SANASA Development Bank : Interim Financial Statements for the period ended 30th September 2022

Interim Financial Statements

For the Period Ended September 2022

The period ended September 2022 continued to be a challenging period for the banking sector. Inflation continued its steep increase to cross the 60% threshold, as a result the Treasury Bill rates too increased crossing the 30% threshold and remains at that level. The rupee exchange rate stabilized after the steep depreciation witnessed in Q2, during Q3. The introduction of new taxes combined with high interest rates and the inflationary environment stifled the spending capacity of the consumers. The liquidity shortage in the market saw a negative private sector credit growth during the quarter under review.

Balance Sheet Performance

In this backdrop, SDB Bank prudently curtailed its advances growth, combined with a focus on loan remediation and recovery which resulted in a 1% drop in the net loan portfolio during the year. The bank, further, focused on deposit mobilization which has resulted in the deposit portfolio growing by 9% during the year to cross the LKR100bn threshold. The SDB's bank placements and investments registered a healthy growth of 28% over the year ended Dec 2021.

Profitability

The top line of the bank remained resilient compared to the same period in the prior year. Despite the high interest rate environment, the bank maintained the Net interest income at the prior year levels, whilst increasing its fee income by 36%, to register an overall increase in Total Operating income of 2%.

Overall costs expanded by 7% despite the high inflation and the impact of the rupee depreciation which had a significant impact on the USD denominated IT related expenses. The net income before impairment narrowed by LKR144Mn due to close at LKR1.8Bn

The bank continued to prudently maintain the impairment cover on the credit portfolio for expected future losses. Hence, the impairment cost during the quarter was LKR 650Mn up from LKR96Mn during the same period in 2021. The YTD impairment stood at LKR1.7Bn compared to the LKR0.45Bn in the prior year.

Accordingly, the bank posted a Profit before VAT on financial services of LKR104Mn for the period ended September 2022 and a loss of LKR214Mn for the quarter ended September 2022. The VAT on Financial services was LKR317Mn YTD and LKR140Mn for the Quarter. Accordingly, SDB recorded a loss of 276Mn year to date and a loss of Rs.354Mn for the quarter ended 30th September 2022.

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Asset Quality and Capital Ratios

The Stage 3 ratio increased to 6.16% for the period ended September 2022, against the 4.13% recorded as at 31st December 2021. The Impairment ratio marginally reduced to 36.6% from 37% as of June 2022.

The bank's Capital adequacy ratios remained strong with the Tier I ratio at 13.03% against a requirement of 8% and the total capital ratio stood at 15.45% against a requirement of 12%

Outlook

The easing of the fuel shortages, stabilization of social agitation and the subsequent increase in mobility has helped the banks key segments to recover rapidly. However, challenges lie ahead stemming from high level of inflation, high rates of interest and proposed higher taxation which will dramatically reduce the disposable income of the people and as a consequence the repayment capacity of loans. The continued LKR liquidity shortage will see the banking sector scrambling to preserve deposits. Hence the bank is placing increased focus on maintaining the asset quality by remediation action to help customer through these challenging times as well as renewing its deposit mobilization efforts to increase its liquidity buffers. The bank remains committed to ensure support for its SME customer base as well as its other customers throughout the island to help Sri Lanka emerge stronger from this difficult period.

