Financial Performance

Sampath Bank reported Total Operating Income of Rs 28.5 Bn for the quarter ended 31st March 2026, supported by steady growth in Net Interest Income (up 5%) and Net Fee and Commission Income (up 28%) year-on-year. Notwithstanding this performance, Profit After Tax (PAT) declined by 26% to Rs 6.2 Bn, due to significantly higher impairment provisions of Rs 4.5 Bn recognised in response to the continued expansion of the loan book and taking into account the evolving geopolitical conditions. Additionally, one-off gains from the disposal of Treasury Bills and Bonds moderated to Rs 0.7 Bn in 2026, a decrease of Rs 2.0 Bn compared to the elevated levels recorded in the previous year.

The Bank’s total asset base crossed the Rs 2 Tn milestone for the first time, representing a significant achievement supported by strong loan growth of Rs 127 Bn in the first quarter of 2026.

The Sampath Group delivered a Profit Before Tax (PBT) of Rs 9.4 Bn and a Profit After Tax of Rs 6.8 Bn for the quarter ended 31st March 2026.

Fund Based Income

The Bank reported total interest income of Rs 46.5 Bn, reflecting year-on-year growth of 6%. This increase was primarily driven by the expansion of the loan portfolio during the reporting period and in the latter part of the previous year, compared to the negative loan growth recorded in the corresponding period of the previous year, as well as an upward movement in the Average Weighted Prime Lending Rate (AWPLR).

Interest expense for the quarter also increased by 6% to Rs 26.4 Bn, reflecting growth in both deposit and borrowing portfolios. As a result, Net Interest Income (NII) stood at Rs 20.1 Bn, an increase of 5% compared to the corresponding quarter of the previous year.

The Net Interest Margin (NIM) contracted marginally by 2 basis points to 4.09%, from 4.11% reported for 2025. This decline was primarily attributable to lower yields across the Bank’s investment portfolio, reflecting reduced rates in the Government Securities portfolio compared to the previous period.

Non-Fund Based Income

During the three month period ended 31st March 2026, the Bank’s total non-fund based income declined marginally by 4% to Rs 8.3 Bn, mainly due to a decrease in capital gains from the sale of Treasury bills and bonds. Capital gains declined from Rs 2.7 Bn in 1Q 2025 to Rs 0.7 Bn in 1Q 2026, representing a year-on-year decline of 75%.

Net fee and commission income, driven by credit expansion, higher trade volumes and increased card usage, recorded a robust growth of 28% across all income channels, reaching Rs 6.1 Bn by the end of the quarter.

The Bank recorded a total exchange gain of Rs 1.5 Bn during the first quarter of 2026, reflecting a year-on-year increase of 24%. This increase was primarily attributable to the depreciation of the Sri Lankan Rupee against the USD by Rs 5.52 during the quarter.

Impairment Charge

In the first quarter of 2026, the Bank reported a total impairment charge of Rs 4.5 Bn, reflecting an increase of Rs 4.6 Bn when compared to the reversal of Rs 0.2 Bn reported in the previous period.

Impairment charge on loans and advances

The Bank recorded an impairment charge of Rs 4.1 Bn on loans and advances, compared to a reversal of Rs 0.1 Bn reported in 1Q 2025, driven by significant (10.4%) expansion of the loan portfolio and the resultant collective impairment requirements. Even though this growth has resulted in higher provisioning requirements, it is expected to generate net positive results during the current financial year.

Furthermore, the Bank continued its policy of conservative provisioning and an additional overlay allowance of Rs 1.5 Bn was recognised as a prudential measure in response to heightened geopolitical uncertainties. This forward-looking approach reflects the Bank’s commitment to prudent credit risk management, ensuring adequate buffers and resilience against potential adverse developments in the operating environment and the broader global landscape.

The Bank also conducted a comprehensive review of its ISL customers, allocating prudent provisions in its Financial Statements based on each customer’s unique credit risk profile. This targeted assessment reinforces the Bank’s disciplined risk management practices and its focus on maintaining financial stability in a challenging global context.

