sampath bank plc- review1q 2011
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862019 SAMPATH BANK PLC- review1Q 2011
httpslidepdfcomreaderfullsampath-bank-plc-review1q-2011 113
SAMPATH BANK PLC
INTERIM UPDATE 1QFY2011
Anal st Minoli Mallawaarachchi minoliasiaca itall
862019 SAMPATH BANK PLC- review1Q 2011
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Page 1
SAMPATH BANK PLC
Sampath Bank Plc (SAMP) LKR28000 is a registered licensed commercial
bank under the purview of the Central Bank of Sri Lanka and being regulated
under the Banking Act No 3 of 1988 SAMP is currently the 3rd
largest private
sector commercial bank with an asset base of LKR2024bn as at end of March
2010 and 188 branches supported by a staff force of 2688 (as per the 2010
annual report)SAMP has its presence over a vast geographical area includingNorth and East which reflects its continued focus on both corporate clients
and retail customers
In 1QFY11 the overall interest income has shown a 2 QoQ improvement
whilst a minute 03 dip was seen YoY Interest expenses for 1QFY10 have
shown an increase of 44 YoY and a 10 QoQ though the interest rates
were relatively low Net interest income for the 1QFY11 has dipped by 56
YoY and 6 QoQ due to decreased income on other interest earning assets
(inclusive of government securities) and increase in overall interest expenses
In addition during 1QFY11 the bank has recorded a 469 YoY improvement
in non interest income While the same income compared with the previous
quarter it is a dip of massive 53
The profit attributable to equity holders of SAMP is an improvement of 638
YoY However apart from the loan book growth and strengthened deposit
base the net profit has improved YoY on the back of accelerated non interest
income reversal of provisions and overall tax reductions
Healthy advances momentum and continuation of improvement in asset
quality
During 1QFY2011 the bankrsquos loans and advances increased by healthy 138
YoY and the asset quality showed further improvement during 1QFY2011with loan loss provisions showing a reversal during the period
The Tier I and Total Capital adequacy ratios stands at 951 (minimum
requirement is 5) and 1141 respectively as at 31st
March 2011 oppose to
1071(Tier I) and 1291(Total Capital) recorded in 4QFY2010
Outlook and Valuation
A lower risk balance sheet is expected to drive down loan loss provisions which
we believe will enable ROE of 28 by FY2011E (existing 23)
The share is trading at 88X based on forecasted earnings for FY2011 compared
to a sector PE of 1522X and a market PE of 1903X
862019 SAMPATH BANK PLC- review1Q 2011
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Page 2
SAMPATH BANK PLC
Corporate profile
Sampath Bank Plc (SAMP) is a registered licensed commercial bank under
the purview of the Central Bank of Sri Lanka and being regulated under
the Banking Act No 3 of 1988 SAMP is currently the 3rd
largest private
sector commercial bank with an asset base of LKR2024bn as at end of
March 2010 and 188 branches supported by a staff force of 2688 (as per
the 2010 annual report)
SAMP has its presence over a vast geographical area including north and
east which reflects its continued focus on both corporate clients and
retail customers
The bank has pioneered in many technological and new product
advancements over the years including introduction of ATM technology
to Sri Lanka being the first bank to introduce credit cards to Sri Lanka in
1989 etc
The SAMP group comprises of 5 subsidiaries namely the bank which
contributes to 94 of pretax profits Sampath Leasing and Factoring SC
Securities (Pvt) Ltd Sampath Information Technology Solutions Ltd and
Sampath Centre Ltd- the property development arm
Banking Sector
As per the Central Bank annual report 2010 there are 22 commercial
banks in the country with a network of 1932 branches 965 extension
offices and 2977 other banking outlets Commercial bankrsquos can be
further categorized as public sector banks private sector banks and
foreign banks
As at the end of 2010 total assets of LCBrsquos stood at LKR 2969 trillion an
increase of 185 compared with a 108 previous year In addition the
2 state owned commercial banks Bank of Ceylon and Peoples Bank
account for a circa 50 of the sector asset base The sector is getting
more attractive with recent changes in regulatory measures The
corporate tax rate has reduced from 35 to 28 Whereas VAT on
financial services has reduced from 20 to 12 In addition the new low
interest rate regime emphasized by the Central Bank would drive the loan
growth in the sector However as oppose to lower rates being paid on
deposits more funds would flow in to the system as a result of previously war affected areas getting banked Further enhancing the
attractiveness of the banking industry the Central Bank is focusing on
raising a mandatory deposit insurance scheme The purpose of the
scheme is to build up a fund which can be utilized to compensate
depositors in a crisis situation hence all these would result in delivering
confidence to the investors
862019 SAMPATH BANK PLC- review1Q 2011
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Page 3
SAMPATH BANK PLC
Interim Results- 31st March 2011
Interest income
In 1QFY11 the overall interest income has shown a 2 QoQ improvement
whilst a minute 03 dip was seen YoY The dip of 03 is a combination of
143 YoY improvement in interest income on loans and advances and
426 YoY dip in interest income on other interest earning assets The
considerable dip in interest on other interest earning assets is
due to long prevailed lower yields recorded in government
securities and a similar movement was also evident
throughout the sector In order to mitigate the impact from
lower yield the bank has kept on reducing its exposure
towards government securities (during the period
31122010-3132011 3 months T- Bill rate has come down
from 724 to 698) Therefore the reduction is 34 from
the investment trading account and 285 from the
investments held to maturity yet the regulatory minimum
levels are accomplished
However the elevated loans and advances by 138 during the period has
assisted in boosting the interest income on loans and advances by 143
YoY and 4 QoQ amidst the prevailing low interest rate environment
862019 SAMPATH BANK PLC- review1Q 2011
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Page 4
SAMPATH BANK PLC
Interest expenses
The interest expenses for 1QFY10 have shown an increase of 44 YoY and
a 10 QoQ though the interest rates were relatively low This is due to a
34 YoYand 10 QoQ increase in interest paid on deposits while interest
paid on other interest bearing liabilities have elevated by 127 YoY and
QoQ
Particularly interest paid on deposits has increased due to accelerated
deposits by 79 over the 3 months period and a shift in the deposit mix
towards more expensive longer term deposits During the period less
expensive demand deposits have narrowed to LKR129bn from a previous
level of LKR136bn which is a dip of 47 and expensive time deposits have
grown by 125 Particularly this has been the companyrsquos strategy towards
generating more deposits in a low interest environment and mobilizing
them to grant more loans where the credit demand is high
Apart from that during the period borrowings have increased by more than26 where a considerable portion coming from banks and financial
institutions in Sri Lanka
Net interest income
Net interest income for the 1QFY11 has dipped by 56 YoY and 6 QoQ
due to decreased income on other interest earning assets (inclusive of
government securities) and increase in overall interest expenses
Non Interest income
During 1QFY11 the bank has recorded a 469 YoY improvement in noninterest income While the same income compared with the previous
quarter it is a dip of a massive 53 However the dip of 53 QoQ is due to
the decline in income generated through other sources including
investments and fee based income As a result the significance of non
interest income in operating income has come down in 1QFY2011 to 32 as
oppose to a previous level of 49 (4QFY10)
Net income Operating income
The net interest income is a 66 increase on a YoY basis despite a dip of
18 QoQ due to the contraction in both net interest income and
noninterest income
Noninterest expenses
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Page 5
SAMPATH BANK PLC
Noninterest expenses
Noninterest expenses have increased by 255 YoY and 10 QoQ The
increase is a result of the organic growth strategies of the bank In this
regard new branch openings and new recruitments accompanied by recent
wage hike have increased personnel costs and premises and establishment
expenses by 146 and 289 YoY respectively
Provision for bad and doubtful debts and loans written off
The loan loss provisions have shown a reversal during the period on the
back of dip in allocations for specific provision by 74 (QoQ) and
improvement in recoveries by more than 100 (QoQ)
VAT on financial services and corporate tax
VAT on financial services and Corporate tax have shown a clear dip of more
than 30 YoY and 88 YoY respectively owing to the rate change from 20
to 12 on VAT on financial services and 35 to 28 on corporate taxes
Net profit
The profit attributable to equity holders of SAMP is an improvement of
638 YoY But at the same time compared with the previous quarter it is a
decline of 27 However apart from the loan book growth and
strengthened deposit base the net profit has improved YoY on the back of
accelerated non interest income reversal of provisions and overall tax
reductions
Asset Quality
The asset mix has historically been dominated by loans and advances which
accounts f or 66 of the bankrsquos assets as at 31st
December 2010 Liquid
assets in the form of cash and investment securities have made up 24 of
its asset base as at the same date and going forward we expect the bankrsquos
asset base to reflect its historical composition as SAMP expands its loan
base in light of the improving macroeconomic environment
Therefore as a consequence of more weight given to loans and advances
within the asset mix the quality of the bankrsquos assets is highly dependent on
the quality of the loan portfolio
In addition the loan portfolio of SAMP is more diversified covering all the
credit demanding sectors whilst putting more weight on Pawning (21 of
the overall loans) Trading (16) Manufacturing (154) Agriculture and
Fishing (10) Particularly in FY2010 the non performing loans and
advances as a percentage of total gross loans and advances have come
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Page 6
SAMPATH BANK PLC
down to 45 as opposed to a previous level of 86 and during the 1QFY11
this has further come down to 41 depicting an improvement in the asset
quality Consequently the improvement in the ratio can be attributable to
the awakening economic activities bankrsquos stringent loan policies and
putting more emphasis on Pawning which is a loan backed by gold
collateral However during the 3 months period the non performing loansand advances show a 33 due to a loan growth of 138 and a revision of
regulations in categorizing the non performing loans
Furthermore SAMPrsquos provisioning is deemed strong as the bankrsquos gross NPL
coverage is 795 in FY2010 which has improved from a lower base of
499 in FY2009
Finally the provision for decline in value of investments has shown a
reversal over the 3 months period indicating an improvement of the quality
of investment securities
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Page 7
SAMPATH BANK PLC
Funding and Liquidity
SAMPrsquos funding and liquidity positions are adequate backed by a funding
base that is dominated by low cost deposits and shareholdersrsquo funds
Bankrsquos funding base is dominated by deposits which account for 82 of its
total funding as at end 1Q2011 (end 4Q2010 83) this was followed by
shareholders funds (9) and borrowings (9) Also during the 1QFY2011
the banks deposit base expanded 79 to LKR1622 bn irrespective of lower
rates offered by the overall banking sector
The deposit base is comprised of 46 short term deposits (including
demand deposits and savings deposits) and 54 long term deposits (term deposits) Even though the long term deposits deemed to be expensive the
bank has continued with expanding long term deposits Consequently the
time deposit growth for 1QFY2011 is 125 However bankrsquos underlying
strategy had been collecting more deposits in a competitive market and
mobilizing them to enhance loan volume despite compressed margins
Moreover the bankrsquos loan to deposit ratio is 86 as at end 1QFY2011
compared with a ratio of 82 at the end of FY2010 thus an indication of
bankrsquos active lending and condensed liquidity position
Nevertheless Bank is maintaining its liquidity above the regulatory levels
where the liquid assets are in the form of government securities balance
with the Central Bank and cash and short term funds
However during the period the bank has reduced its exposure to
government securities due to lower yields hence liquidity has come down
to 2320 from a previous level of 2629 in 4QFY2010 yet satisfying the
regulatory minimum of 20
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Page 8
SAMPATH BANK PLC
Capital Adequacy
SAMPrsquos capital adequacy is deemed strong given the Core capital and Total
capital adequacy ratios stands at 951 (minimum 5) and 1141
(minimum 10) respectively However the current levels are below the
previous ratios of Core capital 1071 and Total capital 1291 which is
due to the bankrsquos expansion strategies including an impressive loan growth
of 138 over the 1Q2011
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Page 9
SAMPATH BANK PLC
Future Outlook
The economic developments taking place throughout the country
coupled with low interest rates have posed a continued demand
for credit Hence this is a good opportunity for the bank to further
expand its loan portfolio being benefited through the availability
of funding The current levels of capital adequacy ratios tier 1
95 (minimum is 5) total capital adequacy ratio 1141
(minimum is 10) are well above the regulatory minimums so
that the bank has adequate buffer to absorb more risk and expand
the loan book
Adding further the bankrsquos novel scrip dividend policy would further
strengthen the fund availability as a consequence of dividends getting
injected back to the company rather than being paid out from the bank
SAMPrsquos organic growth strategies in terms of branch expansions
and new product developments would yield favorable resultsgoing forward During the FY2010 the bank has established more
than 40 branches and this momentum would be further continued
with the objective of covering all the unbanked areas and fulfilling
all the banking needs of the nation However the expansion
strategies would expand the cost base where the current cost to
income ratio is 53 slightly above the sector This is due to the
fact that an average new branch taking 15- 2 years to break even
and during this period the bank is not generating adequate
revenues to curtail the expenditure base But once a new branch
reaches its breakeven level it would boost the overall income
levels bringing down the cost to income ratios to par with thesector
The Pawning segment of the bank comprise of 23 of the overall
loan portfolio as at 31st
December 2010 and during FY2010 total
loans granted under pawning has shown a massive growth of
535 YoY This segment has its ability to grow further Generally
pawning is favorable to a bank due to the loan being gold backed
hence generating no risk of nonperforming loan losses and thereby
improving asset quality while strengthening the bottom line due to
no allowances required
Apart from SAMPrsquos organic growth strategies the bank is also
laying plans for inorganic growth Accordingly these would enhance
the competitive position of the bank as while generating
economies of scale
862019 SAMPATH BANK PLC- review1Q 2011
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Page
10
SAMPATH BANK PLC
Risk Management
The key risk categories of credit risk market risk liquidity risk operational
risk and reputation risk are common to every bank therefore in order to
mitigate these risks SAMP is adopting an integrated approach with a clear
understanding of these multiple risks
Credit risk is arising from the inability of a borrower or counter party to
meet their obligations in accordance with the agreed terms In this regard
in order to mitigate the credit risk SAMP has a well structured and
standardized credit approval process and a post credit monitoring
mechanism Consequently these stringent policies and practices have
resulted in improving the NPL ratios of the company (Gross NPL for as at
31st
March 2011 is 364 and improvement from a previous level of 395
as at 31st
December 2010)
Market risk management- this is the risk that can incur through movementsin equity and interest rate markets currency exchange rates and
commodity prices However the committees are placed in handling these
risks via planning the optimum mix of assets and liabilities stipulating the
liquidity gap position and formulating benchmark lending rates etc
Liquidity risk management
Liquidity risk arises due to unmatched maturities of assets and liabilities
These would deteriorate the bankrsquos ability to honor its commitment as and
when they fall due However SAMP manages these risks through their
deposits and investment portfolios
Reputational risk management
Reputational risks arise due to the negative effect of public opinion which
can cause damage to the brand image The bank has mitigated this by
implementing a customer grievance handling policy
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Page
11
SAMPATH BANK PLC
Valuation
Share offers good value at 88x forecast 2011 net profit
For the FY2011E the profits are forecasted considering corporate tax
revisions (35 to 20) and the expected credit growth in the low interest
economy The earnings would approximate to LKR 49510 mn in FY2011
and LKR 53159 mn in FY2012
Having hit a low of LKR1402 in May 2010 SAMPrsquos share price has risen
strongly by 972 YTD Following this gain SAMP trades at 88X projected
FY11E net profit whilst on a PER of 82X for FY12E forecasted profit Based
on an analysis of a historic 52 week price movement we derived a price
movement of +-5001 on a mean of LKR24144 Hence the flux is
approximately +-21 Furthermore if it is assumed that the same upside
price movement is seen pushing the price to LKR33101 (from a current
level of LKR2800) the forward PE multiples would be 1045X for FY11E and
973X for FY12E
Furthermore when adjusting SAMPrsquos returns to its risk (deviation of the
share price) sharp ratio of the counter is at 217 whilst the Banking Finance
and Insurance sector is at 305 SAMPrsquos return volatility is much higher at
29 as opposed to the sectorrsquos deviation of 20 over the past 52 week
