risks, with each asset class assigned
licensed banks in Sri Lanka are computed Tier I Capital consists of followings, a different risk weightage.
based on the Banking Act Direction No. 1 of y Common Equity Tier I capital (CET I)
2016 issued by Central Bank of Sri Lanka The three pillars under the BASEL III
y Additional Tier I capital (AT I)
(CBSL) based on the “Basel III Accord : framework
Global Regulatory Framework for More
The Common Equity Tier I capital mainly
Resilient Banks and Banking System”. The Three pillars introduced under the Basel II
consists of stated capital, other capital and
Basel III Accord was issued by the Basel regime continue to be applied in the Basel
revenue reserves. CET I is the element of
Committee on Banking Supervision (BCBS) III regime as mentioned below,
capital which has the highest quality and
of the Bank for International Settlement Pillar 1 - Minimum Capital Requirements
the most effective in absorbing losses.
(BIS) in December 2010 (Revised in June
2011). Pillar 2 - Supervisory Review Process
The Additional Tier I (AT I) capital is a
supplementary form of Total Tier I capital. Pillar 3 - Market Discipline
INTRODUCTION TO “BASEL III ACCORD”
AT I includes capital instruments other
In the aftermath of 2008/2009 financial PILLAR 1 – MINIMUM CAPITAL REQUIREMENT
than the instruments included in CET I
crisis, the BCBS agreed on reforms to Pillar-1 deals with maintenance of
capital.
“strengthen global capital and liquidity regulatory capital needed to support the
rules with the goal of promoting a more CAPITAL BUFFERS Banks’ three major risk categories, namely:
resilient banking sector”, giving rise to. The Basel III has introduced new capital buffers credit risk, market risk and operational risk.
Basel III Accord is in effect a regulatory as mentioned below:
response to strengthen the resilience of Pillar 1 capital requirements shall be
banks, with the objective of minimizing y Capital Conservation Buffer (CCB)
maintained as a percentage of Risk
the possibility of occurrence of a financial y Surcharge for Domestic Systemically
Weighted Assets (RWA) calculated based
crisis. Important Banks (D-SIBs) (Banks with
on the following approaches:
total assets of Rs 500 Bn and above)
Under the Basel III framework, banks are y Countercyclical Buffer y The Standardised Approach for Credit
required to compute Capital Adequacy All banks are required to hold additional Risk
Ratios (CARs) in three tiers as mentioned capital buffers over & above the minimum y The Standardised Measurement
below, CET I & Total Capital Adequacy levels. Method for Market Risk
y The Basic Indicator Approach, The
i. Common Equity Tier I (CET I) Capital TIER II CAPITAL
Standardised Approach or the
Ratio Tier II Capital includes revaluation reserve
Alternative Standardised Approach for
ii. Total Tier I Capital Ratio approved by CBSL, general loan loss
Operational Risk
provisions, and subordinated term debts
iii. Total Capital Ratio
approved by CBSL. Sampath Bank PLC has adopted the
Alternative Standardised Approach (ASA)
RISK WEIGHTED ASSETS (RWA)
in calculating the Operational Risk after
Risk Weighted Assets are a measure of the
receiving the approval in principle from
value of the bank’s assets and off-balance
CBSL in November 2017.
sheet exposures, weighted according to
344 SAMPATH BANK PLC ANNUAL REPORT 2017
Capital Adequacy
PILLAR 2 – SUPERVISORY REVIEW PROCESS y Continuously evaluate the bank’s the internal computation procedures
Pillar - 2 sets forth the framework for Internal Capital Adequacy Assessment followed within the bank. Disclosures
the Supervisory Review Process (SRP) to Process (ICAAP) to determine the level under these requirements broadly include;
assess the Banks’ capital adequacy and of capital to be maintained against all the regulatory capital requirements and
to determine whether bank should hold risks and ensure adequate capital is liquidity, risk weighted assets, linkages
additional capital to cover risks that are available to support all risks. between financial statements and
not covered or adequately covered by the regulatory exposures.
minimum capital requirements under PILLAR 3 – MARKET DISCIPLINE
Pillar I. The process encourages banks to; Pillar - 3 presents a number of disclosure Shown below are the Basel III disclosure
requirements aimed at raising the level requirements with regard to regulatory
y Utilise better risk management of market discipline by increasing the capital, liquidity and risk management
techniques level of transparency. Pillar 3 disclosures linkages with the published financial
y Enhance the risk-based supervision in give external stakeholders a better statements along with comparative
order to accurately assess the capital understanding of capital adequacy information (individual and consolidated).
