SRI LANKA EQUITY RESEARCH

BANKING SECTOR

INTERIM RESULTS

06 MAY 2015

SAMPATH BANK [SAMP]

SAMP.N : LKR237.00;

Net earnings up 17% in 1Q2016

RECOMMENDATION

: BUY

FARE VALUE

: LKR296.0

SHARE STATISTICS
Bloomberg Ticker

SAMP SL

Reuters Ticker

SAMP CM

Market Cap.

(LKR bn) 41.9

(USD mn) 289.0

Avg. Daily T/O

(LKR mn) 19.2

(USD 000) 132.6

N - Issued Shares (mn)

177.0

Free Float (%)

53.7

Note: LKR/USD : 145.0

SHARE MOVEMENT YTD

High/ Low (LKR)

3M

12M

253/210 244/210 279.9/210

SAMP.N (%)

(5.2)

(2.9)

(10.2)

ASPI (%)

(4.2)

2.7

(8.7)

MAIN SHAREHOLDERS
As at 31st March 2016
VOTING
Vallibel One Plc

14.95%

Mr Y S H I Silva

9.98%

Employee Provident Fund

9.97%

Rosewood (Pvt) Limited

6.79%

Matthews International Funds

4.58%

ABN Amro Multi Manager Funds

2.61%

Sampath Bank A/c 04

1.63%

Matthews Emerging Asia Fund

1.39%

Akbar Brothers Pvt. Ltd

1.31%

Net earnings up 17% YoY to LKR1,841.3 mn in 1Q16. SAMP reported a 16.7% YoY
earnings growth in 1Q16 largely on account of a 14.4% YoY growth in NII, strong growth
in fees and commission income (20.8% YoY) and 12.1% YoY growth in other income during
the quarter. Further SAMP also managed to keep its impairments also in check during the
quarter.
Net interest income (NII) up 14% YoY in 1Q16. SAMPs NII rose by 14.4% YoY to
LKR4,951.9 mn mainly due to the 27.7% YoY growth in interest income to LKR11,668.2 mn
on account of a 5.4% QoQ (28.2% YoY) growth in the loan book. Meanwhile given the
7.0% QoQ (25.1% YoY) growth in deposit base, interest cost grew by 39.7% YoY to
LKR6,716.3 mn. Majority of the growth in deposits came from time deposits and given that
the CASA mix dropped to 45.1% in 1Q16 (47.5% in 4Q15). However market interest rates
and drop in the higher yielding pawning portfolio saw SAMPs NIMs drop 30 bps YoY
(down 17 bps QoQ) to 3.5% by end of 1Q16 and we believe the bank would be able to
maintain NIMs at 4.0% in the medium term.
Non-interest income rose 26% YoY to LKR2,155.6 mn in 1Q16. Strong growth in credit
and debit card operations, trade related services and commission income from other
banking services led to a 20.8% YoY increase in net fees and commission income to
LKR1,495.3 mn. In addition other operating income rose 12.1% YoY to LKR800.0 mn in
1Q16. Meanwhile net trading income made a loss of LKR139.7 mn as against a loss of
LKR244.5 mn in the corresponding period.
Forecast 2016E net profit up 12.4% to LKR7,442.7 mn. We expect the market interest
rates to increase c.150 bps during 2016 which would lead to a more moderate growth in
the loan book. Given this backdrop we expect SAMP to maintain its interest margin around
4.0%, and forecast 2016E net earnings to increase 12.4% YoY to LKR7,442.7 mn and 2017E
earnings to rise 15.2% YoY to LKR8,574.0 mn.
Share trades on 1.0X PBV on 2016E earnings. The share is trading on 1.0x PBV on 2016E
earnings and 0.8x 2017E earnings. Stock is also trading on 5.6x 2016E earnings and 4.9x
2017E earnings, offering a divided yield of 6.2%. Maintain BUY.