trading period Hence SAMP shows a marginal volatility in its return
compared with the sector
862019 SAMPATH BANK PLC- review1Q 2011
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Page
SAMPATH BANK PLC
Researchhelliphelliphelliphelliphelliphelliphelliphellip
d of Research Saminda Weerasinghe Senior Analyst Amali Perera
11)5320250 (94-11)5320256
indaasiacapitallk amaliasiacapitallk
porates Economy
ela Rasheed (94-11)5320252 Umayangana Randeniya (94-11)5320254
wan De Silva (94-11)5320258 Dhanusha Pathirana (94-11)5320257
hani Perera (94-11)5320251 Nuwan Pradeep (94-11)5320257
oli Mallwaarachchi (94-11)5320360
mala Samarawickrama (94-11)5320253
hara Fernando (94-11)5320256
n Wijekoon (94-11)5320253
na Ukwatta (94-11)5320253
aleshelliphelliphelliphelliphelliphelliphelliphellip
STITUTIONAL SALES RETAIL SALES
ri Marikar (94-11) 5320224 077 3576868 sabriasiacapitallk Shiyam Subaulla (94-11) 5320218 0773502016 shiyamasiacashan Wijayakoon (94-11) 5320208 0777 713645 niroshanasiacapitallk Gagani Jayawardhana (94-11) 5320236 0714084953gaganiasiacap
az Aboobucker (94-11) 5320213 0777-727352 niyazasiacapitallk Priyantha Hingurage (94-11) 5320217 0773502015priyanthaasiara Hedigallage (94-11) 5320211 0777 713663 anuraasiacapitallk Neluka Rodrigo (94-11) 5320214 0777366280nelukaasiacaplaka Hapugoda (94-11-5320240 0777 256740 chelakaasiacapitallk Subeeth Perera (94-11) 5320227 0714042683subeethasiaca
minda Mahanama (94-11) 5320223 0777 556582 mahanamaasiacapitallk n Bibile (94-11) 5320238 0777 352032 hiranasiacapitallk
ANCHESbathgoda Asian Alliance Building No04 Sirimawo Bandaranayake Mw Kadawatha Asiri Perera 011-5734773 0773-692812 asiriasiacapitallk
unegala CSE 1st Floor Union Assurance Building No06 Rajapihilla Rd Kurunegala Asanka Samarakoon 037-5628844 0773-690749 asankaasiacapita
ara Asian Alliance Building No 312Galle Road Nupe Matara Sumeda Jayawardena041-5677525 0773-6873sumedaasiacapita
e Capital Reach Building 2nd Floor No 16A Gamini Mw Galle Ruchira Silva 091-5629998 0773-687027 ruchiraasiacapitLasitha Wijewardena 091-5676766 077-6681884lasithaasiacapita
E Floor CSE01-04 World Trade Centre Colombo ndash 1 Thushara Adhikari 011-5735122 0773-688202adhikariasiacapit
ombo Asia Asset Finance 1711 Station Road Negombo Uthpala Karunatilake 031-5676881 0773691685uthpalaasiacapit
nnappuwa No176 Negombo Road Katuneriya Sajith Iroshan 032 5673881 077 3740208 sajithasiacSandun Athulathmudali 032 5673882 077 2533331 srangaasia
RVICE CENTRESdy Capital Reach Building No165 Katugodella Veediya Kandy Nilupul Hettiarachchi 081-5628500 0773-691816nilupulasia
Radhika Hettiarachchi 081-5625577 0777-810694radhikaasiac
mbantota Hambanthota Chember of Commerce Thangalle Road Hambantota Gayan Anusha Muthumali 047-5679241 0772-351716Shermin Ranasinghe 0772378352 sherminasiacapitallk
para 2nd Floor TKS Building DS Senanayake Street Ampara Ravi De Mel 063-5679071 0772-681995 ravideasiacapital lkMadushanka Rathnayaka063-5679070 0779-036577 shankaasia
na 11-8 First Floor Stanley Road Jaffna Sutharshan 021-5671800 0772-395811suthanasiacapitallkNirmalan 021-5671801 0778-449773 nirmalasiacapitallk
ort has been prepared by Asia Wealths (Private) Limited The information and opinions contained herein has been compiled or arrived at based upon information obtained from sources believed to be reliable and in good faith Such information has not been independently verified and no guaranty
ntation or warranty express or implied is made as to its accuracy completeness or correctness reliability or suitability All such information and opinions are subject to change without notice This document is for information purposes only descriptions of any company or companies or their secu
ned herein are not intended to be complete and this document is not and should not be construed as an offer or solicitation of an offer to buy or sell any securities or other financial instruments In no event will Asia Securities be liable for any loss or damage including without limitation indirect
uential loss or damage or any loss or damage whatsoever arising out of or in connection with the use of this report and any reliance you place on such information is therefore strictly at your own risk curities may to the extent permissible by applicable law or regulation use the above material conclusions research or analysis in which they are based before the material is disseminated to their customers Not all customers will receive the material at the same time Asia Securities their resp
representatives employees related persons andor Asia Securities may have a long or short position in any of the securities or other financial instruments mentioned or issuers described herein at any time and may make a purchase andor sale or offer to make a purchase andor sale of any su
nancial instruments from time to time in the open market or otherwise in each case either as principal or agent Asia Securities may make markets in securities or other financial instruments described in this publication in securities of issuers described herein or in securities underlying or
es Asia Securities may have recently underwritten the securities of an issuer mentioned herein
ormation contained in this report is for general information purposes only This report and its content is copyright of Asia Securities and all rights reserved This report- in whole or in part- may not except with the express written permission of Asia Securities be reproduced or distributed or c
ed in any material form by any means whether graphic electronic mechanical or any means Nor may you transmit it or store it in any other website or other form of electronic retrieval system Any unauthorised use of this report will result in immediate proceedings
862019 SAMPATH BANK PLC- review1Q 2011
httpslidepdfcomreaderfullsampath-bank-plc-review1q-2011 213
Page 1
SAMPATH BANK PLC
Sampath Bank Plc (SAMP) LKR28000 is a registered licensed commercial
bank under the purview of the Central Bank of Sri Lanka and being regulated
under the Banking Act No 3 of 1988 SAMP is currently the 3rd
largest private
sector commercial bank with an asset base of LKR2024bn as at end of March
2010 and 188 branches supported by a staff force of 2688 (as per the 2010
annual report)SAMP has its presence over a vast geographical area includingNorth and East which reflects its continued focus on both corporate clients
and retail customers
In 1QFY11 the overall interest income has shown a 2 QoQ improvement
whilst a minute 03 dip was seen YoY Interest expenses for 1QFY10 have
shown an increase of 44 YoY and a 10 QoQ though the interest rates
were relatively low Net interest income for the 1QFY11 has dipped by 56
YoY and 6 QoQ due to decreased income on other interest earning assets
(inclusive of government securities) and increase in overall interest expenses
In addition during 1QFY11 the bank has recorded a 469 YoY improvement
in non interest income While the same income compared with the previous
quarter it is a dip of massive 53
The profit attributable to equity holders of SAMP is an improvement of 638
YoY However apart from the loan book growth and strengthened deposit
base the net profit has improved YoY on the back of accelerated non interest
income reversal of provisions and overall tax reductions
Healthy advances momentum and continuation of improvement in asset
quality
During 1QFY2011 the bankrsquos loans and advances increased by healthy 138
YoY and the asset quality showed further improvement during 1QFY2011with loan loss provisions showing a reversal during the period
The Tier I and Total Capital adequacy ratios stands at 951 (minimum
requirement is 5) and 1141 respectively as at 31st
March 2011 oppose to
1071(Tier I) and 1291(Total Capital) recorded in 4QFY2010
Outlook and Valuation
A lower risk balance sheet is expected to drive down loan loss provisions which
we believe will enable ROE of 28 by FY2011E (existing 23)
The share is trading at 88X based on forecasted earnings for FY2011 compared
to a sector PE of 1522X and a market PE of 1903X
862019 SAMPATH BANK PLC- review1Q 2011
httpslidepdfcomreaderfullsampath-bank-plc-review1q-2011 313
Page 2
SAMPATH BANK PLC
Corporate profile
Sampath Bank Plc (SAMP) is a registered licensed commercial bank under
the purview of the Central Bank of Sri Lanka and being regulated under
the Banking Act No 3 of 1988 SAMP is currently the 3rd
largest private
sector commercial bank with an asset base of LKR2024bn as at end of
March 2010 and 188 branches supported by a staff force of 2688 (as per
the 2010 annual report)
SAMP has its presence over a vast geographical area including north and
east which reflects its continued focus on both corporate clients and
retail customers
The bank has pioneered in many technological and new product
advancements over the years including introduction of ATM technology
to Sri Lanka being the first bank to introduce credit cards to Sri Lanka in
1989 etc
The SAMP group comprises of 5 subsidiaries namely the bank which
contributes to 94 of pretax profits Sampath Leasing and Factoring SC
Securities (Pvt) Ltd Sampath Information Technology Solutions Ltd and
Sampath Centre Ltd- the property development arm
Banking Sector
As per the Central Bank annual report 2010 there are 22 commercial
banks in the country with a network of 1932 branches 965 extension
offices and 2977 other banking outlets Commercial bankrsquos can be
further categorized as public sector banks private sector banks and
foreign banks
As at the end of 2010 total assets of LCBrsquos stood at LKR 2969 trillion an
increase of 185 compared with a 108 previous year In addition the
2 state owned commercial banks Bank of Ceylon and Peoples Bank
account for a circa 50 of the sector asset base The sector is getting
more attractive with recent changes in regulatory measures The
corporate tax rate has reduced from 35 to 28 Whereas VAT on
financial services has reduced from 20 to 12 In addition the new low
interest rate regime emphasized by the Central Bank would drive the loan
growth in the sector However as oppose to lower rates being paid on
deposits more funds would flow in to the system as a result of previously war affected areas getting banked Further enhancing the
attractiveness of the banking industry the Central Bank is focusing on
raising a mandatory deposit insurance scheme The purpose of the
scheme is to build up a fund which can be utilized to compensate
depositors in a crisis situation hence all these would result in delivering
confidence to the investors
862019 SAMPATH BANK PLC- review1Q 2011
httpslidepdfcomreaderfullsampath-bank-plc-review1q-2011 413
Page 3
SAMPATH BANK PLC
Interim Results- 31st March 2011
Interest income
In 1QFY11 the overall interest income has shown a 2 QoQ improvement
whilst a minute 03 dip was seen YoY The dip of 03 is a combination of
143 YoY improvement in interest income on loans and advances and
426 YoY dip in interest income on other interest earning assets The
considerable dip in interest on other interest earning assets is
due to long prevailed lower yields recorded in government
securities and a similar movement was also evident
throughout the sector In order to mitigate the impact from
lower yield the bank has kept on reducing its exposure
towards government securities (during the period
31122010-3132011 3 months T- Bill rate has come down
from 724 to 698) Therefore the reduction is 34 from
the investment trading account and 285 from the
investments held to maturity yet the regulatory minimum
levels are accomplished
However the elevated loans and advances by 138 during the period has
assisted in boosting the interest income on loans and advances by 143
YoY and 4 QoQ amidst the prevailing low interest rate environment
862019 SAMPATH BANK PLC- review1Q 2011
httpslidepdfcomreaderfullsampath-bank-plc-review1q-2011 513
Page 4
SAMPATH BANK PLC
Interest expenses
The interest expenses for 1QFY10 have shown an increase of 44 YoY and
a 10 QoQ though the interest rates were relatively low This is due to a
34 YoYand 10 QoQ increase in interest paid on deposits while interest
paid on other interest bearing liabilities have elevated by 127 YoY and
QoQ
Particularly interest paid on deposits has increased due to accelerated
deposits by 79 over the 3 months period and a shift in the deposit mix
towards more expensive longer term deposits During the period less
expensive demand deposits have narrowed to LKR129bn from a previous
level of LKR136bn which is a dip of 47 and expensive time deposits have
grown by 125 Particularly this has been the companyrsquos strategy towards
generating more deposits in a low interest environment and mobilizing
them to grant more loans where the credit demand is high
Apart from that during the period borrowings have increased by more than26 where a considerable portion coming from banks and financial
institutions in Sri Lanka
Net interest income
Net interest income for the 1QFY11 has dipped by 56 YoY and 6 QoQ
due to decreased income on other interest earning assets (inclusive of
government securities) and increase in overall interest expenses
Non Interest income
During 1QFY11 the bank has recorded a 469 YoY improvement in noninterest income While the same income compared with the previous
quarter it is a dip of a massive 53 However the dip of 53 QoQ is due to
the decline in income generated through other sources including
investments and fee based income As a result the significance of non
interest income in operating income has come down in 1QFY2011 to 32 as
oppose to a previous level of 49 (4QFY10)
Net income Operating income
The net interest income is a 66 increase on a YoY basis despite a dip of
18 QoQ due to the contraction in both net interest income and
noninterest income
Noninterest expenses
862019 SAMPATH BANK PLC- review1Q 2011
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Page 5
SAMPATH BANK PLC
Noninterest expenses
Noninterest expenses have increased by 255 YoY and 10 QoQ The
increase is a result of the organic growth strategies of the bank In this
regard new branch openings and new recruitments accompanied by recent
wage hike have increased personnel costs and premises and establishment
expenses by 146 and 289 YoY respectively
Provision for bad and doubtful debts and loans written off
The loan loss provisions have shown a reversal during the period on the
back of dip in allocations for specific provision by 74 (QoQ) and
improvement in recoveries by more than 100 (QoQ)
VAT on financial services and corporate tax
VAT on financial services and Corporate tax have shown a clear dip of more
than 30 YoY and 88 YoY respectively owing to the rate change from 20
to 12 on VAT on financial services and 35 to 28 on corporate taxes
Net profit
The profit attributable to equity holders of SAMP is an improvement of
638 YoY But at the same time compared with the previous quarter it is a
decline of 27 However apart from the loan book growth and
strengthened deposit base the net profit has improved YoY on the back of
accelerated non interest income reversal of provisions and overall tax
reductions
Asset Quality
The asset mix has historically been dominated by loans and advances which
accounts f or 66 of the bankrsquos assets as at 31st
December 2010 Liquid
assets in the form of cash and investment securities have made up 24 of
its asset base as at the same date and going forward we expect the bankrsquos
asset base to reflect its historical composition as SAMP expands its loan
base in light of the improving macroeconomic environment
Therefore as a consequence of more weight given to loans and advances
within the asset mix the quality of the bankrsquos assets is highly dependent on
the quality of the loan portfolio
In addition the loan portfolio of SAMP is more diversified covering all the
credit demanding sectors whilst putting more weight on Pawning (21 of
the overall loans) Trading (16) Manufacturing (154) Agriculture and
Fishing (10) Particularly in FY2010 the non performing loans and
advances as a percentage of total gross loans and advances have come
862019 SAMPATH BANK PLC- review1Q 2011
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Page 6
SAMPATH BANK PLC
down to 45 as opposed to a previous level of 86 and during the 1QFY11
this has further come down to 41 depicting an improvement in the asset
quality Consequently the improvement in the ratio can be attributable to
the awakening economic activities bankrsquos stringent loan policies and
putting more emphasis on Pawning which is a loan backed by gold
collateral However during the 3 months period the non performing loansand advances show a 33 due to a loan growth of 138 and a revision of
regulations in categorizing the non performing loans
Furthermore SAMPrsquos provisioning is deemed strong as the bankrsquos gross NPL
coverage is 795 in FY2010 which has improved from a lower base of
499 in FY2009
Finally the provision for decline in value of investments has shown a
reversal over the 3 months period indicating an improvement of the quality
of investment securities
862019 SAMPATH BANK PLC- review1Q 2011
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Page 7
SAMPATH BANK PLC
Funding and Liquidity
SAMPrsquos funding and liquidity positions are adequate backed by a funding
base that is dominated by low cost deposits and shareholdersrsquo funds
Bankrsquos funding base is dominated by deposits which account for 82 of its
total funding as at end 1Q2011 (end 4Q2010 83) this was followed by
shareholders funds (9) and borrowings (9) Also during the 1QFY2011
the banks deposit base expanded 79 to LKR1622 bn irrespective of lower
rates offered by the overall banking sector
The deposit base is comprised of 46 short term deposits (including
demand deposits and savings deposits) and 54 long term deposits (term deposits) Even though the long term deposits deemed to be expensive the
bank has continued with expanding long term deposits Consequently the
time deposit growth for 1QFY2011 is 125 However bankrsquos underlying
strategy had been collecting more deposits in a competitive market and
mobilizing them to enhance loan volume despite compressed margins
Moreover the bankrsquos loan to deposit ratio is 86 as at end 1QFY2011
compared with a ratio of 82 at the end of FY2010 thus an indication of
bankrsquos active lending and condensed liquidity position
Nevertheless Bank is maintaining its liquidity above the regulatory levels
where the liquid assets are in the form of government securities balance
with the Central Bank and cash and short term funds
However during the period the bank has reduced its exposure to
government securities due to lower yields hence liquidity has come down
to 2320 from a previous level of 2629 in 4QFY2010 yet satisfying the
regulatory minimum of 20
862019 SAMPATH BANK PLC- review1Q 2011
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Page 8
SAMPATH BANK PLC
Capital Adequacy
SAMPrsquos capital adequacy is deemed strong given the Core capital and Total