adequacy calculations by providing an insight into
Regulatory Liquidity
Statutory Liquid Assets (Rs 000) - Bank 157,291,328 144,518,286 N/A N/A
Statutory Liquid Assets Ratio (minimum requirement -20%)
Domestic Banking Unit (%) 22.22 21.15 N/A N/A
Off-Shore Banking Unit (%) 24.90 24.51 N/A N/A
Liquidity Coverage Ratio (%) – Rupee
(minimum requirement - 2017-80%) 133.52 122.23 N/A N/A
Liquidity Coverage Ratio (%) – All currency
(minimum requirement - 2017-80%) 118.81 104.01 N/A N/A
INTRODUCTORY INFORMATION | MANAGING OUR BUSINESS | MANAGEMENT DISCUSSION & ANALYSIS | RISK & GOVERNANCE | FINANCIAL INFORMATION SUPPLEMENTARY INFORMATION 345
Common Equity Tier I (CET I) Capital after adjustments 57,623,760 46,558,321 60,632,711 49,131,453
Common Equity Tier I (CET I) Capital 58,677,652 47,715,669 61,647,651 50,115,641
Stated capital 16,307,722 8,704,944 16,307,722 8,704,944
Statutory reserves 2,860,000 2,250,000 2,973,000 2,341,026
Published retained earnings/(Accumulated retained losses) 5,756,827 577,718 8,613,825 2,886,664
Published accumulated other comprehensive income (OCI) 52,078 19,820 52,078 19,820
General and other disclosed reserves 33,701,025 27,701,033 33,701,026 27,701,033
Unpublished current year's profit/loss and gains reflected in OCI - 8,462,154 - 8,462,154
Ordinary shares issued by consolidated banking and financial
subsidiaries of the Bank and held by third parties - - - -
Total adjustments to CET I Capital 1,053,892 1,157,348 1,014,940 984,188
Goodwill (net) - - - -
Intangible assets (net) 946,845 839,089 996,703 857,892
Others (Investments in the capital of banking & financial institutions) 107,047 318,259 18,237 126,296
Additional Tier I (AT I) Capital after adjustments - - - -
Additional Tier I (AT I) Capital - - - -
Qualifying Additional Tier I Capital instruments - - - -
Instruments issued by consolidated banking and financial subsidiaries
of the Bank and held by third parties - - - -
Total adjustments to AT I Capital - - - -
Investment in own shares - - - -
Others (specify) - - - -
Tier II Capital after adjustments
Tier II Capital 23,285,757 18,650,392 24,494,264 19,100,392
Qualifying Tier II capital instruments 20,320,767 15,599,837 21,529,274 16,049,837
Revaluation gains 453,703 630,143 453,703 630,143
Loan loss provisions 2,511,287 2,420,412 2,511,287 2,420,412
Instruments issued by consolidated banking and financial subsidiaries
of the Bank and held by third parties - - - -
Total adjustments to Tier II - - - -
Investment in own shares - - - -
Others (specify) - - - -
CET I Capital 57,623,760 46,558,321 60,632,711 49,131,453
Total Tier I Capital 57,623,760 46,558,321 60,632,711 49,131,453
Total Capital 80,909,517 65,208,713 85,126,975 68,231,845
TABLE - 3 (A) BANK : CREDIT RISK UNDER STANDARDISED APPROACH – CREDIT RISK EXPOSURES AND CREDIT RISK MITIGATION (CRM) EFFECTS
As at 31st December 2017
Exposures before Credit Exposures post CCF and CRM RWA and RWA density
Conversion Factor (CCF) and
CRM
Asset class On- balance Off- balance On- balance Off- balance RWA RWA density
sheet amount sheet amount sheet amount sheet amount
Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 %
TABLE - 3 (B) GROUP : CREDIT RISK UNDER STANDARDISED APPROACH – CREDIT RISK EXPOSURES AND CREDIT RISK MITIGATION (CRM) EFFECTS
As at 31st December 2017
Exposures before Credit Exposures post CCF and CRM RWA and RWA density
Conversion Factor (CCF) and
CRM
Asset class On- balance Off- balance On- balance Off- balance RWA RWA density
sheet amount sheet amount sheet amount sheet amount
Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 %
TABLE - 4 (B) GROUP : CREDIT RISK UNDER STANDARDISED APPROACH: EXPOSURES BY ASSET CLASSES AND RISK WEIGHTS
As at 31st December 2017 (Post CCF & CRM)
Risk weight 0% 20% 50% 60% 75% 100% 150% >150% Total credit
exposures
Asset class amount
Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000
Higher-risk categories - - - - - - - - -
Cash items and other assets 14,905,340 159,345 - - - 16,233,198 - - 31,297,883
Total 116,406,648 25,023,180 52,813,512 19,566,471 65,245,367 461,497,614 6,083,266 - 746,636,058