EARNINGS FORECAST
SHARE PRICE CHART (VOTING)

YE 31 Dec/ (LKR mn)

Net Profit (LKR mn)

YoY growth (%)
EPS (LKR)
YoY growth (%)

Lead Analyst
:
Secondary Analyst :

Asanka Ranasinghe
Shewmay Chang

Apr-16

Mar-16

Jan-16

Feb-16

Dec-15

Oct-15

Nov-15

Sep-15

Jul-15

PER (x)
Aug-15

Jun-15

May-15

290 (LKR)
280
270
260
250
240
230
220
210
200

DPS (LKR)

2013

2014

2015

2016E

2017E

3,635.0

5,263.2

6,623.3

7,442.7

8,574.0

-33.1%

44.8%

25.8%

12.4%

15.2%

20.5

29.7

37.4

42.1

48.4

-33.1%

44.8%

25.8%

12.4%

15.2%

11.5

8.0

6.3

5.6

4.9

8.0

11.0

13.0

14.7

17.0

Div Yield (%)

3.4%

4.6%

5.5%

6.2%

7.2%

BVPS (LKR)

178.9

195.0

221.0

248.3

279.8

PBV (x)

1.3

1.2

1.1

1.0

0.8

ROE (%)

11.5%

15.3%

16.9%

16.9%

17.3%

Note : Super gain tax payment of LKR781.8 mn was paid in 4Q15 and adjusted from the statement of changes in
equity

Softlogic Stockbrokers (Pvt) Ltd., is a fully owned subsidiary of Softlogic Capital Plc and a 72% owned subsidiary of Softlogic Holdings PLC

1 P a g e

SRI LANKA EQUITY RESEARCH

BANKING SECTOR

INTERIM RESULTS

06 MAY 2015

Net interest income (NII) up 14% YoY in 1Q16. SAMPs NII rose by 14.4%
YoY to LKR4,951.9 mn mainly due to the 27.7% YoY growth in interest income
Net Interest Income
to LKR11,668.2 mn on account of a 5.4% QoQ (28.2% YoY) growth in the loan (LKR mn)
book. Meanwhile given the 7.0% QoQ (25.1% YoY) growth in deposit base, 6,000
interest cost grew by 39.7% YoY to LKR6,716.3 mn. Majority of the growth in 5,000
deposits came from time deposits and given that the CASA mix dropped to 4,000
45.1% in 1Q16 (47.5% in 4Q15). However market interest rates and drop in 3,000
the higher yielding pawning portfolio saw SAMPs NIMs drop 30 bps YoY 2,000
(down 17 bps QoQ) to 3.5% by end of 1Q16 and we believe the bank would 1,000
be able to maintain NIMs at 4.0% in the medium term.

10%
8%
6%
4%
2%
0%
-2%
-4%

Non-interest income rose 26% YoY to LKR2,155.6 mn in 1Q16. Strong

growth in credit and debit card operations, trade related services and
commission income from other banking services led to a 20.8% YoY increase
in net fees and commission income to LKR1,495.3 mn. In addition other
operating income rose 12.1% YoY to LKR800.0 mn in 1Q16. Meanwhile net
trading income made a loss of LKR139.7 mn as against a loss of LKR244.5
mn in the corresponding period.
Operating expenses up 15% YoY to LKR3,622.1 mn in 1Q16. Increasing
operating costs was mainly the result of a 14.3% YoY rise in personal costs
to LKR1,714.8 mn. During the quarter, employee headcount increased by 6
(total of 3,999 employees) while branches remained at 225. Other operating
expenses increased by 15.4% YoY to LKR1,675.6 mn during 1Q16. General
price increases, business promotional campaigns and credit card related
expenses were the key drivers of operating expenses. SAMPs Cost (Exl
prov)/Income reduced to 51.0% in 1Q16 cf. 52.3% in 1Q15.
Impairment charges increased plus four folds YoY to LKR234.5 mn in
1Q16. Impairment increased mainly due to the increase in collective
impairments by +5.0x to LKR146.7 mn during the quarter. Individual
impairments also increased +3.0x YoY to LKR87.8 mn during the quarter.
Total tax bill increased 12% YoY to LKR1,408.4 mn. Financial services VAT
rose by 10.9% YoY in 1Q16 to LKR550.7 mn while corporate tax also
increased 12.6% YoY to LKR857.7 mn. SAMPs effective tax rate stood at
43.3% (43.4% in 4Q14) by end of 1Q16.
Net earnings up 17% YoY to LKR1,841.3 mn in 1Q16. SAMP reported a
16.7% YoY earnings growth in 1Q16 largely on account of a 14.4% YoY growth
in NII, strong growth in fees and commission income (20.8% YoY) and 12.1%
YoY growth in other income during the quarter. Further SAMP also managed
to keep its impairments in check during the quarter.