capital adequacy ratios stands at 951 (minimum 5) and 1141
(minimum 10) respectively However the current levels are below the
previous ratios of Core capital 1071 and Total capital 1291 which is
due to the bankrsquos expansion strategies including an impressive loan growth
of 138 over the 1Q2011
862019 SAMPATH BANK PLC- review1Q 2011
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Page 9
SAMPATH BANK PLC
Future Outlook
The economic developments taking place throughout the country
coupled with low interest rates have posed a continued demand
for credit Hence this is a good opportunity for the bank to further
expand its loan portfolio being benefited through the availability
of funding The current levels of capital adequacy ratios tier 1
95 (minimum is 5) total capital adequacy ratio 1141
(minimum is 10) are well above the regulatory minimums so
that the bank has adequate buffer to absorb more risk and expand
the loan book
Adding further the bankrsquos novel scrip dividend policy would further
strengthen the fund availability as a consequence of dividends getting
injected back to the company rather than being paid out from the bank
SAMPrsquos organic growth strategies in terms of branch expansions
and new product developments would yield favorable resultsgoing forward During the FY2010 the bank has established more
than 40 branches and this momentum would be further continued
with the objective of covering all the unbanked areas and fulfilling
all the banking needs of the nation However the expansion
strategies would expand the cost base where the current cost to
income ratio is 53 slightly above the sector This is due to the
fact that an average new branch taking 15- 2 years to break even
and during this period the bank is not generating adequate
revenues to curtail the expenditure base But once a new branch
reaches its breakeven level it would boost the overall income
levels bringing down the cost to income ratios to par with thesector
The Pawning segment of the bank comprise of 23 of the overall
loan portfolio as at 31st
December 2010 and during FY2010 total
loans granted under pawning has shown a massive growth of
535 YoY This segment has its ability to grow further Generally
pawning is favorable to a bank due to the loan being gold backed
hence generating no risk of nonperforming loan losses and thereby
improving asset quality while strengthening the bottom line due to
no allowances required
Apart from SAMPrsquos organic growth strategies the bank is also
laying plans for inorganic growth Accordingly these would enhance
the competitive position of the bank as while generating
economies of scale
862019 SAMPATH BANK PLC- review1Q 2011
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Page
10
SAMPATH BANK PLC
Risk Management
The key risk categories of credit risk market risk liquidity risk operational
risk and reputation risk are common to every bank therefore in order to
mitigate these risks SAMP is adopting an integrated approach with a clear
understanding of these multiple risks
Credit risk is arising from the inability of a borrower or counter party to
meet their obligations in accordance with the agreed terms In this regard
in order to mitigate the credit risk SAMP has a well structured and
standardized credit approval process and a post credit monitoring
mechanism Consequently these stringent policies and practices have
resulted in improving the NPL ratios of the company (Gross NPL for as at
31st
March 2011 is 364 and improvement from a previous level of 395
as at 31st
December 2010)
Market risk management- this is the risk that can incur through movementsin equity and interest rate markets currency exchange rates and
commodity prices However the committees are placed in handling these
risks via planning the optimum mix of assets and liabilities stipulating the
liquidity gap position and formulating benchmark lending rates etc
Liquidity risk management
Liquidity risk arises due to unmatched maturities of assets and liabilities
These would deteriorate the bankrsquos ability to honor its commitment as and
when they fall due However SAMP manages these risks through their
deposits and investment portfolios
Reputational risk management
Reputational risks arise due to the negative effect of public opinion which
can cause damage to the brand image The bank has mitigated this by
implementing a customer grievance handling policy
862019 SAMPATH BANK PLC- review1Q 2011
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Page
11
SAMPATH BANK PLC
Valuation
Share offers good value at 88x forecast 2011 net profit
For the FY2011E the profits are forecasted considering corporate tax
revisions (35 to 20) and the expected credit growth in the low interest
economy The earnings would approximate to LKR 49510 mn in FY2011
and LKR 53159 mn in FY2012
Having hit a low of LKR1402 in May 2010 SAMPrsquos share price has risen
strongly by 972 YTD Following this gain SAMP trades at 88X projected
FY11E net profit whilst on a PER of 82X for FY12E forecasted profit Based
on an analysis of a historic 52 week price movement we derived a price
movement of +-5001 on a mean of LKR24144 Hence the flux is
approximately +-21 Furthermore if it is assumed that the same upside
price movement is seen pushing the price to LKR33101 (from a current
level of LKR2800) the forward PE multiples would be 1045X for FY11E and
973X for FY12E
Furthermore when adjusting SAMPrsquos returns to its risk (deviation of the
share price) sharp ratio of the counter is at 217 whilst the Banking Finance
and Insurance sector is at 305 SAMPrsquos return volatility is much higher at
29 as opposed to the sectorrsquos deviation of 20 over the past 52 week
trading period Hence SAMP shows a marginal volatility in its return
compared with the sector
862019 SAMPATH BANK PLC- review1Q 2011
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Page
SAMPATH BANK PLC
Researchhelliphelliphelliphelliphelliphelliphelliphellip
d of Research Saminda Weerasinghe Senior Analyst Amali Perera
11)5320250 (94-11)5320256
indaasiacapitallk amaliasiacapitallk
porates Economy
ela Rasheed (94-11)5320252 Umayangana Randeniya (94-11)5320254
wan De Silva (94-11)5320258 Dhanusha Pathirana (94-11)5320257
hani Perera (94-11)5320251 Nuwan Pradeep (94-11)5320257
oli Mallwaarachchi (94-11)5320360
mala Samarawickrama (94-11)5320253
hara Fernando (94-11)5320256
n Wijekoon (94-11)5320253
na Ukwatta (94-11)5320253
aleshelliphelliphelliphelliphelliphelliphelliphellip
STITUTIONAL SALES RETAIL SALES
ri Marikar (94-11) 5320224 077 3576868 sabriasiacapitallk Shiyam Subaulla (94-11) 5320218 0773502016 shiyamasiacashan Wijayakoon (94-11) 5320208 0777 713645 niroshanasiacapitallk Gagani Jayawardhana (94-11) 5320236 0714084953gaganiasiacap
az Aboobucker (94-11) 5320213 0777-727352 niyazasiacapitallk Priyantha Hingurage (94-11) 5320217 0773502015priyanthaasiara Hedigallage (94-11) 5320211 0777 713663 anuraasiacapitallk Neluka Rodrigo (94-11) 5320214 0777366280nelukaasiacaplaka Hapugoda (94-11-5320240 0777 256740 chelakaasiacapitallk Subeeth Perera (94-11) 5320227 0714042683subeethasiaca
minda Mahanama (94-11) 5320223 0777 556582 mahanamaasiacapitallk n Bibile (94-11) 5320238 0777 352032 hiranasiacapitallk
ANCHESbathgoda Asian Alliance Building No04 Sirimawo Bandaranayake Mw Kadawatha Asiri Perera 011-5734773 0773-692812 asiriasiacapitallk
unegala CSE 1st Floor Union Assurance Building No06 Rajapihilla Rd Kurunegala Asanka Samarakoon 037-5628844 0773-690749 asankaasiacapita
ara Asian Alliance Building No 312Galle Road Nupe Matara Sumeda Jayawardena041-5677525 0773-6873sumedaasiacapita
e Capital Reach Building 2nd Floor No 16A Gamini Mw Galle Ruchira Silva 091-5629998 0773-687027 ruchiraasiacapitLasitha Wijewardena 091-5676766 077-6681884lasithaasiacapita
E Floor CSE01-04 World Trade Centre Colombo ndash 1 Thushara Adhikari 011-5735122 0773-688202adhikariasiacapit
ombo Asia Asset Finance 1711 Station Road Negombo Uthpala Karunatilake 031-5676881 0773691685uthpalaasiacapit
nnappuwa No176 Negombo Road Katuneriya Sajith Iroshan 032 5673881 077 3740208 sajithasiacSandun Athulathmudali 032 5673882 077 2533331 srangaasia
RVICE CENTRESdy Capital Reach Building No165 Katugodella Veediya Kandy Nilupul Hettiarachchi 081-5628500 0773-691816nilupulasia
Radhika Hettiarachchi 081-5625577 0777-810694radhikaasiac
mbantota Hambanthota Chember of Commerce Thangalle Road Hambantota Gayan Anusha Muthumali 047-5679241 0772-351716Shermin Ranasinghe 0772378352 sherminasiacapitallk
para 2nd Floor TKS Building DS Senanayake Street Ampara Ravi De Mel 063-5679071 0772-681995 ravideasiacapital lkMadushanka Rathnayaka063-5679070 0779-036577 shankaasia
na 11-8 First Floor Stanley Road Jaffna Sutharshan 021-5671800 0772-395811suthanasiacapitallkNirmalan 021-5671801 0778-449773 nirmalasiacapitallk
ort has been prepared by Asia Wealths (Private) Limited The information and opinions contained herein has been compiled or arrived at based upon information obtained from sources believed to be reliable and in good faith Such information has not been independently verified and no guaranty
ntation or warranty express or implied is made as to its accuracy completeness or correctness reliability or suitability All such information and opinions are subject to change without notice This document is for information purposes only descriptions of any company or companies or their secu
ned herein are not intended to be complete and this document is not and should not be construed as an offer or solicitation of an offer to buy or sell any securities or other financial instruments In no event will Asia Securities be liable for any loss or damage including without limitation indirect
uential loss or damage or any loss or damage whatsoever arising out of or in connection with the use of this report and any reliance you place on such information is therefore strictly at your own risk curities may to the extent permissible by applicable law or regulation use the above material conclusions research or analysis in which they are based before the material is disseminated to their customers Not all customers will receive the material at the same time Asia Securities their resp
representatives employees related persons andor Asia Securities may have a long or short position in any of the securities or other financial instruments mentioned or issuers described herein at any time and may make a purchase andor sale or offer to make a purchase andor sale of any su
nancial instruments from time to time in the open market or otherwise in each case either as principal or agent Asia Securities may make markets in securities or other financial instruments described in this publication in securities of issuers described herein or in securities underlying or
es Asia Securities may have recently underwritten the securities of an issuer mentioned herein
ormation contained in this report is for general information purposes only This report and its content is copyright of Asia Securities and all rights reserved This report- in whole or in part- may not except with the express written permission of Asia Securities be reproduced or distributed or c
ed in any material form by any means whether graphic electronic mechanical or any means Nor may you transmit it or store it in any other website or other form of electronic retrieval system Any unauthorised use of this report will result in immediate proceedings
862019 SAMPATH BANK PLC- review1Q 2011
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Page 2
SAMPATH BANK PLC
Corporate profile
Sampath Bank Plc (SAMP) is a registered licensed commercial bank under
the purview of the Central Bank of Sri Lanka and being regulated under
the Banking Act No 3 of 1988 SAMP is currently the 3rd
largest private
sector commercial bank with an asset base of LKR2024bn as at end of
March 2010 and 188 branches supported by a staff force of 2688 (as per
the 2010 annual report)
SAMP has its presence over a vast geographical area including north and
east which reflects its continued focus on both corporate clients and
retail customers
The bank has pioneered in many technological and new product
advancements over the years including introduction of ATM technology
to Sri Lanka being the first bank to introduce credit cards to Sri Lanka in
1989 etc
The SAMP group comprises of 5 subsidiaries namely the bank which
contributes to 94 of pretax profits Sampath Leasing and Factoring SC
Securities (Pvt) Ltd Sampath Information Technology Solutions Ltd and
Sampath Centre Ltd- the property development arm
Banking Sector
As per the Central Bank annual report 2010 there are 22 commercial
banks in the country with a network of 1932 branches 965 extension
offices and 2977 other banking outlets Commercial bankrsquos can be
further categorized as public sector banks private sector banks and
foreign banks
As at the end of 2010 total assets of LCBrsquos stood at LKR 2969 trillion an
increase of 185 compared with a 108 previous year In addition the
2 state owned commercial banks Bank of Ceylon and Peoples Bank
account for a circa 50 of the sector asset base The sector is getting
more attractive with recent changes in regulatory measures The
corporate tax rate has reduced from 35 to 28 Whereas VAT on
financial services has reduced from 20 to 12 In addition the new low
interest rate regime emphasized by the Central Bank would drive the loan
growth in the sector However as oppose to lower rates being paid on
deposits more funds would flow in to the system as a result of previously war affected areas getting banked Further enhancing the
attractiveness of the banking industry the Central Bank is focusing on
raising a mandatory deposit insurance scheme The purpose of the
scheme is to build up a fund which can be utilized to compensate
depositors in a crisis situation hence all these would result in delivering
confidence to the investors
862019 SAMPATH BANK PLC- review1Q 2011
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Page 3
SAMPATH BANK PLC
Interim Results- 31st March 2011
Interest income
In 1QFY11 the overall interest income has shown a 2 QoQ improvement
whilst a minute 03 dip was seen YoY The dip of 03 is a combination of
143 YoY improvement in interest income on loans and advances and
426 YoY dip in interest income on other interest earning assets The
considerable dip in interest on other interest earning assets is
due to long prevailed lower yields recorded in government
securities and a similar movement was also evident
throughout the sector In order to mitigate the impact from
lower yield the bank has kept on reducing its exposure
towards government securities (during the period
31122010-3132011 3 months T- Bill rate has come down
from 724 to 698) Therefore the reduction is 34 from
the investment trading account and 285 from the
investments held to maturity yet the regulatory minimum
levels are accomplished
However the elevated loans and advances by 138 during the period has
assisted in boosting the interest income on loans and advances by 143
YoY and 4 QoQ amidst the prevailing low interest rate environment
862019 SAMPATH BANK PLC- review1Q 2011
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Page 4
SAMPATH BANK PLC
Interest expenses
The interest expenses for 1QFY10 have shown an increase of 44 YoY and
a 10 QoQ though the interest rates were relatively low This is due to a
34 YoYand 10 QoQ increase in interest paid on deposits while interest
paid on other interest bearing liabilities have elevated by 127 YoY and
QoQ
Particularly interest paid on deposits has increased due to accelerated
deposits by 79 over the 3 months period and a shift in the deposit mix
towards more expensive longer term deposits During the period less
expensive demand deposits have narrowed to LKR129bn from a previous
level of LKR136bn which is a dip of 47 and expensive time deposits have
grown by 125 Particularly this has been the companyrsquos strategy towards
generating more deposits in a low interest environment and mobilizing
them to grant more loans where the credit demand is high
Apart from that during the period borrowings have increased by more than26 where a considerable portion coming from banks and financial
institutions in Sri Lanka
Net interest income
Net interest income for the 1QFY11 has dipped by 56 YoY and 6 QoQ
due to decreased income on other interest earning assets (inclusive of
government securities) and increase in overall interest expenses
Non Interest income
During 1QFY11 the bank has recorded a 469 YoY improvement in noninterest income While the same income compared with the previous
quarter it is a dip of a massive 53 However the dip of 53 QoQ is due to
the decline in income generated through other sources including
investments and fee based income As a result the significance of non
interest income in operating income has come down in 1QFY2011 to 32 as
oppose to a previous level of 49 (4QFY10)
Net income Operating income
The net interest income is a 66 increase on a YoY basis despite a dip of
18 QoQ due to the contraction in both net interest income and
noninterest income
Noninterest expenses
862019 SAMPATH BANK PLC- review1Q 2011
httpslidepdfcomreaderfullsampath-bank-plc-review1q-2011 613
Page 5
SAMPATH BANK PLC
Noninterest expenses
Noninterest expenses have increased by 255 YoY and 10 QoQ The
increase is a result of the organic growth strategies of the bank In this
regard new branch openings and new recruitments accompanied by recent
wage hike have increased personnel costs and premises and establishment
expenses by 146 and 289 YoY respectively
Provision for bad and doubtful debts and loans written off
The loan loss provisions have shown a reversal during the period on the
back of dip in allocations for specific provision by 74 (QoQ) and
improvement in recoveries by more than 100 (QoQ)
VAT on financial services and corporate tax
VAT on financial services and Corporate tax have shown a clear dip of more
than 30 YoY and 88 YoY respectively owing to the rate change from 20
to 12 on VAT on financial services and 35 to 28 on corporate taxes
Net profit
The profit attributable to equity holders of SAMP is an improvement of
638 YoY But at the same time compared with the previous quarter it is a
decline of 27 However apart from the loan book growth and
strengthened deposit base the net profit has improved YoY on the back of
accelerated non interest income reversal of provisions and overall tax
reductions
Asset Quality
The asset mix has historically been dominated by loans and advances which
accounts f or 66 of the bankrsquos assets as at 31st
December 2010 Liquid
assets in the form of cash and investment securities have made up 24 of
its asset base as at the same date and going forward we expect the bankrsquos
asset base to reflect its historical composition as SAMP expands its loan
base in light of the improving macroeconomic environment
Therefore as a consequence of more weight given to loans and advances