SUPPLEMENTARY INFORMATION
347
TABLE - 5 : OPERATIONAL RISK UNDER THE ALTERNATIVE STANDARDISED APPROACH
Bank Group
Capital charge Fixed Gross income/ Average loans & advances for the Capital charge Fixed Gross income/ Average loans & advances for the
factor factor period ended 31st December 2017 factor factor period ended 31st December 2017
Business lines 1st Year 2nd Year 3rd Year 1st Year 2nd Year 3rd Year
Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000
Commercial banking 15% 3.50% 130,451,596 157,389,080 202,489,014 15% 3.50% 130,451,596 157,389,080 202,489,014
Capital charge for Operational Risk (Rs 000) 2,933,972 3,267,502
Risk Weighted Amount for Operational Risk (Rs 000) 24,969,975 27,808,531
Basel III Disclosure Requirements
INTRODUCTORY INFORMATION | MANAGING OUR BUSINESS | MANAGEMENT DISCUSSION & ANALYSIS | RISK & GOVERNANCE | FINANCIAL INFORMATION SUPPLEMENTARY INFORMATION 349
SUMMARY DISCUSSION ON ADEQUACY/ 2019 international time line for the by migrating to better risk measuring
MEETING CURRENT AND FUTURE CAPITAL implementation of Basel III. approaches. As a result of these efforts,
REQUIREMENTS
Overview Capital Management Process 1. The Bank successfully issued the first
In order to comply with the new ever Basel III compliant debenture
Having understood that proper “Capital
Basel III guidelines, Sampath Bank’s Capital in Sri Lanka with the “convertibility
management” is vital in ensuring the
Management Process was also revamped option” in December 2017.
long-term stability of the business,
Sampath Bank has continued to maintain and the three-year (2018 – 2020) Capital
Management Plan was rolled out. 2. The Bank’s November 2017 Rights
Capital Adequacy Ratios at healthy
Issue was oversubscribed.
levels by keeping a significant margin
The Capital Management Plan has been
over and above the regulatory minimum 3. The Bank received principle
integrated with the Internal Capital
requirements. approval from CBSL in November
Adequacy Assessment Process (ICAAP) as
well as the Bank’s Strategic Plan, taking 2017, to migrate to the Alternative
Increasing competition and growing market
cognizance of the estimated negative Standardised Approach (ASA) for
complexity in recent times have called for
impact to the Bank’s capital structure measuring the operational risk of
stricter regulatory requirements to bring
arising from changes in new regulations the Bank, which led to a significant
greater focus on the Capital Management
such as SLFRS 9, Inland Revenue Act, etc. improvement in the Bank’s capital
function. The Basel III Capital Standards
adequacy ratios as at 31st December
introduced by the CBSL with effect
The timely implementation of the Capital 2017.
from 1st July 2017 provides stringent
Management Plan comes under the
framework for Banks to enhance the Moving Forward
purview of the new “Board Capital Planning
quality, consistency and the transparency
Committee”. Established in 2017, the Moving forward with the Capital
of their “capital” through the introduction
“Board Capital Planning Committee” Management plan, the Bank will execute
of new capital buffers, new mandatory
consists of the most senior and specific medium term and long term
disclosure requirements and revised
experienced Directors of the Bank. strategies to raise both Tier I and
definitions for capital instruments. Under
Tier II capital in line with Basel III minimum
the new directive, minimum Regulatory
Proactive efforts to comply with the regulatory requirements. In addition,
Requirements for Tier I Capital Ratio (5%)
Basel III regulations saw the Bank timely actions have been identified and will
and Total Capital Ratio (10%) have been
increases its capital levels by issuing be executed during the coming years to
increased significantly to 10% and 14%
Basel III compliant instruments. Steps were optimise the Risk Weighted Assets for the
respectively, with Banks required to comply
also taken to optimize the capital ratios purpose of improving the capital allocation
with these requirements over a period
by reducing Risk Weighted Assets (RWA) of the Bank.
