Sampath Bank tackles Sri Lanka relief efforts after resilient year
Author: Ajantha de Vas Gunasekara, Group Chief Financial Officer, Sampath Bank
July 21, 2021
The first localized case of COVID-19 in Sri Lanka was detected in March 2020 just as the official WHO statement confirmed it as a pandemic. As nations around the world began to shut down en masse in a desperate effort to curb soaring infection rates and control the growing death toll, the Sri Lankan government also announced a nationwide lockdown. island which lasted from March to May in an attempt to control its first wave.
The timing of the decision could not have been worse, however, as it came at a time when the local economy was barely recovering from the ripple effects of the April 2019 Easter Sunday terrorist attacks that had threatened to undo the delicate social fabric of the country and to derail. years of solid economic progress.
In the weeks and months that followed, the country found itself grappling with the toll in human lives and livelihoods as the tourism industry came to a halt and disruptions in industry, tourism trade and commerce raised fears of widespread job losses.
The volatility of the equity and capital markets and the low level of foreign direct investment were some of the other notable setbacks linked to the pandemic. Against this backdrop, Sri Lanka’s economy contracted by an unprecedented rate of 4% in 2020, while available data suggests unemployment climbed to 5.2% in 2020 from just 4.8%. in 2019.
However, some notable government measures have given a much needed boost to help businesses and individuals weather tough times. The broad economic stimulus package, which included the Saubhagya COVID-19 Renaissance facility and the debt moratorium program, both for the benefit of businesses and individuals affected by COVID-19, was launched alongside a combination of measures fiscal and monetary policy.
These included restricting imports, a low interest rate environment and the decision to lower the reserve requirement ratio (SRR) for licensed commercial banks as well as participation in the domestic foreign exchange market. These measures taken together were aimed at stimulating economic activity and preserving the stability of the country’s financial system.
Caught in the crosshairs of the pandemic-induced economic downturn, the local banking sector has also experienced what can only be described as an exceptionally difficult year. The performance of the banking sector fell below expectations in 2020, with both asset quality and profitability compromised due to the higher credit risk. On a positive note, however, the banking sector continued to operate with adequate capital and liquidity buffers and coverage ratios throughout the 12-month period that ended on December 31, 2020.
While the COVID-19 outbreak has brought several issues to the fore, one area that has been constantly in the spotlight in recent months is organizational resilience. For Sampath Bank, building resilience is not a new theme triggered simply as a reactionary response to the pandemic, but rather a coherent long-term effort that goes hand in hand with the annual strategic planning cycle. The Triple Transformation Agenda (TT2020) is the latest in a series of resilience building initiatives that have been developed in conjunction with Sampath Bank’s latest strategic planning cycle.
The TT2020 agenda is part of a long-term strategy to transform three key areas – technology, business and people – to serve as fundamental building blocks in building global resilience for the next three to five. years. After starting the implementation of the TT2020 program at the end of 2019, the first phase, focused on increasing the digital capacities of the bank, was well advanced when the pandemic hit the country in March 2020.
Preventive thinking aimed at building digital skills has been of great benefit to the bank throughout the pandemic, as it was arguably the most critical tool to improve the transactional capacity of Sampath Vishwa platforms (Retail and Corporate) to enable customers to meet their banking needs during the lockdown. period.
Preventive thinking to strengthen digital skills has been very useful to the bank throughout the pandemic
It is also through the early adoption of digital technology that Sampath Bank was able to create an omnichannel environment to provide seamless connectivity across multiple platforms and provide customers with an even better banking experience than they would otherwise have had. through our physical channels. Here are a few notable examples: the ‘cash-in-a-flash’ delivery service, the mobile ATM and the ‘Doorstep Banking’ service, all launched amid the two-month island-wide lockdown to help retail customers to carry out day-to-day banking transactions without having to go to a branch. Based on this, the bank was able to divert more than 90% of the average monthly routine transactions to digital channels during the initial lock-in period. Subsequently, around 80% of routine transactions continued to be done digitally, further testimony to the versatility of Sampath Bank’s digital initiatives in meeting customer expectations.