within the asset mix the quality of the bankrsquos assets is highly dependent on
the quality of the loan portfolio
In addition the loan portfolio of SAMP is more diversified covering all the
credit demanding sectors whilst putting more weight on Pawning (21 of
the overall loans) Trading (16) Manufacturing (154) Agriculture and
Fishing (10) Particularly in FY2010 the non performing loans and
advances as a percentage of total gross loans and advances have come
862019 SAMPATH BANK PLC- review1Q 2011
httpslidepdfcomreaderfullsampath-bank-plc-review1q-2011 713
Page 6
SAMPATH BANK PLC
down to 45 as opposed to a previous level of 86 and during the 1QFY11
this has further come down to 41 depicting an improvement in the asset
quality Consequently the improvement in the ratio can be attributable to
the awakening economic activities bankrsquos stringent loan policies and
putting more emphasis on Pawning which is a loan backed by gold
collateral However during the 3 months period the non performing loansand advances show a 33 due to a loan growth of 138 and a revision of
regulations in categorizing the non performing loans
Furthermore SAMPrsquos provisioning is deemed strong as the bankrsquos gross NPL
coverage is 795 in FY2010 which has improved from a lower base of
499 in FY2009
Finally the provision for decline in value of investments has shown a
reversal over the 3 months period indicating an improvement of the quality
of investment securities
862019 SAMPATH BANK PLC- review1Q 2011
httpslidepdfcomreaderfullsampath-bank-plc-review1q-2011 813
Page 7
SAMPATH BANK PLC
Funding and Liquidity
SAMPrsquos funding and liquidity positions are adequate backed by a funding
base that is dominated by low cost deposits and shareholdersrsquo funds
Bankrsquos funding base is dominated by deposits which account for 82 of its
total funding as at end 1Q2011 (end 4Q2010 83) this was followed by
shareholders funds (9) and borrowings (9) Also during the 1QFY2011
the banks deposit base expanded 79 to LKR1622 bn irrespective of lower
rates offered by the overall banking sector
The deposit base is comprised of 46 short term deposits (including
demand deposits and savings deposits) and 54 long term deposits (term deposits) Even though the long term deposits deemed to be expensive the
bank has continued with expanding long term deposits Consequently the
time deposit growth for 1QFY2011 is 125 However bankrsquos underlying
strategy had been collecting more deposits in a competitive market and
mobilizing them to enhance loan volume despite compressed margins
Moreover the bankrsquos loan to deposit ratio is 86 as at end 1QFY2011
compared with a ratio of 82 at the end of FY2010 thus an indication of
bankrsquos active lending and condensed liquidity position
Nevertheless Bank is maintaining its liquidity above the regulatory levels
where the liquid assets are in the form of government securities balance
with the Central Bank and cash and short term funds
However during the period the bank has reduced its exposure to
government securities due to lower yields hence liquidity has come down
to 2320 from a previous level of 2629 in 4QFY2010 yet satisfying the
regulatory minimum of 20
862019 SAMPATH BANK PLC- review1Q 2011
httpslidepdfcomreaderfullsampath-bank-plc-review1q-2011 913
Page 8
SAMPATH BANK PLC
Capital Adequacy
SAMPrsquos capital adequacy is deemed strong given the Core capital and Total
capital adequacy ratios stands at 951 (minimum 5) and 1141
(minimum 10) respectively However the current levels are below the
previous ratios of Core capital 1071 and Total capital 1291 which is
due to the bankrsquos expansion strategies including an impressive loan growth
of 138 over the 1Q2011
862019 SAMPATH BANK PLC- review1Q 2011
httpslidepdfcomreaderfullsampath-bank-plc-review1q-2011 1013
Page 9
SAMPATH BANK PLC
Future Outlook
The economic developments taking place throughout the country
coupled with low interest rates have posed a continued demand
for credit Hence this is a good opportunity for the bank to further
expand its loan portfolio being benefited through the availability
of funding The current levels of capital adequacy ratios tier 1
95 (minimum is 5) total capital adequacy ratio 1141
(minimum is 10) are well above the regulatory minimums so
that the bank has adequate buffer to absorb more risk and expand
the loan book
Adding further the bankrsquos novel scrip dividend policy would further
strengthen the fund availability as a consequence of dividends getting
injected back to the company rather than being paid out from the bank
SAMPrsquos organic growth strategies in terms of branch expansions
and new product developments would yield favorable resultsgoing forward During the FY2010 the bank has established more
than 40 branches and this momentum would be further continued
with the objective of covering all the unbanked areas and fulfilling
all the banking needs of the nation However the expansion
strategies would expand the cost base where the current cost to
income ratio is 53 slightly above the sector This is due to the
fact that an average new branch taking 15- 2 years to break even
and during this period the bank is not generating adequate
revenues to curtail the expenditure base But once a new branch
reaches its breakeven level it would boost the overall income
levels bringing down the cost to income ratios to par with thesector
The Pawning segment of the bank comprise of 23 of the overall
loan portfolio as at 31st
December 2010 and during FY2010 total
loans granted under pawning has shown a massive growth of
535 YoY This segment has its ability to grow further Generally
pawning is favorable to a bank due to the loan being gold backed
hence generating no risk of nonperforming loan losses and thereby
improving asset quality while strengthening the bottom line due to
no allowances required
Apart from SAMPrsquos organic growth strategies the bank is also
laying plans for inorganic growth Accordingly these would enhance
the competitive position of the bank as while generating
economies of scale
862019 SAMPATH BANK PLC- review1Q 2011
httpslidepdfcomreaderfullsampath-bank-plc-review1q-2011 1113
Page
10
SAMPATH BANK PLC
Risk Management
The key risk categories of credit risk market risk liquidity risk operational
risk and reputation risk are common to every bank therefore in order to
mitigate these risks SAMP is adopting an integrated approach with a clear
understanding of these multiple risks
Credit risk is arising from the inability of a borrower or counter party to
meet their obligations in accordance with the agreed terms In this regard
in order to mitigate the credit risk SAMP has a well structured and
standardized credit approval process and a post credit monitoring
mechanism Consequently these stringent policies and practices have
resulted in improving the NPL ratios of the company (Gross NPL for as at
31st
March 2011 is 364 and improvement from a previous level of 395
as at 31st
December 2010)
Market risk management- this is the risk that can incur through movementsin equity and interest rate markets currency exchange rates and
commodity prices However the committees are placed in handling these
risks via planning the optimum mix of assets and liabilities stipulating the
liquidity gap position and formulating benchmark lending rates etc
Liquidity risk management
Liquidity risk arises due to unmatched maturities of assets and liabilities
These would deteriorate the bankrsquos ability to honor its commitment as and
when they fall due However SAMP manages these risks through their
deposits and investment portfolios
Reputational risk management
Reputational risks arise due to the negative effect of public opinion which
can cause damage to the brand image The bank has mitigated this by
implementing a customer grievance handling policy
862019 SAMPATH BANK PLC- review1Q 2011
httpslidepdfcomreaderfullsampath-bank-plc-review1q-2011 1213
Page
11
SAMPATH BANK PLC
Valuation
Share offers good value at 88x forecast 2011 net profit
For the FY2011E the profits are forecasted considering corporate tax
revisions (35 to 20) and the expected credit growth in the low interest
economy The earnings would approximate to LKR 49510 mn in FY2011
and LKR 53159 mn in FY2012
Having hit a low of LKR1402 in May 2010 SAMPrsquos share price has risen
strongly by 972 YTD Following this gain SAMP trades at 88X projected
FY11E net profit whilst on a PER of 82X for FY12E forecasted profit Based
on an analysis of a historic 52 week price movement we derived a price
movement of +-5001 on a mean of LKR24144 Hence the flux is
approximately +-21 Furthermore if it is assumed that the same upside
price movement is seen pushing the price to LKR33101 (from a current
level of LKR2800) the forward PE multiples would be 1045X for FY11E and
973X for FY12E
Furthermore when adjusting SAMPrsquos returns to its risk (deviation of the
share price) sharp ratio of the counter is at 217 whilst the Banking Finance
and Insurance sector is at 305 SAMPrsquos return volatility is much higher at
29 as opposed to the sectorrsquos deviation of 20 over the past 52 week
trading period Hence SAMP shows a marginal volatility in its return
compared with the sector
862019 SAMPATH BANK PLC- review1Q 2011
httpslidepdfcomreaderfullsampath-bank-plc-review1q-2011 1313
Page
SAMPATH BANK PLC
Researchhelliphelliphelliphelliphelliphelliphelliphellip
d of Research Saminda Weerasinghe Senior Analyst Amali Perera
11)5320250 (94-11)5320256
indaasiacapitallk amaliasiacapitallk
porates Economy
ela Rasheed (94-11)5320252 Umayangana Randeniya (94-11)5320254
wan De Silva (94-11)5320258 Dhanusha Pathirana (94-11)5320257
hani Perera (94-11)5320251 Nuwan Pradeep (94-11)5320257
oli Mallwaarachchi (94-11)5320360
mala Samarawickrama (94-11)5320253
hara Fernando (94-11)5320256
n Wijekoon (94-11)5320253
na Ukwatta (94-11)5320253
aleshelliphelliphelliphelliphelliphelliphelliphellip
STITUTIONAL SALES RETAIL SALES
ri Marikar (94-11) 5320224 077 3576868 sabriasiacapitallk Shiyam Subaulla (94-11) 5320218 0773502016 shiyamasiacashan Wijayakoon (94-11) 5320208 0777 713645 niroshanasiacapitallk Gagani Jayawardhana (94-11) 5320236 0714084953gaganiasiacap
az Aboobucker (94-11) 5320213 0777-727352 niyazasiacapitallk Priyantha Hingurage (94-11) 5320217 0773502015priyanthaasiara Hedigallage (94-11) 5320211 0777 713663 anuraasiacapitallk Neluka Rodrigo (94-11) 5320214 0777366280nelukaasiacaplaka Hapugoda (94-11-5320240 0777 256740 chelakaasiacapitallk Subeeth Perera (94-11) 5320227 0714042683subeethasiaca
minda Mahanama (94-11) 5320223 0777 556582 mahanamaasiacapitallk n Bibile (94-11) 5320238 0777 352032 hiranasiacapitallk
ANCHESbathgoda Asian Alliance Building No04 Sirimawo Bandaranayake Mw Kadawatha Asiri Perera 011-5734773 0773-692812 asiriasiacapitallk
unegala CSE 1st Floor Union Assurance Building No06 Rajapihilla Rd Kurunegala Asanka Samarakoon 037-5628844 0773-690749 asankaasiacapita
ara Asian Alliance Building No 312Galle Road Nupe Matara Sumeda Jayawardena041-5677525 0773-6873sumedaasiacapita
e Capital Reach Building 2nd Floor No 16A Gamini Mw Galle Ruchira Silva 091-5629998 0773-687027 ruchiraasiacapitLasitha Wijewardena 091-5676766 077-6681884lasithaasiacapita
E Floor CSE01-04 World Trade Centre Colombo ndash 1 Thushara Adhikari 011-5735122 0773-688202adhikariasiacapit
ombo Asia Asset Finance 1711 Station Road Negombo Uthpala Karunatilake 031-5676881 0773691685uthpalaasiacapit
nnappuwa No176 Negombo Road Katuneriya Sajith Iroshan 032 5673881 077 3740208 sajithasiacSandun Athulathmudali 032 5673882 077 2533331 srangaasia
RVICE CENTRESdy Capital Reach Building No165 Katugodella Veediya Kandy Nilupul Hettiarachchi 081-5628500 0773-691816nilupulasia
Radhika Hettiarachchi 081-5625577 0777-810694radhikaasiac
mbantota Hambanthota Chember of Commerce Thangalle Road Hambantota Gayan Anusha Muthumali 047-5679241 0772-351716Shermin Ranasinghe 0772378352 sherminasiacapitallk
para 2nd Floor TKS Building DS Senanayake Street Ampara Ravi De Mel 063-5679071 0772-681995 ravideasiacapital lkMadushanka Rathnayaka063-5679070 0779-036577 shankaasia
na 11-8 First Floor Stanley Road Jaffna Sutharshan 021-5671800 0772-395811suthanasiacapitallkNirmalan 021-5671801 0778-449773 nirmalasiacapitallk
ort has been prepared by Asia Wealths (Private) Limited The information and opinions contained herein has been compiled or arrived at based upon information obtained from sources believed to be reliable and in good faith Such information has not been independently verified and no guaranty
ntation or warranty express or implied is made as to its accuracy completeness or correctness reliability or suitability All such information and opinions are subject to change without notice This document is for information purposes only descriptions of any company or companies or their secu
ned herein are not intended to be complete and this document is not and should not be construed as an offer or solicitation of an offer to buy or sell any securities or other financial instruments In no event will Asia Securities be liable for any loss or damage including without limitation indirect
uential loss or damage or any loss or damage whatsoever arising out of or in connection with the use of this report and any reliance you place on such information is therefore strictly at your own risk curities may to the extent permissible by applicable law or regulation use the above material conclusions research or analysis in which they are based before the material is disseminated to their customers Not all customers will receive the material at the same time Asia Securities their resp
representatives employees related persons andor Asia Securities may have a long or short position in any of the securities or other financial instruments mentioned or issuers described herein at any time and may make a purchase andor sale or offer to make a purchase andor sale of any su
nancial instruments from time to time in the open market or otherwise in each case either as principal or agent Asia Securities may make markets in securities or other financial instruments described in this publication in securities of issuers described herein or in securities underlying or
es Asia Securities may have recently underwritten the securities of an issuer mentioned herein
ormation contained in this report is for general information purposes only This report and its content is copyright of Asia Securities and all rights reserved This report- in whole or in part- may not except with the express written permission of Asia Securities be reproduced or distributed or c
ed in any material form by any means whether graphic electronic mechanical or any means Nor may you transmit it or store it in any other website or other form of electronic retrieval system Any unauthorised use of this report will result in immediate proceedings
862019 SAMPATH BANK PLC- review1Q 2011
httpslidepdfcomreaderfullsampath-bank-plc-review1q-2011 413
Page 3
SAMPATH BANK PLC
Interim Results- 31st March 2011
Interest income
In 1QFY11 the overall interest income has shown a 2 QoQ improvement
whilst a minute 03 dip was seen YoY The dip of 03 is a combination of
143 YoY improvement in interest income on loans and advances and
426 YoY dip in interest income on other interest earning assets The
considerable dip in interest on other interest earning assets is
due to long prevailed lower yields recorded in government
securities and a similar movement was also evident
throughout the sector In order to mitigate the impact from
lower yield the bank has kept on reducing its exposure
towards government securities (during the period
31122010-3132011 3 months T- Bill rate has come down
from 724 to 698) Therefore the reduction is 34 from
the investment trading account and 285 from the
investments held to maturity yet the regulatory minimum
levels are accomplished
However the elevated loans and advances by 138 during the period has
assisted in boosting the interest income on loans and advances by 143
YoY and 4 QoQ amidst the prevailing low interest rate environment
862019 SAMPATH BANK PLC- review1Q 2011
httpslidepdfcomreaderfullsampath-bank-plc-review1q-2011 513
Page 4
SAMPATH BANK PLC
Interest expenses
The interest expenses for 1QFY10 have shown an increase of 44 YoY and
a 10 QoQ though the interest rates were relatively low This is due to a
34 YoYand 10 QoQ increase in interest paid on deposits while interest
paid on other interest bearing liabilities have elevated by 127 YoY and
QoQ
Particularly interest paid on deposits has increased due to accelerated
deposits by 79 over the 3 months period and a shift in the deposit mix
towards more expensive longer term deposits During the period less
expensive demand deposits have narrowed to LKR129bn from a previous
level of LKR136bn which is a dip of 47 and expensive time deposits have
grown by 125 Particularly this has been the companyrsquos strategy towards
generating more deposits in a low interest environment and mobilizing
them to grant more loans where the credit demand is high
Apart from that during the period borrowings have increased by more than26 where a considerable portion coming from banks and financial
institutions in Sri Lanka
Net interest income
Net interest income for the 1QFY11 has dipped by 56 YoY and 6 QoQ
due to decreased income on other interest earning assets (inclusive of
government securities) and increase in overall interest expenses
Non Interest income
During 1QFY11 the bank has recorded a 469 YoY improvement in noninterest income While the same income compared with the previous
quarter it is a dip of a massive 53 However the dip of 53 QoQ is due to
the decline in income generated through other sources including
investments and fee based income As a result the significance of non
interest income in operating income has come down in 1QFY2011 to 32 as
oppose to a previous level of 49 (4QFY10)
Net income Operating income
The net interest income is a 66 increase on a YoY basis despite a dip of
18 QoQ due to the contraction in both net interest income and
noninterest income
Noninterest expenses
862019 SAMPATH BANK PLC- review1Q 2011
httpslidepdfcomreaderfullsampath-bank-plc-review1q-2011 613
Page 5
SAMPATH BANK PLC
Noninterest expenses
Noninterest expenses have increased by 255 YoY and 10 QoQ The
increase is a result of the organic growth strategies of the bank In this
regard new branch openings and new recruitments accompanied by recent
wage hike have increased personnel costs and premises and establishment
expenses by 146 and 289 YoY respectively
Provision for bad and doubtful debts and loans written off
The loan loss provisions have shown a reversal during the period on the
back of dip in allocations for specific provision by 74 (QoQ) and
improvement in recoveries by more than 100 (QoQ)
VAT on financial services and corporate tax
VAT on financial services and Corporate tax have shown a clear dip of more
than 30 YoY and 88 YoY respectively owing to the rate change from 20
