Business Times

Sampath keen to sell Union Bank stake

By Duruthu Edirimuni Chandrasekera

Sampath, Bank on a high after a successful 2010, is keen to sell its 7.9% stake in Union Bank PLC (UB) officials said. "We're not keen in having substantial stakes in other commercial banks and at the correct time if we get a good price we'll sell UB," Harris Premaratne, Managing Director Sampath told the Business Times.

He added that Sampath's investment of Lanka Bank Finance (LBF) on the other hand will be retained. "We will not sell the 11% Sampath has in LBF. LBF has done well last year and if possible we'll buy some more in it,” Mr. Premaratne said, putting to rest market speculation that the bank will sell LBF shares.

He said that Sampath is eyeing such strategic stakes in financial institutions abroad. "We're looking for strategic, important stakes in financial institutions in other countries. They are hard to get, and we'll be selective when buying them,” he added. He said Sampath will be doing this, while developing its local operations.

The bank's pre-tax profit which rose to Rs.4, 501.7 million in 2010 reflected an increase of Rs.525.5 million or 13.2% over the pre-tax profit of Rs.3, 976.2 million for 2009. The post-tax profit of the bank recorded a growth of 57.4% over the last year, rising from Rs.2, 098.3 million in 2009 to Rs 3,302.7 in 2010.

Mr. Premaratne said that a higher growth rate in post-tax profits than that in pre-tax profits was made possible due to the tax free income accrued during the period, which included a capital gain of Rs. 654.8 million realized through the sale of bonus-shares received from LBF, a recovery against an impairment provision of Rs. 1331.4 million and an increase of Rs.333.02 million in mark to market gains in the trading portfolio of the bank.

He said the net return on the bank entire fund-based operation, which is Net Interest Income(NII), made the single largest contribution for the increased profitability, rising from Rs 7,805.2 million in 2009 to Rs. 8,524,8 million in 2010, registering growth of Rs 719.6 million 9.2% This growth in NII was facilitated by the continued volume expansion in the fund based operation and success of the bank in managing the returne thereion, as reflected by the healthy Net Interest Margin (NIM), which amounted to 5% in 2010 , above the industry average of 4.5%.

Total deposit base and the total assets of the bank grew by 19.4% and 18.5% respectively in the year 2010; well above the industry average of 15.6%. In addition, the Sampath recorded a significant growth of 30.3% over 31.12.2009, which too surpassed the industry average of 22.6% in customer advances.
Mr. Premaratne said now what is needed for Sampath is larges scales / volumes.

"To achieve this, we will open 210 branches this year, which will bridge the network gap,” he said. He added this year Sampath will go strong on their remittances and credit card businesses. "Now the card business is re-energised. We brought in 25% new cards last year (against 2009 number). We also plan to go into rural areas with this business."

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