Impairment charge on other financial instruments

An impairment charge of Rs 0.4 Bn was recognised against other financial instruments during 1Q 2026, primarily due to new investments made during the quarter.

Operating Expenses

During the quarter, operating expenses increased by 19% year on year, driven primarily by costs related to the rollout of new strategic initiatives. The increase was mainly attributable to salary enhancements granted in 2025, the expansion of the cadre to undertake new initiatives and support business growth, and higher investments in technology. These strategic long-term investments are expected to deliver enhanced income in the coming years.

As growth in operating expenses outpaced the improvement in operating income, primarily due to the decline in one off disposal gains recorded in 2025, the Bank’s cost to income ratio (CIR) deteriorated by 620 basis points, increasing from 38.8% in 1Q 2025 to 45.0% in 1Q 2026.

Taxation

The total tax expense for the period amounted to Rs 5.0 Bn, representing a year on year decline of 43%, mainly attributable to lower profits and the finalization of prior period tax assessments.

Key Ratios

The Return on Average Shareholders’ Equity (after tax) stood at 14.05% as at 31st March 2026, compared to 17.93% as at 31st December 2025. Similarly, the Return on Average Assets (before tax) declined to 1.68% from 2.60% reported as at 31st December 2025.

Capital and Liquidity

The Bank maintained all capital ratios well above the regulatory minimum requirements. As at 31st March 2026, the CET 1, Tier 1 and Total Capital ratios stood at 13.17%, 13.17% and 15.79%, respectively, compared to 14.75%, 14.75%, and 17.65% as at year end 2025. The decline in capital ratios was primarily due to the increase in risk-weighted assets arising from substantial loan growth during the quarter.

Liquidity levels remained robust, with the All-currency Liquidity Coverage Ratio (LCR) at 187.87% and the Net Stable Funding Ratio (NSFR) at 161.30% as at 31st March 2026, both comfortably above the regulatory minimum requirement of 100%.

The recognition of profit for capital purposes under Basel III following audit certification, together with the proposed Tier II debenture issue, is expected to further strengthen the Bank’s capital position during the remainder of the year.

Assets

During the reporting period total assets grew by 6%, reflecting an annualized growth of 24%, to Rs 2.1 Tn as at 31st March 2026, supported by the expansion of the loan portfolio. Gross loans increased by Rs 127.5 Bn, from Rs 1,223.6 Bn at end 2025 to Rs 1,351.1 Bn. This growth was primarily driven by a Rs 105 Bn increase in LKR denominated loans, while FCY loans recorded a modest increase of Rs 22 Bn during the period.

Liabilities

The Bank’s total liabilities increased by 7% since year end 2025, reflecting an annualized growth rate of 28%, to Rs 1.92 Tn as at 31st March 2026. This growth was primarily driven by the expansion of the deposit portfolio. Deposits increased by Rs 69 Bn from Rs 1.65 Tn at year end 2025 to Rs 1.72 Tn as at 31st March 2026. The increase was mainly driven by LKR denominated deposits, which contributed Rs 49 Bn, while foreign currency deposits increased by Rs 20 Bn.

Dividend

At the Annual General Meeting held on 30th March 2026, the shareholders of Sampath Bank approved a first and final cash dividend of Rs 10.30 per share for the financial year 2025. The Bank consequently recognised a provision of Rs 12.1 Bn in the 1Q 2026 Financial Statements to facilitate the payment of the approved final dividend to shareholders.

Commitment to Stakeholder Well-being

Reinforcing its environmental leadership, Sampath Bank became the first Sri Lankan bank to obtain ISO 14001:2015 certification across its Head Office and branch network. It also deepened its commitment to responsible business by joining the UN Global Compact Sri Lanka as a Patron on Diversity & Inclusion and Water & Ocean Stewardship, while partnering with NCPC Sri Lanka to raise awareness among Corporate and SME clients on low-carbon transition and sustainable business models.