to 12 on VAT on financial services and 35 to 28 on corporate taxes
Net profit
The profit attributable to equity holders of SAMP is an improvement of
638 YoY But at the same time compared with the previous quarter it is a
decline of 27 However apart from the loan book growth and
strengthened deposit base the net profit has improved YoY on the back of
accelerated non interest income reversal of provisions and overall tax
reductions
Asset Quality
The asset mix has historically been dominated by loans and advances which
accounts f or 66 of the bankrsquos assets as at 31st
December 2010 Liquid
assets in the form of cash and investment securities have made up 24 of
its asset base as at the same date and going forward we expect the bankrsquos
asset base to reflect its historical composition as SAMP expands its loan
base in light of the improving macroeconomic environment
Therefore as a consequence of more weight given to loans and advances
within the asset mix the quality of the bankrsquos assets is highly dependent on
the quality of the loan portfolio
In addition the loan portfolio of SAMP is more diversified covering all the
credit demanding sectors whilst putting more weight on Pawning (21 of
the overall loans) Trading (16) Manufacturing (154) Agriculture and
Fishing (10) Particularly in FY2010 the non performing loans and
advances as a percentage of total gross loans and advances have come
862019 SAMPATH BANK PLC- review1Q 2011
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Page 6
SAMPATH BANK PLC
down to 45 as opposed to a previous level of 86 and during the 1QFY11
this has further come down to 41 depicting an improvement in the asset
quality Consequently the improvement in the ratio can be attributable to
the awakening economic activities bankrsquos stringent loan policies and
putting more emphasis on Pawning which is a loan backed by gold
collateral However during the 3 months period the non performing loansand advances show a 33 due to a loan growth of 138 and a revision of
regulations in categorizing the non performing loans
Furthermore SAMPrsquos provisioning is deemed strong as the bankrsquos gross NPL
coverage is 795 in FY2010 which has improved from a lower base of
499 in FY2009
Finally the provision for decline in value of investments has shown a
reversal over the 3 months period indicating an improvement of the quality
of investment securities
862019 SAMPATH BANK PLC- review1Q 2011
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Page 7
SAMPATH BANK PLC
Funding and Liquidity
SAMPrsquos funding and liquidity positions are adequate backed by a funding
base that is dominated by low cost deposits and shareholdersrsquo funds
Bankrsquos funding base is dominated by deposits which account for 82 of its
total funding as at end 1Q2011 (end 4Q2010 83) this was followed by
shareholders funds (9) and borrowings (9) Also during the 1QFY2011
the banks deposit base expanded 79 to LKR1622 bn irrespective of lower
rates offered by the overall banking sector
The deposit base is comprised of 46 short term deposits (including
demand deposits and savings deposits) and 54 long term deposits (term deposits) Even though the long term deposits deemed to be expensive the
bank has continued with expanding long term deposits Consequently the
time deposit growth for 1QFY2011 is 125 However bankrsquos underlying
strategy had been collecting more deposits in a competitive market and
mobilizing them to enhance loan volume despite compressed margins
Moreover the bankrsquos loan to deposit ratio is 86 as at end 1QFY2011
compared with a ratio of 82 at the end of FY2010 thus an indication of
bankrsquos active lending and condensed liquidity position
Nevertheless Bank is maintaining its liquidity above the regulatory levels
where the liquid assets are in the form of government securities balance
with the Central Bank and cash and short term funds
However during the period the bank has reduced its exposure to
government securities due to lower yields hence liquidity has come down
to 2320 from a previous level of 2629 in 4QFY2010 yet satisfying the
regulatory minimum of 20
862019 SAMPATH BANK PLC- review1Q 2011
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Page 8
SAMPATH BANK PLC
Capital Adequacy
SAMPrsquos capital adequacy is deemed strong given the Core capital and Total
capital adequacy ratios stands at 951 (minimum 5) and 1141
(minimum 10) respectively However the current levels are below the
previous ratios of Core capital 1071 and Total capital 1291 which is
due to the bankrsquos expansion strategies including an impressive loan growth
of 138 over the 1Q2011
862019 SAMPATH BANK PLC- review1Q 2011
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Page 9
SAMPATH BANK PLC
Future Outlook
The economic developments taking place throughout the country
coupled with low interest rates have posed a continued demand
for credit Hence this is a good opportunity for the bank to further
expand its loan portfolio being benefited through the availability
of funding The current levels of capital adequacy ratios tier 1
95 (minimum is 5) total capital adequacy ratio 1141
(minimum is 10) are well above the regulatory minimums so
that the bank has adequate buffer to absorb more risk and expand
the loan book
Adding further the bankrsquos novel scrip dividend policy would further
strengthen the fund availability as a consequence of dividends getting
injected back to the company rather than being paid out from the bank
SAMPrsquos organic growth strategies in terms of branch expansions
and new product developments would yield favorable resultsgoing forward During the FY2010 the bank has established more
than 40 branches and this momentum would be further continued
with the objective of covering all the unbanked areas and fulfilling
all the banking needs of the nation However the expansion
strategies would expand the cost base where the current cost to
income ratio is 53 slightly above the sector This is due to the
fact that an average new branch taking 15- 2 years to break even
and during this period the bank is not generating adequate
revenues to curtail the expenditure base But once a new branch
reaches its breakeven level it would boost the overall income
levels bringing down the cost to income ratios to par with thesector
The Pawning segment of the bank comprise of 23 of the overall
loan portfolio as at 31st
December 2010 and during FY2010 total
loans granted under pawning has shown a massive growth of
535 YoY This segment has its ability to grow further Generally
pawning is favorable to a bank due to the loan being gold backed
hence generating no risk of nonperforming loan losses and thereby
improving asset quality while strengthening the bottom line due to
no allowances required
Apart from SAMPrsquos organic growth strategies the bank is also
laying plans for inorganic growth Accordingly these would enhance
the competitive position of the bank as while generating
economies of scale
862019 SAMPATH BANK PLC- review1Q 2011
httpslidepdfcomreaderfullsampath-bank-plc-review1q-2011 1113
Page
10
SAMPATH BANK PLC
Risk Management
The key risk categories of credit risk market risk liquidity risk operational
risk and reputation risk are common to every bank therefore in order to
mitigate these risks SAMP is adopting an integrated approach with a clear
understanding of these multiple risks
Credit risk is arising from the inability of a borrower or counter party to
meet their obligations in accordance with the agreed terms In this regard
in order to mitigate the credit risk SAMP has a well structured and
standardized credit approval process and a post credit monitoring
mechanism Consequently these stringent policies and practices have
resulted in improving the NPL ratios of the company (Gross NPL for as at
31st
March 2011 is 364 and improvement from a previous level of 395
as at 31st
December 2010)
Market risk management- this is the risk that can incur through movementsin equity and interest rate markets currency exchange rates and
commodity prices However the committees are placed in handling these
risks via planning the optimum mix of assets and liabilities stipulating the
liquidity gap position and formulating benchmark lending rates etc
Liquidity risk management
Liquidity risk arises due to unmatched maturities of assets and liabilities
These would deteriorate the bankrsquos ability to honor its commitment as and
when they fall due However SAMP manages these risks through their
deposits and investment portfolios
Reputational risk management
Reputational risks arise due to the negative effect of public opinion which
can cause damage to the brand image The bank has mitigated this by
implementing a customer grievance handling policy
862019 SAMPATH BANK PLC- review1Q 2011
httpslidepdfcomreaderfullsampath-bank-plc-review1q-2011 1213
Page
11
SAMPATH BANK PLC
Valuation
Share offers good value at 88x forecast 2011 net profit
For the FY2011E the profits are forecasted considering corporate tax
revisions (35 to 20) and the expected credit growth in the low interest
economy The earnings would approximate to LKR 49510 mn in FY2011
and LKR 53159 mn in FY2012
Having hit a low of LKR1402 in May 2010 SAMPrsquos share price has risen
strongly by 972 YTD Following this gain SAMP trades at 88X projected
FY11E net profit whilst on a PER of 82X for FY12E forecasted profit Based
on an analysis of a historic 52 week price movement we derived a price
movement of +-5001 on a mean of LKR24144 Hence the flux is
approximately +-21 Furthermore if it is assumed that the same upside
price movement is seen pushing the price to LKR33101 (from a current
level of LKR2800) the forward PE multiples would be 1045X for FY11E and
973X for FY12E
Furthermore when adjusting SAMPrsquos returns to its risk (deviation of the
share price) sharp ratio of the counter is at 217 whilst the Banking Finance
and Insurance sector is at 305 SAMPrsquos return volatility is much higher at
29 as opposed to the sectorrsquos deviation of 20 over the past 52 week
trading period Hence SAMP shows a marginal volatility in its return
compared with the sector
862019 SAMPATH BANK PLC- review1Q 2011
httpslidepdfcomreaderfullsampath-bank-plc-review1q-2011 1313
Page
SAMPATH BANK PLC
Researchhelliphelliphelliphelliphelliphelliphelliphellip
d of Research Saminda Weerasinghe Senior Analyst Amali Perera
11)5320250 (94-11)5320256
indaasiacapitallk amaliasiacapitallk
porates Economy
ela Rasheed (94-11)5320252 Umayangana Randeniya (94-11)5320254
wan De Silva (94-11)5320258 Dhanusha Pathirana (94-11)5320257
hani Perera (94-11)5320251 Nuwan Pradeep (94-11)5320257
oli Mallwaarachchi (94-11)5320360
mala Samarawickrama (94-11)5320253
hara Fernando (94-11)5320256
n Wijekoon (94-11)5320253
na Ukwatta (94-11)5320253
aleshelliphelliphelliphelliphelliphelliphelliphellip
STITUTIONAL SALES RETAIL SALES
ri Marikar (94-11) 5320224 077 3576868 sabriasiacapitallk Shiyam Subaulla (94-11) 5320218 0773502016 shiyamasiacashan Wijayakoon (94-11) 5320208 0777 713645 niroshanasiacapitallk Gagani Jayawardhana (94-11) 5320236 0714084953gaganiasiacap
az Aboobucker (94-11) 5320213 0777-727352 niyazasiacapitallk Priyantha Hingurage (94-11) 5320217 0773502015priyanthaasiara Hedigallage (94-11) 5320211 0777 713663 anuraasiacapitallk Neluka Rodrigo (94-11) 5320214 0777366280nelukaasiacaplaka Hapugoda (94-11-5320240 0777 256740 chelakaasiacapitallk Subeeth Perera (94-11) 5320227 0714042683subeethasiaca
minda Mahanama (94-11) 5320223 0777 556582 mahanamaasiacapitallk n Bibile (94-11) 5320238 0777 352032 hiranasiacapitallk
ANCHESbathgoda Asian Alliance Building No04 Sirimawo Bandaranayake Mw Kadawatha Asiri Perera 011-5734773 0773-692812 asiriasiacapitallk
unegala CSE 1st Floor Union Assurance Building No06 Rajapihilla Rd Kurunegala Asanka Samarakoon 037-5628844 0773-690749 asankaasiacapita
ara Asian Alliance Building No 312Galle Road Nupe Matara Sumeda Jayawardena041-5677525 0773-6873sumedaasiacapita
e Capital Reach Building 2nd Floor No 16A Gamini Mw Galle Ruchira Silva 091-5629998 0773-687027 ruchiraasiacapitLasitha Wijewardena 091-5676766 077-6681884lasithaasiacapita
E Floor CSE01-04 World Trade Centre Colombo ndash 1 Thushara Adhikari 011-5735122 0773-688202adhikariasiacapit
ombo Asia Asset Finance 1711 Station Road Negombo Uthpala Karunatilake 031-5676881 0773691685uthpalaasiacapit
nnappuwa No176 Negombo Road Katuneriya Sajith Iroshan 032 5673881 077 3740208 sajithasiacSandun Athulathmudali 032 5673882 077 2533331 srangaasia
RVICE CENTRESdy Capital Reach Building No165 Katugodella Veediya Kandy Nilupul Hettiarachchi 081-5628500 0773-691816nilupulasia
Radhika Hettiarachchi 081-5625577 0777-810694radhikaasiac
mbantota Hambanthota Chember of Commerce Thangalle Road Hambantota Gayan Anusha Muthumali 047-5679241 0772-351716Shermin Ranasinghe 0772378352 sherminasiacapitallk
para 2nd Floor TKS Building DS Senanayake Street Ampara Ravi De Mel 063-5679071 0772-681995 ravideasiacapital lkMadushanka Rathnayaka063-5679070 0779-036577 shankaasia
na 11-8 First Floor Stanley Road Jaffna Sutharshan 021-5671800 0772-395811suthanasiacapitallkNirmalan 021-5671801 0778-449773 nirmalasiacapitallk
ort has been prepared by Asia Wealths (Private) Limited The information and opinions contained herein has been compiled or arrived at based upon information obtained from sources believed to be reliable and in good faith Such information has not been independently verified and no guaranty
ntation or warranty express or implied is made as to its accuracy completeness or correctness reliability or suitability All such information and opinions are subject to change without notice This document is for information purposes only descriptions of any company or companies or their secu
ned herein are not intended to be complete and this document is not and should not be construed as an offer or solicitation of an offer to buy or sell any securities or other financial instruments In no event will Asia Securities be liable for any loss or damage including without limitation indirect
uential loss or damage or any loss or damage whatsoever arising out of or in connection with the use of this report and any reliance you place on such information is therefore strictly at your own risk curities may to the extent permissible by applicable law or regulation use the above material conclusions research or analysis in which they are based before the material is disseminated to their customers Not all customers will receive the material at the same time Asia Securities their resp
representatives employees related persons andor Asia Securities may have a long or short position in any of the securities or other financial instruments mentioned or issuers described herein at any time and may make a purchase andor sale or offer to make a purchase andor sale of any su
nancial instruments from time to time in the open market or otherwise in each case either as principal or agent Asia Securities may make markets in securities or other financial instruments described in this publication in securities of issuers described herein or in securities underlying or
es Asia Securities may have recently underwritten the securities of an issuer mentioned herein
ormation contained in this report is for general information purposes only This report and its content is copyright of Asia Securities and all rights reserved This report- in whole or in part- may not except with the express written permission of Asia Securities be reproduced or distributed or c
ed in any material form by any means whether graphic electronic mechanical or any means Nor may you transmit it or store it in any other website or other form of electronic retrieval system Any unauthorised use of this report will result in immediate proceedings
862019 SAMPATH BANK PLC- review1Q 2011
httpslidepdfcomreaderfullsampath-bank-plc-review1q-2011 513
Page 4
SAMPATH BANK PLC
Interest expenses
The interest expenses for 1QFY10 have shown an increase of 44 YoY and
a 10 QoQ though the interest rates were relatively low This is due to a
34 YoYand 10 QoQ increase in interest paid on deposits while interest
paid on other interest bearing liabilities have elevated by 127 YoY and
QoQ
Particularly interest paid on deposits has increased due to accelerated
deposits by 79 over the 3 months period and a shift in the deposit mix
towards more expensive longer term deposits During the period less
expensive demand deposits have narrowed to LKR129bn from a previous
level of LKR136bn which is a dip of 47 and expensive time deposits have
grown by 125 Particularly this has been the companyrsquos strategy towards
generating more deposits in a low interest environment and mobilizing
them to grant more loans where the credit demand is high
Apart from that during the period borrowings have increased by more than26 where a considerable portion coming from banks and financial
institutions in Sri Lanka
Net interest income
Net interest income for the 1QFY11 has dipped by 56 YoY and 6 QoQ
due to decreased income on other interest earning assets (inclusive of
government securities) and increase in overall interest expenses
Non Interest income
During 1QFY11 the bank has recorded a 469 YoY improvement in noninterest income While the same income compared with the previous
quarter it is a dip of a massive 53 However the dip of 53 QoQ is due to
the decline in income generated through other sources including
investments and fee based income As a result the significance of non
interest income in operating income has come down in 1QFY2011 to 32 as
oppose to a previous level of 49 (4QFY10)
Net income Operating income
The net interest income is a 66 increase on a YoY basis despite a dip of
18 QoQ due to the contraction in both net interest income and
noninterest income
Noninterest expenses
862019 SAMPATH BANK PLC- review1Q 2011
httpslidepdfcomreaderfullsampath-bank-plc-review1q-2011 613
Page 5
SAMPATH BANK PLC
Noninterest expenses
Noninterest expenses have increased by 255 YoY and 10 QoQ The
increase is a result of the organic growth strategies of the bank In this
regard new branch openings and new recruitments accompanied by recent
wage hike have increased personnel costs and premises and establishment
expenses by 146 and 289 YoY respectively
Provision for bad and doubtful debts and loans written off
The loan loss provisions have shown a reversal during the period on the
back of dip in allocations for specific provision by 74 (QoQ) and
improvement in recoveries by more than 100 (QoQ)
VAT on financial services and corporate tax
VAT on financial services and Corporate tax have shown a clear dip of more
than 30 YoY and 88 YoY respectively owing to the rate change from 20
to 12 on VAT on financial services and 35 to 28 on corporate taxes
Net profit
The profit attributable to equity holders of SAMP is an improvement of
638 YoY But at the same time compared with the previous quarter it is a
decline of 27 However apart from the loan book growth and