of 18 months, to meet the 01st January
350 SAMPATH BANK PLC ANNUAL REPORT 2017
Total Stock of High-Quality Liquid Assets (HQLA) 106,931,037 106,340,392 94,072,648 93,257,780
Total adjusted level 1A assets 105,049,760 105,274,160 91,899,251 91,899,251
Level 1 assets 105,049,760 105,049,760 91,742,926 91,742,926
Total adjusted level 2A assets 999,980 849,983 999,980 849,983
Level 2A assets 999,980 849,983 999,980 849,983
Total adjusted level 2B assets 881,297 440,649 1,329,742 664,871
Level 2B assets 881,297 440,649 1,329,742 664,871
Issuer Sampath Bank PLC Sampath Bank PLC Sampath Bank PLC Sampath Bank PLC Sampath Bank PLC Siyapatha Finance PLC Siyapatha Finance PLC
Unique identifier D0246- D0308- D0365- D0389- D0426- D0319- D0394-
LK0090D20774 LK0090D22713 LK0090D23281 LK0090D23521 LK0090D23893 LK0432D22816 LK0432D23582
D0247-13.40% p.a. D0309-8.10% p.a. D0366-6 months net D0390-6 months D0395-13.50 % p.a.
T bill rate + 1.25% gross T bill rate + 1.0%
INTRODUCTORY INFORMATION | MANAGING OUR BUSINESS | MANAGEMENT DISCUSSION & ANALYSIS | RISK & GOVERNANCE | FINANCIAL INFORMATION
* In the event of an occurrence of a Trigger Event as determined at the sole discretion of the Central Bank of Sri Lanka, there would be a conversion of Debentures to ordinary voting shares by the Company without any
requirement of approval by the Debenture Holders, in compliance with BASEL III requirements. Upon the occurrence of a Trigger Event, the outstanding balance of the Debentures including the total par value of the
Debentures and Debenture Interest accrued and unpaid as at that date will be permanently converted to ordinary voting shares at the Conversion Price.
SUPPLEMENTARY INFORMATION
** The price based on the simple average of the daily Volume Weighted Average Price(VWAP) of an ordinary voting share during the three months (03) period, immediately preceding the date of the Trigger Event
351
352 SAMPATH BANK PLC ANNUAL REPORT 2017
TABLE - 9 : DIFFERENCES BETWEEN ACCOUNTING AND REGULATORY SCOPES AND MAPPING OF FINANCIAL STATEMENT CATEGORIES WITH
REGULATORY RISK CATEGORIES - BANK
As at 31st December 2017
Item Carrying values Carrying values Subject to credit Subject to market Not subject
as reported in under scope risk framework risk framework to capital
published of regulatory requirements
financial reporting or subject to
statements deduction from
capital
Rs 000 Rs 000 Rs 000 Rs 000 Rs 000
SPECIFIC DISCLOSURES
Independent Assurance Report to Sampath enable to obtain assurance that we would y Checking the calculations performed
Bank PLC on the Sustainability Reporting become aware of all significant matters that by the bank on a sample basis through
Criteria Presented in the Integrated Annual might be identified in a reasonable assurance recalculation.
Report- 2017 engagement. Accordingly, we do not express
an opinion providing reasonable assurance. yReconciling and agreeing the data on
INTRODUCTION AND SCOPE OF THE financial performance are properly
ENGAGEMENT MANAGEMENT OF THE BANK’S RESPONSIBILITY derived from the bank’s audited financial
The management of Sampath Bank PLC (“the FOR THE REPORT statements for the year ended 31
Bank”) engaged us to provide an independent The management of the bank is responsible December 2017.
assurance on the following elements of the for the preparation of the self-declaration,
sustainability reporting criteria presented in the information and statements contained y Comparison of the content of the Report
the annual report- 2017 (“the Report”). within the Report, and for maintaining against the criteria for a Global Reporting
adequate records and internal controls Initiative, GRI Standards: In accordance’ -
y Reasonable assurance on the information that are designed to support the sustaining Comprehensive guidelines.
on financial performance as specified on reporting process in line with the GRI
page 339 of the Report. Sustainability Reporting Guidelines. Our procedures did not include testing
electronic systems used to collect and
y Limited assurance on other information ERNST & YOUNG’S RESPONSIBILITY aggregate the information.