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SANASA DEVELOPMENT BANK PLC

INCOME STATEMENT

			Bank
In Rupees Thousands (Rs'000)	For the period ended			For the quarter ended
	30th September	Change		30th September	Change
	2022	2021			2022	2021
Interest income	15,486,349	10,912,534	42%		6,431,568	3,638,431	77%
Interest expenses	(10,653,053)	(6,030,725)	77%		(5,041,258)	(1,925,598)	162%
Net interest income	4,833,296	4,881,809	-1%		1,390,310	1,712,834	-19%
Fee and commission income	434,961	312,700	39%		271,679	96,964	180%
Fee and commission expenses	(19,301)	(8,034)	140%		(6,147)	(1,761)	249%
Net fee and commission income	415,660	304,665	36%		265,532	95,203	179%
Net gains/(losses) from trading	(1,078)	2,756	-139%		2,226	2,050	9%
Net fair value gains/(losses) on financial assets at fair value		176,409	-59%		45,138	50,787	-11%
through profit or loss	73,098
Net other operating income	205,551	47,937	329%		25,717	31,918	-19%
Total operating income	5,526,527	5,413,576	2%		1,728,923	1,892,791	-9%
Impairment for loans and other losses	(1,684,425)	(454,926)	270%		(645,723)	(95,555)	576%
Net operating income	3,842,102	4,958,650	-23%		1,083,200	1,797,236	-40%
Personnel expenses	(2,101,369)	(1,879,494)	12%		(696,107)	(627,227)	11%
Depreciation and amortization expenses	(351,897)	(332,041)	6%		(134,279)	(107,324)	25%
Other expenses	(1,284,660)	(1,269,163)	1%		(467,429)	(497,085)	-6%
Operating profit/ (loss) before VAT on financial services	104,177	1,477,952	-93%		(214,615)	565,601	-138%
Value Added Tax (VAT) on financial services	(317,341)	(410,762)	-23%		(140,448)	(144,290)	-3%
Operating profit/(loss) after VAT on financial services	(213,165)	1,067,190	-120%		(355,064)	421,311	-184%
Profit/(loss) before tax	(213,165)	1,067,190	-120%		(355,064)	421,311	-184%
Income tax expenses	(63,050)	(317,129)	-80%		611	(173,450)	-100%
Profit/(loss) for the period	(276,214)	750,061	-137%		(354,453)	247,861	-243%
Profit/(loss) attributable to:
Equity holders of the parent	(276,214)	750,061	-137%		(354,453)	247,861	-243%
Non-controlling interests	-	-	-		-	-	-
	(276,214)	750,061	-137%		(354,453)	247,861	-243%
Earnings per share on profit
Basic earnings per ordinary share (Rs.)	(1.72)	7.45	-123%		(2.21)	2.46	-190%
Diluted earnings per ordinary share (Rs.)	(1.72)	7.45	-123%		(2.21)	2.46	-190%
SANASA DEVELOPMENT BANK PLC
STATEMENT OF COMPREHENSIVE INCOME
			Bank
In Rupees Thousands (Rs'000)	For the period ended			For the quarter ended
	30th September	Change		30th September	Change
	2022	2021			2022	2021
Profit/(loss) for the period	(276,214)	750,061	-137%		(354,453)	247,861	-243%
Other comprehensive income/(expenses) not to be reclassified to
income statement
Actuarial gains/(losses)on defined benefit plans	-	-	-		-	-	-
Deferred tax relating to defined benefit plans	-	-	-		-	-	-
Gains/(Losses) on re-measuring investments in equity instruments	-	-	-		-	-	-
designated at fair value through other comprehensive income
Other comprehensive income/(expenses) for the period net of taxes	-	-	-		-	-	-
Total comprehensive income/(expenses) for the period
(276,214)	750,061	-137%		(354,453)	247,861	-243%
Total comprehensive income/(expenses) attributable to:
Equity holders of the parent	(276,214)	750,061	-137%		(354,453)	247,861	-243%
Non-controlling interests	-	-	-		-	-	-
Total comprehensive income/(expenses) for the period
(276,214)	750,061	-137%		(354,453)	247,861	-243%

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SANASA DEVELOPMENT BANK PLC

STATEMENT OF FINANCIAL POSITION

		Bank
In Rupees Thousands (Rs'000)	As at 30.09.2022	As at 31.12.2021	Change
		(Audited)
Assets
Cash and cash equivalents	3,193,767	3,117,485	2%
Placements with banks	18,064,763	15,108,410	20%
Financial assets fair value through Profit or Loss	1,385,013	727,787	90%
Financial assets at amortised cost
- loans and receivebles from other customers	110,378,315	111,891,256	-1%
- debt and other instruments	16,795,128	12,031,302	40%
Financial assets measured at fair value through other comprehensive income	56,939	56,939	-
Investment in subsidiary	6,163	6,163	-
Property, plant and equipment	904,821	952,104	-5%
Right of use assets	504,127	565,477	-11%
Investment properties	19,695	19,167	3%
Intangible assets	466,532	338,933	38%
Deferred tax assets	589,673	299,448	97%
Other assets	3,423,112	2,704,446	27%
Total assets	155,788,046	147,818,916	5%
Liabilities
Financial liabilities at amortised cost
- due to depositors	102,646,244	93,902,939	9%
- due to other borrowers	32,649,226	33,569,838	-3%
Subordinated debt	5,229,257	3,752,578	39%
Retirement benefit obligations	621,409	571,665	9%
Current tax liabilities	210,193	293,250	-28%
Other liabilities	1,340,896	1,598,949	-16%
Total liabilities	142,697,226	133,689,220	7%
Equity
Stated capital/assigned capital	11,287,765	11,287,765	-
Statutory reserve fund	314,173	314,173	-
Retained earnings	1,461,277	2,500,153	-42%
Other reserves	27,605	27,605	-
Total equity	13,090,821	14,129,697	-7%
Total equity and liabilities
155,788,046	147,818,916	5%
	(0)	0
Contingent liabilities and commitments	202,716	203,139	0%
Net asset value per share (Rs.)	81	88	-7%
Memorandum information
Number of employees	1,399	1,433	-2%
Number of branches	94	94	-

Certification:

We certify that the above Financial Statements are in compliance with the requirements of the Companies Act No. 7 of 2007.

Sgd	Sgd
Sanjeeva Jayasinghe	Shanka Abeywardene
Head of Finance	DGM-finance & Planning / CFO

We, the undersigned, being the Directors of the SANASA Development Bank PLC, jointly certify that :-

( a ) the above statements have been prepared in compliance with the format and definitions prescribed by the Central Bank of Sri Lanka: and

( b ) ) the information contained in these statements have been extracted from the unaudited financial statements of the Bank, unless indicated as audited.

Sgd	Sgd	Sgd
Dinithi Ratnayake	Chaaminda Kumarasiri	Niranjan Thangarajah
Chairperson	Director	Acting Chief Executive Officer

11 November 2022

Colombo

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