NII

-6%

QoQ Growth

OPEX
(LKR mn)
4,500

60%

4,000

58%

3,500

56%
54%

3,000

52%

2,500

50%

2,000

48%

1,500

46%

1,000

44%

500

42%

40%

OPEX

Cost/income (Ex. Prov)

Net Earnings
(LKR mn)
2,000

30%

1,800

20%

1,600
1,400

10%

1,200

0%

1,000
800

-10%

600

-20%

400

-30%

200
0

-40%

Earnings

Softlogic Stockbrokers (Pvt) Ltd., is a fully owned subsidiary of Softlogic Capital Plc and a 72% owned subsidiary of Softlogic Holdings PLC

QoQ Growth

2 P a g e

SRI LANKA EQUITY RESEARCH

BANKING SECTOR

INTERIM RESULTS

Net loan book up 5.4% QoQ during 1Q16. SAMP managed to record a loan
growth of 5.4% QoQ and 28.2% YoY to LKR407.0 mn in 1Q16. Bank witnessed
growth in Term Loans (+13% YTD), Lease Rentals (+6% YTD), Housing (+6%
YTD), Import loans (+11% YTD) and Overdrafts (+4% YTD). However pawning
exposure was further reduced by a 5.6% YTD reduction in pawning portfolio
(3.2% of total portfolio) as a result of the banks continuous effort to reduce
the exposure to pawning. Further Money market loans reduced by 40% YTD.
Gross NPL reduced 20 bps YoY in 1Q16. Banks gross NPL ratio decreased
to 1.7% (1.8% in Q14) while net NPL ratio declined marginally YoY to 0.5%.
Furthermore on a QoQ basis gross and net NPL ratio increased 3 bps and 5
bps respectively.

06 MAY 2015

Net Loans
(LKR mn)
450,000

14%

400,000

12%

350,000

10%
8%

300,000

6%

250,000

4%

200,000

2%

150,000

0%

100,000

-2%

50,000

-4%

-6%

Net Loans

Deposit base grew 7.0% QoQ in 1Q16. SAMP managed to grow its deposits
by 7.0% QoQ and 25.1% YoY to LKR435.6 bn. Despite the low deposit rate
environment the bank witnessed a steady deposit flow. Larger growth in
deposits came from time deposits and given that CASA mix has dropped to
45.1% in 1Q16 (47.5% in 4Q15).
SAMP remains adequately capitalized. The bank continued to adopt a
policy of leveraging its capital to an optimum level and remains adequately
capitalized with Tier 1 CAR 7.6% (5.0% minimum regulatory threshold) and a
total CAR of 11.9% (10% regulatory amount) by end of 1Q16. Further the bank
successfully concluded a LKR7.0 bn debenture issue which would further
strengthen Tier II. Meanwhile the statutory liquid asset ratio stood at 20.8%
in 1Q16 (24.4% in 4Q14).

Forecast 2016E net profit up 12.4% to LKR7,442.7 mn. We expect the

market interest rates to increase c.150 bps during 2016 which would lead to
a more moderate growth in the loan book. Given this backdrop we expect
SAMP to maintain its interest margin around 4.0%, and forecast 2016E net
earnings to increase 12.4% YoY to LKR7,442.7 mn and 2017E earnings to rise
15.2% YoY to LKR8,574.0 mn.
Share trades on 1.0X PBV on 2016E earnings. The share is trading on 1.0x
PBV on 2016E earnings and 0.8x 2017E earnings. Stock is also trading on 5.6x
2016E earnings and 4.9x 2017E earning, offering a divided yield of 6.2%.
Maintain Buy.