presented in the Report, prepared in Our responsibility is to express a conclusion
accordance with the requirements of the as to whether we have become aware of any LIMITATIONS AND CONSIDERATIONS
Global Reporting Initiative GRI Standards: matter that causes us to believe that the Environmental and social performance data
‘In accordance’ - Comprehensive Report is not prepared in accordance with are subject to inherent limitations given
guidelines. the requirements of the Global Reporting their nature and the methods used for
Initiative, GRI Standards: ‘In accordance’ determining, calculating and estimating such
BASIS OF OUR WORK AND LEVEL OF - Comprehensive guidelines. This report is data
ASSURANCE made solely to the Bank in accordance with
We performed our procedures to provide our engagement letter dated 30 August CONCLUSION
limited assurance in accordance with Sri 2017. We disclaim any assumption of Based on the procedures performed, as
Lanka Standard on Assurance Engagements responsibility for any reliance on this report described above, we conclude that;
(SLSAE 3000): ‘Assurance Engagements to any person other than the bank or for any
Other than Audits or Reviews of Historical purpose other than that for which it was
y The information on financial performance
Financial Information’, issued by the Institute prepared. In conducting our engagement,
as specified on page 339 of the Report are
of Chartered Accountants of Sri Lanka we have complied with the independence
properly derived from the audited financial
(“CASL”). requirements of the Code for Ethics for
statements of the Bank for the year ended
Professional Accountants issued by the CASL.
31 December 2017.
The evaluation criteria used for this limited
assurance engagement are based on the KEY ASSURANCE PROCEDURES
y Nothing has come to our attention
Sustainability Reporting Guidelines (“GRI We planned and performed our procedures
that causes us to believe that other
Guidelines”) and related information in to obtain the information and explanations
information presented in the Report
particular, the requirements to achieve GRI considered necessary to provide sufficient
are not fairly presented, in all material
Standards ‘In accordance’ - Comprehensive evidence to support our limited assurance
respects, in accordance with the Bank’s
guideline publication, publicly available at conclusions. Key assurance procedures
sustainability practices and policies some
GRI’s global website at “www.globalreporting. included:
of which are derived from Sustainability
org”. Reporting Guideline, GRI Standards- ‘In
yInterviewing relevant the bank’s personnel accordance’ Comprehensive.
Our engagement provides limited assurance to understand the process for collection,
as well as reasonable assurance. A limited analysis, aggregation and presentation of
assurance engagement is substantially data.
less in scope than a reasonable assurance
engagement conducted in accordance with y Reviewing and validation of the Ernst & Young
SLSAE-3000 and consequently does not information contained in the Report. Chartered Accountants
15 February 2018
Colombo
360 SAMPATH BANK PLC ANNUAL REPORT 2017
A Asset and Liability Committee (ALCO) global regulatory standards on bank capital
Acceptances A risk-management committee in a bank adequacy and liquidity.
Risk-weighted Assets T Y
Used in the calculation of risk-based Tier I Capital Yield to Maturity
capital ratios. The face amount of lower Tier I Capital consists of Common Equity Discount rate at which the present value of
risk assets is discounted using risk Tier I Capital (CET I) and Additional Tier I future payments would equal the security’s
weighting factors in order to reflect a Capital (AT I). current price.
comparable risk per rupee among all types
of assets. The risk inherent in commitment Total Capital (Capital Base)
& contingencies is also recognised, first by Capital base is summation of the core
adjusting notional values to Statement of capital (Tier I) and the supplementary
Financial Position (or credit) equivalents capital (Tier II).
and then by applying appropriate risk
weighting factors. Twelve Month Expected Credit Losses
The portion of lifetime expected credit
S
losses that represent the expected credit
Segmental Analysis losses that result from default events on
Analysis of financial information by a financial instrument that are possible
segments of an enterprise specifically, within the 12 months after the reporting
the different industries and the different date.
geographical areas in which it operates.
U
Shareholders’ Funds Unit Trust
Total of issued and fully paid share capital An undertaking formed to invest in
and capital and revenue reserves. securities under the terms of a trust deed.