Demonstrating its commitment to supporting its customers when they need it, the bank has also launched proactive efforts to give eligible businesses and SMEs the opportunity to access government assistance measures such as the Saubhagya COVID-19 Renaissance Facility offered at a four percent prime rate and the debt moratorium program. As a result, the first phase of the debt moratorium was granted to approximately 50 percent of the clients of the loan portfolio, while the second phase was extended to approximately 30 percent of the bank’s loan portfolio.
Keen to play its role in supporting Sri Lanka’s post-pandemic economic recovery, Sampath Bank has gone beyond regulatory relief measures and defined its own relief efforts under the theme “Revive Sri Lanka”. This initiative was launched in mid-2020 with the launch of “Sampath Diriya”, a special loan program financed by the bank to allow manufacturing and exporting SMEs to access financing at a preferential interest rate. To complement these efforts, the bank launched “Evolve”, a robust e-commerce platform for SMEs.
Meanwhile, with banking declared an essential service under COVID-19 emergency laws, employee safety has taken on a whole new meaning. It was crucial to prioritize the physical safety of employees and staff were encouraged to work from home whenever possible. All recommended health and safety guidelines have been implemented for employee safety, including detailed work schedules for branch teams and company management, as well as special transportation arrangements accompanied by a comprehensive COVID-19 surveillance system. In addition, no salary cuts or layoffs were announced and all confirmed employees have obtained their full vested rights under the performance-based bonus plan for the year 2019.
A new learning management system has also been put in place to ensure the continuity of training activities. With the aim of building overall resilience and helping the bank manage the long-term impacts of COVID-19, risk management systems have been further strengthened with the implementation of sophisticated early warning systems as well as ‘a series of machine learning tools for the detection of potential non-performing advances. Business continuity planning (BCP) controls have also been strengthened to ensure knowledge of the different risk profiles of the different branches. In addition, after a comprehensive bank-wide vulnerability assessment, it was decided to further strengthen the independent site disaster recovery framework currently in place as an additional BCP measure.
At the same time, seeing the pandemic as an opportunity to reiterate its commitment to helping underserved communities, the bank continued its flagship CSR initiative: the “Wewata Jeewayak” reservoir restoration program. Two major reservoir restoration projects were undertaken and completed in 2020, bringing the total number of restored reservoirs to nine, since the initiative was launched in 2001. The bank has also partnered with two major companies to donate ‘a fully equipped PCR lab at Colombo Military Hospital, adding a huge boost to the country’s overall COVID-19 testing capacity. The donation was made through the “Hope for Life” fund, an internal fund managed by Sampath Bank to fulfill its goal of raising public health standards in Sri Lanka.
Meanwhile, at a time when many players in the local banking sector were struggling to cope with the impact of the economic downturn, Sampath Bank has demonstrated its tenacity by continuing to grow in 2020. The bank’s asset base broke the historic bar of Rs 1trn to reach Rs 1.1 trn ($ 5.5 billion) as of December 31, 2020, which represents an increase of 15.4% from 962 billion rupees (4.8 billion dollars) declared at the end of the previous fiscal year. Exceeding the trillion mark in total assets in just over 33 years is an important milestone in the bank’s journey to date, as it places Sampath Bank on the books of local bank records as the youngest bank in reach this remarkable landmark. Fueled by robust asset growth, the bank recorded a PAT of Rs 8 billion ($ 40 million) and a PBT of Rs 11.2 billion ($ 56 million) for fiscal 2020, which enabled the declaration of a cash dividend to shareholders at a payout rate of 39%. These are all very credible accomplishments that undoubtedly demonstrate the resilience of Sampath Bank and once again prove the bank’s ability to consistently meet stakeholder expectations, even in times of economic adversity.