QoQ Growth

Asset Quality
3%

2%

1%

0%

Gross NPL Ratio

Net NPL Ratio

Deposits
(LKR mn)
500,000

8%

450,000

7%

400,000

6%

350,000
300,000

5%

250,000

4%

200,000

3%

150,000

2%

100,000
50,000

1%

0%

Deposits

Softlogic Stockbrokers (Pvt) Ltd., is a fully owned subsidiary of Softlogic Capital Plc and a 72% owned subsidiary of Softlogic Holdings PLC

QoQ Growth

3 P a g e

SRI LANKA EQUITY RESEARCH

BANKING SECTOR

INTERIM RESULTS

06 MAY 2015

Softlogic Research Guide to Investment Rating

BUY
Trading BUY
Neutral
Take Profit
Sell
Not Rated

:
:
:
:
:
:

Share price may exceed 15% over the next 12 months

Share price may exceed 7.5% over the next 3 months, however longer-term outlook could vary
Share price may fall within the range of +/- 7.5% over the next 12 months
Target price has been attained. Look to accumulate at lower levels
Share price may fall by more than 15% over the next 12 months
Stock is not within regular research coverage

Equity Research
Danushka Samarasinghe
danushka@softlogic.lk
+94 11 7277001, +94 77-3020231

Asanka Ranasinghe
asanka.ranasinghe@equity.softlogic.lk
+ 94 11 7277035, +94 77-1078497

Tharushi Perera
tharushi.perera@equity.softlogic.lk
+ 94 11 7277034, +94 77-3482321

Shadini Silva
shadini.silva@equity.softlogic.lk
+ 94 11 7277036

Suhendrini Yatawara
suhendrini.yatawara@equity.softlogic.lk
+94 11 7277032

Shewmay Chang
shewmay.chang@equity.softlogic.lk
+94 11 7277033

Ranjan Ranatunga
Ranjan.ranatunga@equity.softlogic.lk
+94 11 7277031

Nishanthi Hettiarachchi
nisha.hettiarachchi@equity.softlogic.lk
+94 11 7277030, +94 11 77 1078499

Equity Sales
Dihan Dedigama
Hussain Gani
Prasanna Chandrasekera
Eardley Kern
Andre Lowe
Achindi Silva
Hisham Haniffa
Vino Ramasamy
Jeevan Hettigoda
Dilip Fernando

dihan@softlogic.lk
gani@softlogic.lk
prasanna.chandrasekera@equity.softlogic.lk
l.kern@equity.softlogic.lk
andre.lowe@equity.softlogic.lk
achindi.silva@equity.softlogic.lk
hisham.haniffa@equity.softlogic.lk
vino.ramasamy@equity.softlogic.lk
jeevan.hettigoda@equity.softlogic.lk
dilip.fernando@equity.softlogic.lk

+94 11 7277010 / +94 117277055, +94 777689933

+94 11 7277020 / +94 777992086
+94 11 7277056
+94 11 7277053, +94 777348018
+94 11 7277052, +94 777230040
+94 11 7277054, +94 77 3825087
+94 773828781
+94 11 7277059, +94 77 9596486
+94 11 7277051, +94 77 3782661
+94 11 7277000 +94 77 3379730

madushanka.rathnayaka@equity.softlogic.lk

034 7451000 0773566465

krishan.williams@equity.softlogic.lk

031 7451000 0773569827

lakmal.sandaruwan@equity.softlogic.lk

038 7451000 077-3573390

sasindu.amarasekera@equity.softlogic.lk

011 7277098 077-2626895

Branches
Horana
Madushanka Rathnayaka
Negombo
Krishan Williams
Panadura
Lakmal S. Gunawardana
CSE Trading Floor
Sasindu Amarasekera

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Softlogic Stockbrokers (Pvt) Ltd., is a fully owned subsidiary of Softlogic Capital Plc and a 72% owned subsidiary of Softlogic Holdings PLC

4 P a g e