strengthened deposit base the net profit has improved YoY on the back of
accelerated non interest income reversal of provisions and overall tax
reductions
Asset Quality
The asset mix has historically been dominated by loans and advances which
accounts f or 66 of the bankrsquos assets as at 31st
December 2010 Liquid
assets in the form of cash and investment securities have made up 24 of
its asset base as at the same date and going forward we expect the bankrsquos
asset base to reflect its historical composition as SAMP expands its loan
base in light of the improving macroeconomic environment
Therefore as a consequence of more weight given to loans and advances
within the asset mix the quality of the bankrsquos assets is highly dependent on
the quality of the loan portfolio
In addition the loan portfolio of SAMP is more diversified covering all the
credit demanding sectors whilst putting more weight on Pawning (21 of
the overall loans) Trading (16) Manufacturing (154) Agriculture and
Fishing (10) Particularly in FY2010 the non performing loans and
advances as a percentage of total gross loans and advances have come
862019 SAMPATH BANK PLC- review1Q 2011
httpslidepdfcomreaderfullsampath-bank-plc-review1q-2011 713
Page 6
SAMPATH BANK PLC
down to 45 as opposed to a previous level of 86 and during the 1QFY11
this has further come down to 41 depicting an improvement in the asset
quality Consequently the improvement in the ratio can be attributable to
the awakening economic activities bankrsquos stringent loan policies and
putting more emphasis on Pawning which is a loan backed by gold
collateral However during the 3 months period the non performing loansand advances show a 33 due to a loan growth of 138 and a revision of
regulations in categorizing the non performing loans
Furthermore SAMPrsquos provisioning is deemed strong as the bankrsquos gross NPL
coverage is 795 in FY2010 which has improved from a lower base of
499 in FY2009
Finally the provision for decline in value of investments has shown a
reversal over the 3 months period indicating an improvement of the quality
of investment securities
862019 SAMPATH BANK PLC- review1Q 2011
httpslidepdfcomreaderfullsampath-bank-plc-review1q-2011 813
Page 7
SAMPATH BANK PLC
Funding and Liquidity
SAMPrsquos funding and liquidity positions are adequate backed by a funding
base that is dominated by low cost deposits and shareholdersrsquo funds
Bankrsquos funding base is dominated by deposits which account for 82 of its
total funding as at end 1Q2011 (end 4Q2010 83) this was followed by
shareholders funds (9) and borrowings (9) Also during the 1QFY2011
the banks deposit base expanded 79 to LKR1622 bn irrespective of lower
rates offered by the overall banking sector
The deposit base is comprised of 46 short term deposits (including
demand deposits and savings deposits) and 54 long term deposits (term deposits) Even though the long term deposits deemed to be expensive the
bank has continued with expanding long term deposits Consequently the
time deposit growth for 1QFY2011 is 125 However bankrsquos underlying
strategy had been collecting more deposits in a competitive market and
mobilizing them to enhance loan volume despite compressed margins
Moreover the bankrsquos loan to deposit ratio is 86 as at end 1QFY2011
compared with a ratio of 82 at the end of FY2010 thus an indication of
bankrsquos active lending and condensed liquidity position
Nevertheless Bank is maintaining its liquidity above the regulatory levels
where the liquid assets are in the form of government securities balance
with the Central Bank and cash and short term funds
However during the period the bank has reduced its exposure to
government securities due to lower yields hence liquidity has come down
to 2320 from a previous level of 2629 in 4QFY2010 yet satisfying the
regulatory minimum of 20
862019 SAMPATH BANK PLC- review1Q 2011
httpslidepdfcomreaderfullsampath-bank-plc-review1q-2011 913
Page 8
SAMPATH BANK PLC
Capital Adequacy
SAMPrsquos capital adequacy is deemed strong given the Core capital and Total
capital adequacy ratios stands at 951 (minimum 5) and 1141
(minimum 10) respectively However the current levels are below the
previous ratios of Core capital 1071 and Total capital 1291 which is
due to the bankrsquos expansion strategies including an impressive loan growth
of 138 over the 1Q2011
862019 SAMPATH BANK PLC- review1Q 2011
httpslidepdfcomreaderfullsampath-bank-plc-review1q-2011 1013
Page 9
SAMPATH BANK PLC
Future Outlook
The economic developments taking place throughout the country
coupled with low interest rates have posed a continued demand
for credit Hence this is a good opportunity for the bank to further
expand its loan portfolio being benefited through the availability
of funding The current levels of capital adequacy ratios tier 1
95 (minimum is 5) total capital adequacy ratio 1141
(minimum is 10) are well above the regulatory minimums so
that the bank has adequate buffer to absorb more risk and expand
the loan book
Adding further the bankrsquos novel scrip dividend policy would further
strengthen the fund availability as a consequence of dividends getting
injected back to the company rather than being paid out from the bank
SAMPrsquos organic growth strategies in terms of branch expansions
and new product developments would yield favorable resultsgoing forward During the FY2010 the bank has established more
than 40 branches and this momentum would be further continued
with the objective of covering all the unbanked areas and fulfilling
all the banking needs of the nation However the expansion
strategies would expand the cost base where the current cost to
income ratio is 53 slightly above the sector This is due to the
fact that an average new branch taking 15- 2 years to break even
and during this period the bank is not generating adequate
revenues to curtail the expenditure base But once a new branch
reaches its breakeven level it would boost the overall income
levels bringing down the cost to income ratios to par with thesector
The Pawning segment of the bank comprise of 23 of the overall
loan portfolio as at 31st
December 2010 and during FY2010 total
loans granted under pawning has shown a massive growth of
535 YoY This segment has its ability to grow further Generally
pawning is favorable to a bank due to the loan being gold backed
hence generating no risk of nonperforming loan losses and thereby
improving asset quality while strengthening the bottom line due to
no allowances required
Apart from SAMPrsquos organic growth strategies the bank is also
laying plans for inorganic growth Accordingly these would enhance
the competitive position of the bank as while generating
economies of scale
862019 SAMPATH BANK PLC- review1Q 2011
httpslidepdfcomreaderfullsampath-bank-plc-review1q-2011 1113
Page
10
SAMPATH BANK PLC
Risk Management
The key risk categories of credit risk market risk liquidity risk operational
risk and reputation risk are common to every bank therefore in order to
mitigate these risks SAMP is adopting an integrated approach with a clear
understanding of these multiple risks
Credit risk is arising from the inability of a borrower or counter party to
meet their obligations in accordance with the agreed terms In this regard
in order to mitigate the credit risk SAMP has a well structured and
standardized credit approval process and a post credit monitoring
mechanism Consequently these stringent policies and practices have
resulted in improving the NPL ratios of the company (Gross NPL for as at
31st
March 2011 is 364 and improvement from a previous level of 395
as at 31st
December 2010)
Market risk management- this is the risk that can incur through movementsin equity and interest rate markets currency exchange rates and
commodity prices However the committees are placed in handling these
risks via planning the optimum mix of assets and liabilities stipulating the
liquidity gap position and formulating benchmark lending rates etc
Liquidity risk management
Liquidity risk arises due to unmatched maturities of assets and liabilities
These would deteriorate the bankrsquos ability to honor its commitment as and
when they fall due However SAMP manages these risks through their
deposits and investment portfolios
Reputational risk management
Reputational risks arise due to the negative effect of public opinion which
can cause damage to the brand image The bank has mitigated this by
implementing a customer grievance handling policy
862019 SAMPATH BANK PLC- review1Q 2011
httpslidepdfcomreaderfullsampath-bank-plc-review1q-2011 1213
Page
11
SAMPATH BANK PLC
Valuation
Share offers good value at 88x forecast 2011 net profit
For the FY2011E the profits are forecasted considering corporate tax
revisions (35 to 20) and the expected credit growth in the low interest
economy The earnings would approximate to LKR 49510 mn in FY2011
and LKR 53159 mn in FY2012
Having hit a low of LKR1402 in May 2010 SAMPrsquos share price has risen
strongly by 972 YTD Following this gain SAMP trades at 88X projected
FY11E net profit whilst on a PER of 82X for FY12E forecasted profit Based
on an analysis of a historic 52 week price movement we derived a price
movement of +-5001 on a mean of LKR24144 Hence the flux is
approximately +-21 Furthermore if it is assumed that the same upside
price movement is seen pushing the price to LKR33101 (from a current
level of LKR2800) the forward PE multiples would be 1045X for FY11E and
973X for FY12E
Furthermore when adjusting SAMPrsquos returns to its risk (deviation of the
share price) sharp ratio of the counter is at 217 whilst the Banking Finance
and Insurance sector is at 305 SAMPrsquos return volatility is much higher at
29 as opposed to the sectorrsquos deviation of 20 over the past 52 week
trading period Hence SAMP shows a marginal volatility in its return
compared with the sector
862019 SAMPATH BANK PLC- review1Q 2011
httpslidepdfcomreaderfullsampath-bank-plc-review1q-2011 1313
Page
SAMPATH BANK PLC
Researchhelliphelliphelliphelliphelliphelliphelliphellip
d of Research Saminda Weerasinghe Senior Analyst Amali Perera
11)5320250 (94-11)5320256
indaasiacapitallk amaliasiacapitallk
porates Economy
ela Rasheed (94-11)5320252 Umayangana Randeniya (94-11)5320254
wan De Silva (94-11)5320258 Dhanusha Pathirana (94-11)5320257
hani Perera (94-11)5320251 Nuwan Pradeep (94-11)5320257
oli Mallwaarachchi (94-11)5320360
mala Samarawickrama (94-11)5320253
hara Fernando (94-11)5320256
n Wijekoon (94-11)5320253
na Ukwatta (94-11)5320253
aleshelliphelliphelliphelliphelliphelliphelliphellip
STITUTIONAL SALES RETAIL SALES
ri Marikar (94-11) 5320224 077 3576868 sabriasiacapitallk Shiyam Subaulla (94-11) 5320218 0773502016 shiyamasiacashan Wijayakoon (94-11) 5320208 0777 713645 niroshanasiacapitallk Gagani Jayawardhana (94-11) 5320236 0714084953gaganiasiacap
az Aboobucker (94-11) 5320213 0777-727352 niyazasiacapitallk Priyantha Hingurage (94-11) 5320217 0773502015priyanthaasiara Hedigallage (94-11) 5320211 0777 713663 anuraasiacapitallk Neluka Rodrigo (94-11) 5320214 0777366280nelukaasiacaplaka Hapugoda (94-11-5320240 0777 256740 chelakaasiacapitallk Subeeth Perera (94-11) 5320227 0714042683subeethasiaca
minda Mahanama (94-11) 5320223 0777 556582 mahanamaasiacapitallk n Bibile (94-11) 5320238 0777 352032 hiranasiacapitallk
ANCHESbathgoda Asian Alliance Building No04 Sirimawo Bandaranayake Mw Kadawatha Asiri Perera 011-5734773 0773-692812 asiriasiacapitallk
unegala CSE 1st Floor Union Assurance Building No06 Rajapihilla Rd Kurunegala Asanka Samarakoon 037-5628844 0773-690749 asankaasiacapita
ara Asian Alliance Building No 312Galle Road Nupe Matara Sumeda Jayawardena041-5677525 0773-6873sumedaasiacapita
e Capital Reach Building 2nd Floor No 16A Gamini Mw Galle Ruchira Silva 091-5629998 0773-687027 ruchiraasiacapitLasitha Wijewardena 091-5676766 077-6681884lasithaasiacapita
E Floor CSE01-04 World Trade Centre Colombo ndash 1 Thushara Adhikari 011-5735122 0773-688202adhikariasiacapit
ombo Asia Asset Finance 1711 Station Road Negombo Uthpala Karunatilake 031-5676881 0773691685uthpalaasiacapit
nnappuwa No176 Negombo Road Katuneriya Sajith Iroshan 032 5673881 077 3740208 sajithasiacSandun Athulathmudali 032 5673882 077 2533331 srangaasia
RVICE CENTRESdy Capital Reach Building No165 Katugodella Veediya Kandy Nilupul Hettiarachchi 081-5628500 0773-691816nilupulasia
Radhika Hettiarachchi 081-5625577 0777-810694radhikaasiac
mbantota Hambanthota Chember of Commerce Thangalle Road Hambantota Gayan Anusha Muthumali 047-5679241 0772-351716Shermin Ranasinghe 0772378352 sherminasiacapitallk
para 2nd Floor TKS Building DS Senanayake Street Ampara Ravi De Mel 063-5679071 0772-681995 ravideasiacapital lkMadushanka Rathnayaka063-5679070 0779-036577 shankaasia
na 11-8 First Floor Stanley Road Jaffna Sutharshan 021-5671800 0772-395811suthanasiacapitallkNirmalan 021-5671801 0778-449773 nirmalasiacapitallk
ort has been prepared by Asia Wealths (Private) Limited The information and opinions contained herein has been compiled or arrived at based upon information obtained from sources believed to be reliable and in good faith Such information has not been independently verified and no guaranty
ntation or warranty express or implied is made as to its accuracy completeness or correctness reliability or suitability All such information and opinions are subject to change without notice This document is for information purposes only descriptions of any company or companies or their secu
ned herein are not intended to be complete and this document is not and should not be construed as an offer or solicitation of an offer to buy or sell any securities or other financial instruments In no event will Asia Securities be liable for any loss or damage including without limitation indirect
uential loss or damage or any loss or damage whatsoever arising out of or in connection with the use of this report and any reliance you place on such information is therefore strictly at your own risk curities may to the extent permissible by applicable law or regulation use the above material conclusions research or analysis in which they are based before the material is disseminated to their customers Not all customers will receive the material at the same time Asia Securities their resp
representatives employees related persons andor Asia Securities may have a long or short position in any of the securities or other financial instruments mentioned or issuers described herein at any time and may make a purchase andor sale or offer to make a purchase andor sale of any su
nancial instruments from time to time in the open market or otherwise in each case either as principal or agent Asia Securities may make markets in securities or other financial instruments described in this publication in securities of issuers described herein or in securities underlying or
es Asia Securities may have recently underwritten the securities of an issuer mentioned herein
ormation contained in this report is for general information purposes only This report and its content is copyright of Asia Securities and all rights reserved This report- in whole or in part- may not except with the express written permission of Asia Securities be reproduced or distributed or c
ed in any material form by any means whether graphic electronic mechanical or any means Nor may you transmit it or store it in any other website or other form of electronic retrieval system Any unauthorised use of this report will result in immediate proceedings
862019 SAMPATH BANK PLC- review1Q 2011
httpslidepdfcomreaderfullsampath-bank-plc-review1q-2011 613
Page 5
SAMPATH BANK PLC
Noninterest expenses
Noninterest expenses have increased by 255 YoY and 10 QoQ The
increase is a result of the organic growth strategies of the bank In this
regard new branch openings and new recruitments accompanied by recent
wage hike have increased personnel costs and premises and establishment
expenses by 146 and 289 YoY respectively
Provision for bad and doubtful debts and loans written off
The loan loss provisions have shown a reversal during the period on the
back of dip in allocations for specific provision by 74 (QoQ) and
improvement in recoveries by more than 100 (QoQ)
VAT on financial services and corporate tax
VAT on financial services and Corporate tax have shown a clear dip of more
than 30 YoY and 88 YoY respectively owing to the rate change from 20
to 12 on VAT on financial services and 35 to 28 on corporate taxes
Net profit
The profit attributable to equity holders of SAMP is an improvement of
638 YoY But at the same time compared with the previous quarter it is a
decline of 27 However apart from the loan book growth and
strengthened deposit base the net profit has improved YoY on the back of
accelerated non interest income reversal of provisions and overall tax
reductions
Asset Quality
The asset mix has historically been dominated by loans and advances which
accounts f or 66 of the bankrsquos assets as at 31st
December 2010 Liquid
assets in the form of cash and investment securities have made up 24 of
its asset base as at the same date and going forward we expect the bankrsquos
asset base to reflect its historical composition as SAMP expands its loan
base in light of the improving macroeconomic environment
Therefore as a consequence of more weight given to loans and advances
within the asset mix the quality of the bankrsquos assets is highly dependent on
the quality of the loan portfolio
In addition the loan portfolio of SAMP is more diversified covering all the
credit demanding sectors whilst putting more weight on Pawning (21 of
the overall loans) Trading (16) Manufacturing (154) Agriculture and
Fishing (10) Particularly in FY2010 the non performing loans and
advances as a percentage of total gross loans and advances have come
862019 SAMPATH BANK PLC- review1Q 2011
httpslidepdfcomreaderfullsampath-bank-plc-review1q-2011 713
Page 6
SAMPATH BANK PLC
down to 45 as opposed to a previous level of 86 and during the 1QFY11
this has further come down to 41 depicting an improvement in the asset
quality Consequently the improvement in the ratio can be attributable to
the awakening economic activities bankrsquos stringent loan policies and
putting more emphasis on Pawning which is a loan backed by gold
collateral However during the 3 months period the non performing loansand advances show a 33 due to a loan growth of 138 and a revision of
regulations in categorizing the non performing loans
Furthermore SAMPrsquos provisioning is deemed strong as the bankrsquos gross NPL
coverage is 795 in FY2010 which has improved from a lower base of
499 in FY2009
Finally the provision for decline in value of investments has shown a
reversal over the 3 months period indicating an improvement of the quality
of investment securities
862019 SAMPATH BANK PLC- review1Q 2011
httpslidepdfcomreaderfullsampath-bank-plc-review1q-2011 813
Page 7
SAMPATH BANK PLC
Funding and Liquidity