ABBREVIATIONS
12mECL Twelve Month Expected Credit BTL Below the Line EPF Employee Provident Fund
Loss CAR Capital Adequacy Ratio EPS Earnings per Share
ACS Advanced Card System / CAS Common ATM Switch / Credit ESMS Environmental & Social Risk
Access Control Server Approval System Management System
AFS Available for Sale CASA Current Accounts and Savings ESOP Employee Share Option Plan
AGM Assistant General Manager/ Accounts ETDP Executive Talent Development
Annual General Meeting (as CASL Chartered Accountants of Sri Programme
appropriate) Lanka (ICASL) ETF Employee Trust Fund
AI Artificial Intelligence CBSL Central Bank of Sri Lanka EU European Union
ALCO Asset & Liability Management CCB Capital Conservation Buffer EVE Economic Value of Equity
Committee CCD Central Cash Department EWS Early Warning Signals
AML Anti Money Laundering
CCPU Central Credit Processing Unit FATCA Foreign Account Tax Compliant
APD Association of Primary Dealers
CCU Credit Control Unit Act
APP A self-contained program or
CEA Central Environmental FBI Fund Based Income
piece of software designed
Authority FCBU Foreign Currency Banking Unit
to fulfill a particular purpose;
CEO Chief Executive Officer FD Fixed Deposit
an application, especially as
CET I Common Equity Tier I FDI Foreign Direct Investments
downloaded by a user to a
mobile device. CFMs Close Family Members Fin-tech Financial Technology
ASA Alternative Standard Approach CH4 Methane FIRB Foundation Internal Rating
ASPI All Share Price Index CIR Cost to Income Ratio Based
AT 1 Additional Tier 1 CITS Cheque Image Truncation FSVAT Financial Services Value Added
ATL Above the Line System Tax
CO2 Carbon Dioxide FVOCI Fair Value through Other
ATM Automated Teller Machine
CO2e Carbon Dioxide equivalent, is Comprehensive Income
AWDR Average Weighted Deposit Rate FVPL Fair Value through Profit or
a standard unit for measuring
AWPLR Average Weighted Prime Loss
carbon footprints
Lending Rate CRIB Credit Information Bureau of FX Foreign Exchange
BAC Board Audit Committee GCC Gulf Cooperation Council
Sri Lanka
BBS Branch Bench Strength CRMU Credit Risk Management Unit GCFO Group Chief Financial Officer
BCBS Basel Committee on Bank CSE Colombo Stock Exchange GCHRO Group Chief Human Resources
Supervision CSR Corporate Social Responsibility Officer
BCP Business Continuity Plan GDP Gross Domestic Production
CSU Credit Supervision Unit
BDU Business Development Unit GHG Green House Gas
DBU Domestic Banking Unit
BEEZ Base for Enthusiasts of GRI Global Reporting Initiative
Dept. Department
Environmental Science &
DGM Deputy General Manager HHI Herfindahl - Hirshman Index
Zoology
BIA Basic Indicator Approach DPS Dividend per Share HR Human Resources
BIA Business Impact Analysis DRI Disseminating Regulatory HRM Human Resources
Information Management
BIRMC Board Integrated Risk
DRP Disaster Recovery Procedure hrs Hours
Management Committee
BIS Bank for International D-SIB Domestic Systemically HTM Held to Maturity
Settlements Important Banks i.e. That is
Bn Billions EAD Exposure at Default IBC Inner Back Cover
BNO Bank Note Operation ECG Effective Career Guidance ICAAP Internal Capital Adequacy
BOD Board of Directors ECL Expected Credit Loss Assessment Process
BOI Board of Investment ED Executive Director ICASL The Institute of Chartered
EFC Employee Federation of Ceylon Accountants of Sri Lanka
bps Basis Point
(CASL)
BRPTRC Board Related Party EFF Extended Fund Facility
ICC International Chamber of
Transaction Review Committee EIR Effective Interest Rate
Commerce
BSC Business Support Center EMDE Emerging market and ICOFR Internal Control Over Financial
BTC Board Treasury Committee developing economies Reporting
INTRODUCTORY INFORMATION | MANAGING OUR BUSINESS | MANAGEMENT DISCUSSION & ANALYSIS | RISK & GOVERNANCE | FINANCIAL INFORMATION SUPPLEMENTARY INFORMATION 367
IFA Investment Fund Account NIM Net Interest Margin SDGs Sustainability Development
IIRC International Integrated NPA Non Performing Advances Goals
Reporting Council NPL Non Performing Loans SEC Securities and Exchange
IMF International Monetary fund Commission of Sri Lanka
NSC Network Service Centre
IND Independent Director SENS Sampath Employee Notification
OCI Other Comprehensive Income
System
IPO Initial Public Offer OPEC Organization of the Petroleum SGD Sustainable Development
<IR> Integrated Reporting Exporting Countries Goals
IRMF Integrated Risk Management pa Per Annum SID Senior Independent Director
Framework P/E Ratio Price Earnings Ratio SITS Sampath Information
IRMU Integrated Risk Management P2P Person to Person Technology Solutions Ltd
Unit SLAR Statutory Liquid Asset Ratio
PAT Profit After Tax
