Sampath Bank reported an 83% increase in net profits to Rs2.4 billion in the June 2021 quarter, despite a 50% increase in loan impairment, due to improving net interest incomes and rising fee and commission income as more people use payment cards and digital banking channels.

Net interest income increased by 34% to Rs10.8 billion on falling interest expenses and increasing fee and commission income. The bank had re-priced its deposit products on time, helping it to lower interest expenses even as interest income fell by a marginal 0.5% due to the low interest rate regime during the period, First Capital Research said.

Net fee and commission income increased mainly due to the higher customer usage of payment cards and electronic channels. Net other operating income grew by 173.8%, backed by the increase in realized exchange income stemming from the 1.1% depreciation of the rupee against the US dollar reported during the second quarter of 2021, First Capital Research said.

The bank generated new loans worth Rs30 billion during the first half of 2021, up 4.1% from a year earlier, driven by term loans, gold loans, and overdrafts. Sampath Bank trailed private sector credit growth of 6.7%, reflecting a conservative lending policy.

Provisions for bad loans increased 50% year-on-year on the back of additional provisioning despite signs of an economic recovery apparent in the first quarter of 2021. Following a reassessment of the impairment assumptions, the bank decided to apply a more prudent approach in the second quarter in light of the evolving impact of the Covid-19 third wave and the extension of the moratorium framework, First Capital Research said.

As of end-June 2021, Sampath Bank maintained capital adequacy ratios well above the minimum regulatory requirements. “We believe Sampath Bank’s adequate capital buffer may enable it to sail through the tough times and help boost credit growth in the near term when economic activity recovers to a greater extent,” First Capital Research said.