SAMPrsquos funding and liquidity positions are adequate backed by a funding
base that is dominated by low cost deposits and shareholdersrsquo funds
Bankrsquos funding base is dominated by deposits which account for 82 of its
total funding as at end 1Q2011 (end 4Q2010 83) this was followed by
shareholders funds (9) and borrowings (9) Also during the 1QFY2011
the banks deposit base expanded 79 to LKR1622 bn irrespective of lower
rates offered by the overall banking sector
The deposit base is comprised of 46 short term deposits (including
demand deposits and savings deposits) and 54 long term deposits (term deposits) Even though the long term deposits deemed to be expensive the
bank has continued with expanding long term deposits Consequently the
time deposit growth for 1QFY2011 is 125 However bankrsquos underlying
strategy had been collecting more deposits in a competitive market and
mobilizing them to enhance loan volume despite compressed margins
Moreover the bankrsquos loan to deposit ratio is 86 as at end 1QFY2011
compared with a ratio of 82 at the end of FY2010 thus an indication of
bankrsquos active lending and condensed liquidity position
Nevertheless Bank is maintaining its liquidity above the regulatory levels
where the liquid assets are in the form of government securities balance
with the Central Bank and cash and short term funds
However during the period the bank has reduced its exposure to
government securities due to lower yields hence liquidity has come down
to 2320 from a previous level of 2629 in 4QFY2010 yet satisfying the
regulatory minimum of 20
862019 SAMPATH BANK PLC- review1Q 2011
httpslidepdfcomreaderfullsampath-bank-plc-review1q-2011 913
Page 8
SAMPATH BANK PLC
Capital Adequacy
SAMPrsquos capital adequacy is deemed strong given the Core capital and Total
capital adequacy ratios stands at 951 (minimum 5) and 1141
(minimum 10) respectively However the current levels are below the
previous ratios of Core capital 1071 and Total capital 1291 which is
due to the bankrsquos expansion strategies including an impressive loan growth
of 138 over the 1Q2011
862019 SAMPATH BANK PLC- review1Q 2011
httpslidepdfcomreaderfullsampath-bank-plc-review1q-2011 1013
Page 9
SAMPATH BANK PLC
Future Outlook
The economic developments taking place throughout the country
coupled with low interest rates have posed a continued demand
for credit Hence this is a good opportunity for the bank to further
expand its loan portfolio being benefited through the availability
of funding The current levels of capital adequacy ratios tier 1
95 (minimum is 5) total capital adequacy ratio 1141
(minimum is 10) are well above the regulatory minimums so
that the bank has adequate buffer to absorb more risk and expand
the loan book
Adding further the bankrsquos novel scrip dividend policy would further
strengthen the fund availability as a consequence of dividends getting
injected back to the company rather than being paid out from the bank
SAMPrsquos organic growth strategies in terms of branch expansions
and new product developments would yield favorable resultsgoing forward During the FY2010 the bank has established more
than 40 branches and this momentum would be further continued
with the objective of covering all the unbanked areas and fulfilling
all the banking needs of the nation However the expansion
strategies would expand the cost base where the current cost to
income ratio is 53 slightly above the sector This is due to the
fact that an average new branch taking 15- 2 years to break even
and during this period the bank is not generating adequate
revenues to curtail the expenditure base But once a new branch
reaches its breakeven level it would boost the overall income
levels bringing down the cost to income ratios to par with thesector
The Pawning segment of the bank comprise of 23 of the overall
loan portfolio as at 31st
December 2010 and during FY2010 total
loans granted under pawning has shown a massive growth of
535 YoY This segment has its ability to grow further Generally
pawning is favorable to a bank due to the loan being gold backed
hence generating no risk of nonperforming loan losses and thereby
improving asset quality while strengthening the bottom line due to
no allowances required
Apart from SAMPrsquos organic growth strategies the bank is also
laying plans for inorganic growth Accordingly these would enhance
the competitive position of the bank as while generating
economies of scale
862019 SAMPATH BANK PLC- review1Q 2011
httpslidepdfcomreaderfullsampath-bank-plc-review1q-2011 1113
Page
10
SAMPATH BANK PLC
Risk Management
The key risk categories of credit risk market risk liquidity risk operational
risk and reputation risk are common to every bank therefore in order to
mitigate these risks SAMP is adopting an integrated approach with a clear
understanding of these multiple risks
Credit risk is arising from the inability of a borrower or counter party to
meet their obligations in accordance with the agreed terms In this regard
in order to mitigate the credit risk SAMP has a well structured and
standardized credit approval process and a post credit monitoring
mechanism Consequently these stringent policies and practices have
resulted in improving the NPL ratios of the company (Gross NPL for as at
31st
March 2011 is 364 and improvement from a previous level of 395
as at 31st
December 2010)
Market risk management- this is the risk that can incur through movementsin equity and interest rate markets currency exchange rates and
commodity prices However the committees are placed in handling these
risks via planning the optimum mix of assets and liabilities stipulating the
liquidity gap position and formulating benchmark lending rates etc
Liquidity risk management
Liquidity risk arises due to unmatched maturities of assets and liabilities
These would deteriorate the bankrsquos ability to honor its commitment as and
when they fall due However SAMP manages these risks through their
deposits and investment portfolios
Reputational risk management
Reputational risks arise due to the negative effect of public opinion which
can cause damage to the brand image The bank has mitigated this by
implementing a customer grievance handling policy
862019 SAMPATH BANK PLC- review1Q 2011
httpslidepdfcomreaderfullsampath-bank-plc-review1q-2011 1213
Page
11
SAMPATH BANK PLC
Valuation
Share offers good value at 88x forecast 2011 net profit
For the FY2011E the profits are forecasted considering corporate tax
revisions (35 to 20) and the expected credit growth in the low interest
economy The earnings would approximate to LKR 49510 mn in FY2011
and LKR 53159 mn in FY2012
Having hit a low of LKR1402 in May 2010 SAMPrsquos share price has risen
strongly by 972 YTD Following this gain SAMP trades at 88X projected
FY11E net profit whilst on a PER of 82X for FY12E forecasted profit Based
on an analysis of a historic 52 week price movement we derived a price
movement of +-5001 on a mean of LKR24144 Hence the flux is
approximately +-21 Furthermore if it is assumed that the same upside
price movement is seen pushing the price to LKR33101 (from a current
level of LKR2800) the forward PE multiples would be 1045X for FY11E and
973X for FY12E
Furthermore when adjusting SAMPrsquos returns to its risk (deviation of the
share price) sharp ratio of the counter is at 217 whilst the Banking Finance
and Insurance sector is at 305 SAMPrsquos return volatility is much higher at
29 as opposed to the sectorrsquos deviation of 20 over the past 52 week
trading period Hence SAMP shows a marginal volatility in its return
compared with the sector
862019 SAMPATH BANK PLC- review1Q 2011
httpslidepdfcomreaderfullsampath-bank-plc-review1q-2011 1313
Page
SAMPATH BANK PLC
Researchhelliphelliphelliphelliphelliphelliphelliphellip
d of Research Saminda Weerasinghe Senior Analyst Amali Perera
11)5320250 (94-11)5320256
indaasiacapitallk amaliasiacapitallk
porates Economy
ela Rasheed (94-11)5320252 Umayangana Randeniya (94-11)5320254
wan De Silva (94-11)5320258 Dhanusha Pathirana (94-11)5320257
hani Perera (94-11)5320251 Nuwan Pradeep (94-11)5320257
oli Mallwaarachchi (94-11)5320360
mala Samarawickrama (94-11)5320253
hara Fernando (94-11)5320256
n Wijekoon (94-11)5320253
na Ukwatta (94-11)5320253
aleshelliphelliphelliphelliphelliphelliphelliphellip
STITUTIONAL SALES RETAIL SALES
ri Marikar (94-11) 5320224 077 3576868 sabriasiacapitallk Shiyam Subaulla (94-11) 5320218 0773502016 shiyamasiacashan Wijayakoon (94-11) 5320208 0777 713645 niroshanasiacapitallk Gagani Jayawardhana (94-11) 5320236 0714084953gaganiasiacap
az Aboobucker (94-11) 5320213 0777-727352 niyazasiacapitallk Priyantha Hingurage (94-11) 5320217 0773502015priyanthaasiara Hedigallage (94-11) 5320211 0777 713663 anuraasiacapitallk Neluka Rodrigo (94-11) 5320214 0777366280nelukaasiacaplaka Hapugoda (94-11-5320240 0777 256740 chelakaasiacapitallk Subeeth Perera (94-11) 5320227 0714042683subeethasiaca
minda Mahanama (94-11) 5320223 0777 556582 mahanamaasiacapitallk n Bibile (94-11) 5320238 0777 352032 hiranasiacapitallk
ANCHESbathgoda Asian Alliance Building No04 Sirimawo Bandaranayake Mw Kadawatha Asiri Perera 011-5734773 0773-692812 asiriasiacapitallk
unegala CSE 1st Floor Union Assurance Building No06 Rajapihilla Rd Kurunegala Asanka Samarakoon 037-5628844 0773-690749 asankaasiacapita
ara Asian Alliance Building No 312Galle Road Nupe Matara Sumeda Jayawardena041-5677525 0773-6873sumedaasiacapita
e Capital Reach Building 2nd Floor No 16A Gamini Mw Galle Ruchira Silva 091-5629998 0773-687027 ruchiraasiacapitLasitha Wijewardena 091-5676766 077-6681884lasithaasiacapita
E Floor CSE01-04 World Trade Centre Colombo ndash 1 Thushara Adhikari 011-5735122 0773-688202adhikariasiacapit
ombo Asia Asset Finance 1711 Station Road Negombo Uthpala Karunatilake 031-5676881 0773691685uthpalaasiacapit
nnappuwa No176 Negombo Road Katuneriya Sajith Iroshan 032 5673881 077 3740208 sajithasiacSandun Athulathmudali 032 5673882 077 2533331 srangaasia
RVICE CENTRESdy Capital Reach Building No165 Katugodella Veediya Kandy Nilupul Hettiarachchi 081-5628500 0773-691816nilupulasia
Radhika Hettiarachchi 081-5625577 0777-810694radhikaasiac
mbantota Hambanthota Chember of Commerce Thangalle Road Hambantota Gayan Anusha Muthumali 047-5679241 0772-351716Shermin Ranasinghe 0772378352 sherminasiacapitallk
para 2nd Floor TKS Building DS Senanayake Street Ampara Ravi De Mel 063-5679071 0772-681995 ravideasiacapital lkMadushanka Rathnayaka063-5679070 0779-036577 shankaasia
na 11-8 First Floor Stanley Road Jaffna Sutharshan 021-5671800 0772-395811suthanasiacapitallkNirmalan 021-5671801 0778-449773 nirmalasiacapitallk
ort has been prepared by Asia Wealths (Private) Limited The information and opinions contained herein has been compiled or arrived at based upon information obtained from sources believed to be reliable and in good faith Such information has not been independently verified and no guaranty
ntation or warranty express or implied is made as to its accuracy completeness or correctness reliability or suitability All such information and opinions are subject to change without notice This document is for information purposes only descriptions of any company or companies or their secu
ned herein are not intended to be complete and this document is not and should not be construed as an offer or solicitation of an offer to buy or sell any securities or other financial instruments In no event will Asia Securities be liable for any loss or damage including without limitation indirect
uential loss or damage or any loss or damage whatsoever arising out of or in connection with the use of this report and any reliance you place on such information is therefore strictly at your own risk curities may to the extent permissible by applicable law or regulation use the above material conclusions research or analysis in which they are based before the material is disseminated to their customers Not all customers will receive the material at the same time Asia Securities their resp
representatives employees related persons andor Asia Securities may have a long or short position in any of the securities or other financial instruments mentioned or issuers described herein at any time and may make a purchase andor sale or offer to make a purchase andor sale of any su
nancial instruments from time to time in the open market or otherwise in each case either as principal or agent Asia Securities may make markets in securities or other financial instruments described in this publication in securities of issuers described herein or in securities underlying or
es Asia Securities may have recently underwritten the securities of an issuer mentioned herein
ormation contained in this report is for general information purposes only This report and its content is copyright of Asia Securities and all rights reserved This report- in whole or in part- may not except with the express written permission of Asia Securities be reproduced or distributed or c
ed in any material form by any means whether graphic electronic mechanical or any means Nor may you transmit it or store it in any other website or other form of electronic retrieval system Any unauthorised use of this report will result in immediate proceedings
862019 SAMPATH BANK PLC- review1Q 2011
httpslidepdfcomreaderfullsampath-bank-plc-review1q-2011 713
Page 6
SAMPATH BANK PLC
down to 45 as opposed to a previous level of 86 and during the 1QFY11
this has further come down to 41 depicting an improvement in the asset
quality Consequently the improvement in the ratio can be attributable to
the awakening economic activities bankrsquos stringent loan policies and
putting more emphasis on Pawning which is a loan backed by gold
collateral However during the 3 months period the non performing loansand advances show a 33 due to a loan growth of 138 and a revision of
regulations in categorizing the non performing loans
Furthermore SAMPrsquos provisioning is deemed strong as the bankrsquos gross NPL
coverage is 795 in FY2010 which has improved from a lower base of
499 in FY2009
Finally the provision for decline in value of investments has shown a
reversal over the 3 months period indicating an improvement of the quality
of investment securities
862019 SAMPATH BANK PLC- review1Q 2011
httpslidepdfcomreaderfullsampath-bank-plc-review1q-2011 813
Page 7
SAMPATH BANK PLC
Funding and Liquidity
SAMPrsquos funding and liquidity positions are adequate backed by a funding
base that is dominated by low cost deposits and shareholdersrsquo funds
Bankrsquos funding base is dominated by deposits which account for 82 of its
total funding as at end 1Q2011 (end 4Q2010 83) this was followed by
shareholders funds (9) and borrowings (9) Also during the 1QFY2011
the banks deposit base expanded 79 to LKR1622 bn irrespective of lower
rates offered by the overall banking sector
The deposit base is comprised of 46 short term deposits (including
demand deposits and savings deposits) and 54 long term deposits (term deposits) Even though the long term deposits deemed to be expensive the
bank has continued with expanding long term deposits Consequently the
time deposit growth for 1QFY2011 is 125 However bankrsquos underlying
strategy had been collecting more deposits in a competitive market and
mobilizing them to enhance loan volume despite compressed margins
Moreover the bankrsquos loan to deposit ratio is 86 as at end 1QFY2011
compared with a ratio of 82 at the end of FY2010 thus an indication of
bankrsquos active lending and condensed liquidity position
Nevertheless Bank is maintaining its liquidity above the regulatory levels
where the liquid assets are in the form of government securities balance
with the Central Bank and cash and short term funds
However during the period the bank has reduced its exposure to
government securities due to lower yields hence liquidity has come down
to 2320 from a previous level of 2629 in 4QFY2010 yet satisfying the
regulatory minimum of 20
862019 SAMPATH BANK PLC- review1Q 2011
httpslidepdfcomreaderfullsampath-bank-plc-review1q-2011 913
Page 8
SAMPATH BANK PLC
Capital Adequacy
SAMPrsquos capital adequacy is deemed strong given the Core capital and Total
capital adequacy ratios stands at 951 (minimum 5) and 1141
(minimum 10) respectively However the current levels are below the
previous ratios of Core capital 1071 and Total capital 1291 which is
due to the bankrsquos expansion strategies including an impressive loan growth
of 138 over the 1Q2011
862019 SAMPATH BANK PLC- review1Q 2011
httpslidepdfcomreaderfullsampath-bank-plc-review1q-2011 1013
Page 9
SAMPATH BANK PLC
Future Outlook
The economic developments taking place throughout the country
coupled with low interest rates have posed a continued demand
for credit Hence this is a good opportunity for the bank to further
expand its loan portfolio being benefited through the availability
of funding The current levels of capital adequacy ratios tier 1
95 (minimum is 5) total capital adequacy ratio 1141
(minimum is 10) are well above the regulatory minimums so
that the bank has adequate buffer to absorb more risk and expand
the loan book
Adding further the bankrsquos novel scrip dividend policy would further
strengthen the fund availability as a consequence of dividends getting
injected back to the company rather than being paid out from the bank
SAMPrsquos organic growth strategies in terms of branch expansions
and new product developments would yield favorable resultsgoing forward During the FY2010 the bank has established more
than 40 branches and this momentum would be further continued
with the objective of covering all the unbanked areas and fulfilling
all the banking needs of the nation However the expansion
strategies would expand the cost base where the current cost to
income ratio is 53 slightly above the sector This is due to the
fact that an average new branch taking 15- 2 years to break even
and during this period the bank is not generating adequate
revenues to curtail the expenditure base But once a new branch
reaches its breakeven level it would boost the overall income
levels bringing down the cost to income ratios to par with thesector
The Pawning segment of the bank comprise of 23 of the overall
loan portfolio as at 31st
December 2010 and during FY2010 total
loans granted under pawning has shown a massive growth of
535 YoY This segment has its ability to grow further Generally
pawning is favorable to a bank due to the loan being gold backed
hence generating no risk of nonperforming loan losses and thereby
improving asset quality while strengthening the bottom line due to
no allowances required
Apart from SAMPrsquos organic growth strategies the bank is also
laying plans for inorganic growth Accordingly these would enhance
the competitive position of the bank as while generating
economies of scale
862019 SAMPATH BANK PLC- review1Q 2011
httpslidepdfcomreaderfullsampath-bank-plc-review1q-2011 1113
Page
10
SAMPATH BANK PLC