ISO International Standards
PBBS Performance Based Bonus SLAS Sri Lanka Accounting Standard
Organization
IT Information Technology Scheme SLASSCOM Sri Lanka Association of
PBT Profit Before Tax Software & Service Companies
Kg Kilogram
PD Probability of Default SLDB Sri Lanka Development Bonds
Km Kilometer
PIN Personal Identification Number SLFA Sri Lanka Forex Association
Km2 Square kilometer
PLC Public Limited Company SLFR Standing Lending Facility Rate
KMP Key Management Personnel
PLR Prime Lending Rate SLFRS Sri Lanka Accounting Standard
KPI Key Performance Indicator
PMP Project Management Process SLIPS Sri Lanka Interbank Payments
KPO Katunayake Pay Office
POS Point of Sale System
KRI Key Risk Indicator SME Small & Medium Enterprises
PPE Property, Plant & Equipment
KWh Kilowatt-hour SMS Short Message Service
PPP Public-private-partnership
KYC Know Your Customer SNaPC Sampath Nature Protection
PR Public Relations
LC Letter of Credit Club
PUC Projected Unit Credit Snr Senior
LCB Licensed Commercial Bank
R&D Research & Development SPPI Solely the Payment of Principal
LGD Loss Given Default
RCC Risk and Compliance & Interest
LKAS Sri Lanka Accounting Standard
Committee SRR Statutory Reserve Ratio
LSFB Lanka Financial Services RCSA Risk and Control Self
Bureau SWIFT Society for Worldwide Interbank
Assessments Financial Telecommunication
LSUG Lanka SWIFT User Group REER Real Effective Exchange Rate tCO2e Tonnes of carbon dioxide
LTECL Life Time Expected Credit Loss RHS Right Hand Side equivalent
LTV Ratio Loan to Value Ratio RM Relationship Manager Tel-cos Telecommunications
m3 Cubic meter RNU Recovery Nursing Unit Companies
MD Managing Director ROA Return on Average Assets Tn Trillion
MISU Management Information ROCE Return on Capital Employed TOI Total Operating Income
System Unit TOR Terms of Reference
ROE Return on Equity
Mn Millions TT Telegraphic Transfer
RPT Related Party Transaction/(s)
MoM Month on Month UK United Kingdom
Rs Rupees
MSME Micro, Small and Medium Scale UN United Nations
Entrepreneur RSA Rate Sensitive Assets
RSL Rate Sensitive Liabilities UOC University of Colombo
Mw Megawatt
RTO Recovery Time Objectives US United States of America
N2O Nitrous Oxide
RWA Risk- Weighted Assets USD / US$ United States Dollar
NBFI Non-Bank Financial Institution
S&P Standard & Poor VaR Value at Risk
NBT Nations Building Tax
SBEA Sampath Bank Employee VAT Value Added Tax
NCRE Non-Conventional Renewable
Energy Association Vis-à-vis in relation to, counterpart
NED Non Executive Director SBU Strategic Business Unit Viz. Namely
NFBI Non Fund Based Income SCL Special Commodity Levy W Watt
NID Non Independent Director SDFR Standing Deposit Facility Rate WHT Withholding Tax
NII Net Interest Income SDGM Senior Deputy General Manager YoY Year on Year
368 SAMPATH BANK PLC ANNUAL REPORT 2017
Notice is hereby given that the 32nd 5. To re-elect Miss Annika Senanayake Note:-
Annual General Meeting of Sampath Bank who retires at the Annual General A member is entitled to appoint a Proxy
PLC will be held at the “Balmoral” Hall, The Meeting as a Director in terms of to attend and vote on his/her/its behalf
Kingsbury, No. 48, Janadhipathi Mawatha, Article No. 87 of the Articles of and a Proxy need not be a member of the
Colombo 01, on 29th March 2018 at 9.30 Association of the Company. Company. A Form of Proxy is enclosed for
a.m. for the following purposes: this purpose. The instrument appointing a
6. To re-elect Mrs Saumya Amarasekera
who retires at the Annual General Proxy must be deposited at the Registered
1. To receive and consider the Annual Office of the Company at No. 110, Sir
Meeting as a Director in terms of
Report of the Board of Directors on James Peiris Mawatha, Colombo 02, not
Article No. 87 of the Articles of
the affairs of the Company and the less than forty eight (48) hours before the
Association of the Company.
Statement of Audited Accounts for the time fixed for holding of the Meeting.
year ended 31st December 2017 with 7. To re-elect Mr Channa Palansuriya
the Report of the Auditors thereon. who retires at the Annual General You are kindly requested to bring with
Meeting as a Director in terms of you, your National Identity Card or any
2. To approve the recommended
Article No. 87 of the Articles of valid source of identification. (eg. Driving
dividend of Rs. 17.20 per share as the
Association of the Company. license, Passport)
first and final dividend for the financial
year 2017, such right to the dividend 8. To approve the donations and
applying to the increased number contributions made by the Directors
of shares allotted pursuant to the during the year under review.