The Bank continues to advance its sustainability agenda through its infrastructure rejuvenation programme, “Wewata Jeewayak”, marked by the completion of its 40th tank restoration, providing significant support for agricultural and community development in Sri Lanka. This initiative, together with the Bank’s ongoing programmes in coral restoration, turtle conservation, reforestation, mangrove restoration and other environmental and community projects, establishes Sampath Bank as a key contributor to environmental and social sustainability in the country.

As part of its ocean plastic reduction efforts, a Material Recovery Facility (MRF) established in Batheegama, Dickwella, in partnership with an organisation with aligned sustainability objectives, was officially handed over to the community.

Sampath Bank advanced its sustainability agenda during the period, strengthening sustainable finance, climate governance and operational performance. The Bank expanded ESG linked credit screening in line with the best global practices and successfully implemented SLFRS S1 and S2 under its Climate First Action Plan, enhancing climate related governance, risk management and reporting.

As part of its contribution to green finance, Sampath Bank launched a Green Fixed Deposit supported by a comprehensive Green Deposit Framework, which obtained independent limited assurance at the pre-issuance stage, thereby enhancing credibility and stakeholder confidence.

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Sampath Bank PLC continues to transform Sri Lanka’s banking landscape through the introduction of a fully integrated, AI-driven lending ecosystem, reinforcing its leadership in intelligent, data-led financial solutions. This marks one of the first comprehensive AI-driven lending frameworks in Sri Lanka, enabling seamless, paper-light loan approvals within seconds while setting a new benchmark for speed, simplicity, and accessibility across the industry.

The AI-driven lending model is designed to make accessing finance faster and more straightforward for customers. Existing customers who meet eligibility criteria receive instant loan offers through automated assessments, removing the need for documentation, collateral, guarantors, or salary remittance, while maintaining responsible lending practices. New-to-Bank customers are supported through a digitally enabled process that combines external credit insights with a holistic view of financial activity, allowing faster loan approvals at branch level. The entire journey is delivered through the Bank’s Vishwa digital platform, ensuring a seamless, secure, and transparent experience from application to disbursement.

Commenting on the development, DarshinPathinayake, Chief Business Intelligence Officer at Sampath Bank, stated that “Sampath Bank’s AI-driven lending ecosystem represents a significant step forward in delivering intelligent and responsive banking solutions. The use of advanced analytics enables faster access to finance while maintaining consistency, accuracy, and strong risk discipline, ensuring a superior customer experience across every touchpoint.”

The Bank’s enhanced leasing framework further strengthens its offering through simplified income assessment models and reduced turnaround times, enabling eligible approvals within a significantly shorter period. Personal leasing aligns income estimation to customer profiles, while commercial leasing applies structured evaluations supported by turnover analysis and supplementary income considerations where required, ensuring consistency and reliability across segments.

Sampath Bank continues to strengthen SME financing through AI-driven capabilities that make access to funding faster, fairer, and more transparent. Commenting further, Asanka Liyanage, Deputy General Manager – Consumer & SME Banking at Sampath Bank, stated that “This transformation is centred on making access to finance simpler and more inclusive for individuals and businesses across Sri Lanka. Faster turnaround times, reduced complexity, and a more transparent evaluation process enable customers to move forward with confidence, while ensuring that funding decisions are aligned with their true financial strength and growth potential.” Advanced tools analyse transaction flows and cash movement patterns to build a clear and reliable view of business performance. A structured, data-led evaluation model then applies consistent criteria to assess creditworthiness, ensuring objective assessments across the network while maintaining strong risk oversight.

This transformation enables businesses to access finance based on their true performance, reduces reliance on subjective assessments, and supports more consistent and responsible lending outcomes. Sampath Bank’s continued investment in AI-driven lending reinforces its position at the forefront of digital banking while delivering meaningful value to customers across retail, leasing, and SME segments.

The post Sampath Bank Leads Sri Lanka’s Lending Transformation Through AI-Enabled Credit Intelligence appeared first on Newswire.