Rights Issue 2018 announced on 19th
9. To re-appoint Messrs Ernst & Young,
December 2017 as well, subject to
Chartered Accountants as Auditors
the entitlement date for the dividend
of the Company for the ensuing year
being notified subsequently.
and to authorize the Directors to
3. To elect Mr Yonmerenne Simon determine their remuneration.
Hewage Rushanka Sulakshana Silva
who was appointed to the Board to fill By Order of the Board
up a casual vacancy in the Board in
terms of Article No. 93 of the Articles
of Association of the Company.
NOTES
370 SAMPATH BANK PLC ANNUAL REPORT 2017
Notes
INTRODUCTORY INFORMATION | MANAGING OUR BUSINESS | MANAGEMENT DISCUSSION & ANALYSIS | RISK & GOVERNANCE | FINANCIAL INFORMATION SUPPLEMENTARY INFORMATION 371
To request information or submit a comment / query to the Bank, please complete the following and return this page to:
Company Secretary,
Sampath Bank PLC,
No. 110, Sir James Peiris Mawatha,
Colombo 02, Sri Lanka.
e-mail: company_secretary@sampath.lk
Tel: +94 11 4730418 / 420 / 548
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FORM OF PROXY
THIRTY SECOND ANNUAL GENERAL MEETING
Sampath Bank PLC
110, Sir James Peiris Mawatha,
Colombo – 02
I/We,...........................................................................................................................................................................……..........…............……........…...............................of
....................................................................................................................................................................................................……........…....................................................
being a member/members of Sampath Bank PLC hereby appoint Mr/Mrs/Miss/Ven/Rev…………………..............................................................…..........
.................................…...........................................…...........................................….................................................................................………………………………….............
of…………………………………………………..............................................................................................…...........................................….......................................................
failing him/her Mr Channa Palansuriya of No. 118/1, Dr N. M. Perera Mawatha, Colombo 08, failing him Prof Malik Ranasinghe of No.
18, Layards Road, Colombo 05, failing him Mr Sanjiva Senanayake of No. 164/16, Nawala Road, Nugegoda, failing him Mr Deepal
Sooriyaarachchi of No. 28/10 Birnamwood, Wijesekera Mawatha, Mirihana, Nugegoda, failing him Mrs Dhara Wijayatilake of No. 78/1, Old
Road, Nawala, failing her Miss Annika Senanayake of No. 18/1, Alfred Place, Colombo 03, failing her Mr Ranil Pathirana of No. 243/5, Lake
Gardens, Sri Jayawardenapura Mawatha, Rajagiriya, failing him Mrs Saumya Amarasekera of No. 03, Sravasti Place, Colombo 07, failing
her Mr Rushanka Silva of No. 90/4, Galkanda Road, Aniwatte, Kandy, failing him Mr Nanda Fernando of No. 91, Sri Dhammadara Road,
Ratmalana, as my/our proxy to attend and vote for me/us on my/our behalf at the Thirty Second Annual General Meeting of the Company
to be held at the “Balmoral” Hall, The Kingsbury, No. 48, Janadhipathi Mawatha, Colombo 01, on 29th March 2018 at 9.30 a.m. and at any
adjournment thereof.
FOR AGAINST
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 2017 with the Report of the Auditors
thereon.
2. To approve the recommended dividend of Rs. 17.20 per share as the first and final dividend for the financial
year 2017, such right to the dividend applying to the increased number of shares allotted pursuant to the
Rights Issue 2018 announced on 19th December 2017 as well, subject to the entitlement date for the
dividend being notified subsequently.
3. To elect Mr Yonmerenne Simon Hewage Rushanka Sulakshana Silva who was appointed to the Board to fill up
a casual vacancy in the Board in terms of Article No. 93 of the Articles of Association of the Company.
4. To re-elect Mr Sanjiva Senanayake who retires at the Annual General Meeting as a Director in terms of Article
No. 87 of the Articles of Association of the Company.
5. To re-elect Miss Annika Senanayake who retires at the Annual General Meeting as a Director in terms of
Article No. 87 of the Articles of Association of the Company.
6. To re-elect Mrs Saumya Amarasekera 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 re-elect Mr Channa Palansuriya who retires at the Annual General Meeting as a Director in terms of Article
No. 87 of the Articles of Association of the Company.
8. To approve the donations and contributions made by the Directors during the year under review.
9. To re-appoint Messrs Ernst & Young, Chartered Accountants as Auditors of the Company for the ensuing year
and to authorise the Directors to determine their remuneration.
Signature ……………………………………………………………………………………………………
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 Annual General 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 before 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, authorize 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/her discretion, will vote as he/she 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.
No of shares : …………………………………………………………………………………………………………………………………