Risk Management
The key risk categories of credit risk market risk liquidity risk operational
risk and reputation risk are common to every bank therefore in order to
mitigate these risks SAMP is adopting an integrated approach with a clear
understanding of these multiple risks
Credit risk is arising from the inability of a borrower or counter party to
meet their obligations in accordance with the agreed terms In this regard
in order to mitigate the credit risk SAMP has a well structured and
standardized credit approval process and a post credit monitoring
mechanism Consequently these stringent policies and practices have
resulted in improving the NPL ratios of the company (Gross NPL for as at
31st
March 2011 is 364 and improvement from a previous level of 395
as at 31st
December 2010)
Market risk management- this is the risk that can incur through movementsin equity and interest rate markets currency exchange rates and
commodity prices However the committees are placed in handling these
risks via planning the optimum mix of assets and liabilities stipulating the
liquidity gap position and formulating benchmark lending rates etc
Liquidity risk management
Liquidity risk arises due to unmatched maturities of assets and liabilities
These would deteriorate the bankrsquos ability to honor its commitment as and
when they fall due However SAMP manages these risks through their
deposits and investment portfolios
Reputational risk management
Reputational risks arise due to the negative effect of public opinion which
can cause damage to the brand image The bank has mitigated this by
implementing a customer grievance handling policy
862019 SAMPATH BANK PLC- review1Q 2011
httpslidepdfcomreaderfullsampath-bank-plc-review1q-2011 1213
Page
11
SAMPATH BANK PLC
Valuation
Share offers good value at 88x forecast 2011 net profit
For the FY2011E the profits are forecasted considering corporate tax
revisions (35 to 20) and the expected credit growth in the low interest
economy The earnings would approximate to LKR 49510 mn in FY2011
and LKR 53159 mn in FY2012
Having hit a low of LKR1402 in May 2010 SAMPrsquos share price has risen
strongly by 972 YTD Following this gain SAMP trades at 88X projected
FY11E net profit whilst on a PER of 82X for FY12E forecasted profit Based
on an analysis of a historic 52 week price movement we derived a price
movement of +-5001 on a mean of LKR24144 Hence the flux is
approximately +-21 Furthermore if it is assumed that the same upside
price movement is seen pushing the price to LKR33101 (from a current
level of LKR2800) the forward PE multiples would be 1045X for FY11E and
973X for FY12E
Furthermore when adjusting SAMPrsquos returns to its risk (deviation of the
share price) sharp ratio of the counter is at 217 whilst the Banking Finance
and Insurance sector is at 305 SAMPrsquos return volatility is much higher at
29 as opposed to the sectorrsquos deviation of 20 over the past 52 week
trading period Hence SAMP shows a marginal volatility in its return
compared with the sector
862019 SAMPATH BANK PLC- review1Q 2011
httpslidepdfcomreaderfullsampath-bank-plc-review1q-2011 1313
Page
SAMPATH BANK PLC
Researchhelliphelliphelliphelliphelliphelliphelliphellip
d of Research Saminda Weerasinghe Senior Analyst Amali Perera
11)5320250 (94-11)5320256
indaasiacapitallk amaliasiacapitallk
porates Economy
ela Rasheed (94-11)5320252 Umayangana Randeniya (94-11)5320254
wan De Silva (94-11)5320258 Dhanusha Pathirana (94-11)5320257
hani Perera (94-11)5320251 Nuwan Pradeep (94-11)5320257
oli Mallwaarachchi (94-11)5320360
mala Samarawickrama (94-11)5320253
hara Fernando (94-11)5320256
n Wijekoon (94-11)5320253
na Ukwatta (94-11)5320253
aleshelliphelliphelliphelliphelliphelliphelliphellip
STITUTIONAL SALES RETAIL SALES
ri Marikar (94-11) 5320224 077 3576868 sabriasiacapitallk Shiyam Subaulla (94-11) 5320218 0773502016 shiyamasiacashan Wijayakoon (94-11) 5320208 0777 713645 niroshanasiacapitallk Gagani Jayawardhana (94-11) 5320236 0714084953gaganiasiacap
az Aboobucker (94-11) 5320213 0777-727352 niyazasiacapitallk Priyantha Hingurage (94-11) 5320217 0773502015priyanthaasiara Hedigallage (94-11) 5320211 0777 713663 anuraasiacapitallk Neluka Rodrigo (94-11) 5320214 0777366280nelukaasiacaplaka Hapugoda (94-11-5320240 0777 256740 chelakaasiacapitallk Subeeth Perera (94-11) 5320227 0714042683subeethasiaca
minda Mahanama (94-11) 5320223 0777 556582 mahanamaasiacapitallk n Bibile (94-11) 5320238 0777 352032 hiranasiacapitallk
ANCHESbathgoda Asian Alliance Building No04 Sirimawo Bandaranayake Mw Kadawatha Asiri Perera 011-5734773 0773-692812 asiriasiacapitallk
unegala CSE 1st Floor Union Assurance Building No06 Rajapihilla Rd Kurunegala Asanka Samarakoon 037-5628844 0773-690749 asankaasiacapita
ara Asian Alliance Building No 312Galle Road Nupe Matara Sumeda Jayawardena041-5677525 0773-6873sumedaasiacapita
e Capital Reach Building 2nd Floor No 16A Gamini Mw Galle Ruchira Silva 091-5629998 0773-687027 ruchiraasiacapitLasitha Wijewardena 091-5676766 077-6681884lasithaasiacapita
E Floor CSE01-04 World Trade Centre Colombo ndash 1 Thushara Adhikari 011-5735122 0773-688202adhikariasiacapit
ombo Asia Asset Finance 1711 Station Road Negombo Uthpala Karunatilake 031-5676881 0773691685uthpalaasiacapit
nnappuwa No176 Negombo Road Katuneriya Sajith Iroshan 032 5673881 077 3740208 sajithasiacSandun Athulathmudali 032 5673882 077 2533331 srangaasia
RVICE CENTRESdy Capital Reach Building No165 Katugodella Veediya Kandy Nilupul Hettiarachchi 081-5628500 0773-691816nilupulasia
Radhika Hettiarachchi 081-5625577 0777-810694radhikaasiac
mbantota Hambanthota Chember of Commerce Thangalle Road Hambantota Gayan Anusha Muthumali 047-5679241 0772-351716Shermin Ranasinghe 0772378352 sherminasiacapitallk
para 2nd Floor TKS Building DS Senanayake Street Ampara Ravi De Mel 063-5679071 0772-681995 ravideasiacapital lkMadushanka Rathnayaka063-5679070 0779-036577 shankaasia
na 11-8 First Floor Stanley Road Jaffna Sutharshan 021-5671800 0772-395811suthanasiacapitallkNirmalan 021-5671801 0778-449773 nirmalasiacapitallk
ort has been prepared by Asia Wealths (Private) Limited The information and opinions contained herein has been compiled or arrived at based upon information obtained from sources believed to be reliable and in good faith Such information has not been independently verified and no guaranty
ntation or warranty express or implied is made as to its accuracy completeness or correctness reliability or suitability All such information and opinions are subject to change without notice This document is for information purposes only descriptions of any company or companies or their secu
ned herein are not intended to be complete and this document is not and should not be construed as an offer or solicitation of an offer to buy or sell any securities or other financial instruments In no event will Asia Securities be liable for any loss or damage including without limitation indirect
uential loss or damage or any loss or damage whatsoever arising out of or in connection with the use of this report and any reliance you place on such information is therefore strictly at your own risk curities may to the extent permissible by applicable law or regulation use the above material conclusions research or analysis in which they are based before the material is disseminated to their customers Not all customers will receive the material at the same time Asia Securities their resp
representatives employees related persons andor Asia Securities may have a long or short position in any of the securities or other financial instruments mentioned or issuers described herein at any time and may make a purchase andor sale or offer to make a purchase andor sale of any su
nancial instruments from time to time in the open market or otherwise in each case either as principal or agent Asia Securities may make markets in securities or other financial instruments described in this publication in securities of issuers described herein or in securities underlying or
es Asia Securities may have recently underwritten the securities of an issuer mentioned herein
ormation contained in this report is for general information purposes only This report and its content is copyright of Asia Securities and all rights reserved This report- in whole or in part- may not except with the express written permission of Asia Securities be reproduced or distributed or c
ed in any material form by any means whether graphic electronic mechanical or any means Nor may you transmit it or store it in any other website or other form of electronic retrieval system Any unauthorised use of this report will result in immediate proceedings
862019 SAMPATH BANK PLC- review1Q 2011
httpslidepdfcomreaderfullsampath-bank-plc-review1q-2011 813
Page 7
SAMPATH BANK PLC
Funding and Liquidity
SAMPrsquos funding and liquidity positions are adequate backed by a funding
base that is dominated by low cost deposits and shareholdersrsquo funds
Bankrsquos funding base is dominated by deposits which account for 82 of its
total funding as at end 1Q2011 (end 4Q2010 83) this was followed by
shareholders funds (9) and borrowings (9) Also during the 1QFY2011
the banks deposit base expanded 79 to LKR1622 bn irrespective of lower
rates offered by the overall banking sector
The deposit base is comprised of 46 short term deposits (including
demand deposits and savings deposits) and 54 long term deposits (term deposits) Even though the long term deposits deemed to be expensive the
bank has continued with expanding long term deposits Consequently the
time deposit growth for 1QFY2011 is 125 However bankrsquos underlying
strategy had been collecting more deposits in a competitive market and
mobilizing them to enhance loan volume despite compressed margins
Moreover the bankrsquos loan to deposit ratio is 86 as at end 1QFY2011
compared with a ratio of 82 at the end of FY2010 thus an indication of
bankrsquos active lending and condensed liquidity position
Nevertheless Bank is maintaining its liquidity above the regulatory levels
where the liquid assets are in the form of government securities balance
with the Central Bank and cash and short term funds
However during the period the bank has reduced its exposure to
government securities due to lower yields hence liquidity has come down
to 2320 from a previous level of 2629 in 4QFY2010 yet satisfying the
regulatory minimum of 20
862019 SAMPATH BANK PLC- review1Q 2011
httpslidepdfcomreaderfullsampath-bank-plc-review1q-2011 913
Page 8
SAMPATH BANK PLC
Capital Adequacy
SAMPrsquos capital adequacy is deemed strong given the Core capital and Total
capital adequacy ratios stands at 951 (minimum 5) and 1141
(minimum 10) respectively However the current levels are below the
previous ratios of Core capital 1071 and Total capital 1291 which is
due to the bankrsquos expansion strategies including an impressive loan growth
of 138 over the 1Q2011
862019 SAMPATH BANK PLC- review1Q 2011
httpslidepdfcomreaderfullsampath-bank-plc-review1q-2011 1013
Page 9
SAMPATH BANK PLC
Future Outlook
The economic developments taking place throughout the country
coupled with low interest rates have posed a continued demand
for credit Hence this is a good opportunity for the bank to further
expand its loan portfolio being benefited through the availability
of funding The current levels of capital adequacy ratios tier 1
95 (minimum is 5) total capital adequacy ratio 1141
(minimum is 10) are well above the regulatory minimums so
that the bank has adequate buffer to absorb more risk and expand
the loan book
Adding further the bankrsquos novel scrip dividend policy would further
strengthen the fund availability as a consequence of dividends getting
injected back to the company rather than being paid out from the bank
SAMPrsquos organic growth strategies in terms of branch expansions
and new product developments would yield favorable resultsgoing forward During the FY2010 the bank has established more
than 40 branches and this momentum would be further continued
with the objective of covering all the unbanked areas and fulfilling
all the banking needs of the nation However the expansion
strategies would expand the cost base where the current cost to
income ratio is 53 slightly above the sector This is due to the
fact that an average new branch taking 15- 2 years to break even
and during this period the bank is not generating adequate
revenues to curtail the expenditure base But once a new branch
reaches its breakeven level it would boost the overall income
levels bringing down the cost to income ratios to par with thesector
The Pawning segment of the bank comprise of 23 of the overall
loan portfolio as at 31st
December 2010 and during FY2010 total
loans granted under pawning has shown a massive growth of
535 YoY This segment has its ability to grow further Generally
pawning is favorable to a bank due to the loan being gold backed
hence generating no risk of nonperforming loan losses and thereby
improving asset quality while strengthening the bottom line due to
no allowances required
Apart from SAMPrsquos organic growth strategies the bank is also
laying plans for inorganic growth Accordingly these would enhance
the competitive position of the bank as while generating
economies of scale
862019 SAMPATH BANK PLC- review1Q 2011
httpslidepdfcomreaderfullsampath-bank-plc-review1q-2011 1113
Page
10
SAMPATH BANK PLC
Risk Management
The key risk categories of credit risk market risk liquidity risk operational
risk and reputation risk are common to every bank therefore in order to
mitigate these risks SAMP is adopting an integrated approach with a clear
understanding of these multiple risks
Credit risk is arising from the inability of a borrower or counter party to
meet their obligations in accordance with the agreed terms In this regard
in order to mitigate the credit risk SAMP has a well structured and
standardized credit approval process and a post credit monitoring
mechanism Consequently these stringent policies and practices have
resulted in improving the NPL ratios of the company (Gross NPL for as at
31st
March 2011 is 364 and improvement from a previous level of 395
as at 31st
December 2010)
Market risk management- this is the risk that can incur through movementsin equity and interest rate markets currency exchange rates and
commodity prices However the committees are placed in handling these
risks via planning the optimum mix of assets and liabilities stipulating the
liquidity gap position and formulating benchmark lending rates etc
Liquidity risk management
Liquidity risk arises due to unmatched maturities of assets and liabilities
These would deteriorate the bankrsquos ability to honor its commitment as and
when they fall due However SAMP manages these risks through their
deposits and investment portfolios
Reputational risk management
Reputational risks arise due to the negative effect of public opinion which
can cause damage to the brand image The bank has mitigated this by
implementing a customer grievance handling policy
862019 SAMPATH BANK PLC- review1Q 2011
httpslidepdfcomreaderfullsampath-bank-plc-review1q-2011 1213
Page
11
SAMPATH BANK PLC
Valuation
Share offers good value at 88x forecast 2011 net profit
For the FY2011E the profits are forecasted considering corporate tax
revisions (35 to 20) and the expected credit growth in the low interest
economy The earnings would approximate to LKR 49510 mn in FY2011
and LKR 53159 mn in FY2012
Having hit a low of LKR1402 in May 2010 SAMPrsquos share price has risen
strongly by 972 YTD Following this gain SAMP trades at 88X projected
FY11E net profit whilst on a PER of 82X for FY12E forecasted profit Based
on an analysis of a historic 52 week price movement we derived a price
movement of +-5001 on a mean of LKR24144 Hence the flux is
approximately +-21 Furthermore if it is assumed that the same upside
price movement is seen pushing the price to LKR33101 (from a current
level of LKR2800) the forward PE multiples would be 1045X for FY11E and
973X for FY12E
Furthermore when adjusting SAMPrsquos returns to its risk (deviation of the
share price) sharp ratio of the counter is at 217 whilst the Banking Finance
and Insurance sector is at 305 SAMPrsquos return volatility is much higher at
29 as opposed to the sectorrsquos deviation of 20 over the past 52 week
trading period Hence SAMP shows a marginal volatility in its return
compared with the sector
862019 SAMPATH BANK PLC- review1Q 2011
httpslidepdfcomreaderfullsampath-bank-plc-review1q-2011 1313
Page
SAMPATH BANK PLC
Researchhelliphelliphelliphelliphelliphelliphelliphellip
d of Research Saminda Weerasinghe Senior Analyst Amali Perera
11)5320250 (94-11)5320256
indaasiacapitallk amaliasiacapitallk
porates Economy
ela Rasheed (94-11)5320252 Umayangana Randeniya (94-11)5320254
wan De Silva (94-11)5320258 Dhanusha Pathirana (94-11)5320257
hani Perera (94-11)5320251 Nuwan Pradeep (94-11)5320257
oli Mallwaarachchi (94-11)5320360
mala Samarawickrama (94-11)5320253
hara Fernando (94-11)5320256
n Wijekoon (94-11)5320253
na Ukwatta (94-11)5320253
aleshelliphelliphelliphelliphelliphelliphelliphellip
STITUTIONAL SALES RETAIL SALES
ri Marikar (94-11) 5320224 077 3576868 sabriasiacapitallk Shiyam Subaulla (94-11) 5320218 0773502016 shiyamasiacashan Wijayakoon (94-11) 5320208 0777 713645 niroshanasiacapitallk Gagani Jayawardhana (94-11) 5320236 0714084953gaganiasiacap
az Aboobucker (94-11) 5320213 0777-727352 niyazasiacapitallk Priyantha Hingurage (94-11) 5320217 0773502015priyanthaasiara Hedigallage (94-11) 5320211 0777 713663 anuraasiacapitallk Neluka Rodrigo (94-11) 5320214 0777366280nelukaasiacaplaka Hapugoda (94-11-5320240 0777 256740 chelakaasiacapitallk Subeeth Perera (94-11) 5320227 0714042683subeethasiaca
minda Mahanama (94-11) 5320223 0777 556582 mahanamaasiacapitallk n Bibile (94-11) 5320238 0777 352032 hiranasiacapitallk
ANCHESbathgoda Asian Alliance Building No04 Sirimawo Bandaranayake Mw Kadawatha Asiri Perera 011-5734773 0773-692812 asiriasiacapitallk
unegala CSE 1st Floor Union Assurance Building No06 Rajapihilla Rd Kurunegala Asanka Samarakoon 037-5628844 0773-690749 asankaasiacapita
ara Asian Alliance Building No 312Galle Road Nupe Matara Sumeda Jayawardena041-5677525 0773-6873sumedaasiacapita
e Capital Reach Building 2nd Floor No 16A Gamini Mw Galle Ruchira Silva 091-5629998 0773-687027 ruchiraasiacapitLasitha Wijewardena 091-5676766 077-6681884lasithaasiacapita
E Floor CSE01-04 World Trade Centre Colombo ndash 1 Thushara Adhikari 011-5735122 0773-688202adhikariasiacapit
ombo Asia Asset Finance 1711 Station Road Negombo Uthpala Karunatilake 031-5676881 0773691685uthpalaasiacapit
nnappuwa No176 Negombo Road Katuneriya Sajith Iroshan 032 5673881 077 3740208 sajithasiacSandun Athulathmudali 032 5673882 077 2533331 srangaasia
RVICE CENTRESdy Capital Reach Building No165 Katugodella Veediya Kandy Nilupul Hettiarachchi 081-5628500 0773-691816nilupulasia
Radhika Hettiarachchi 081-5625577 0777-810694radhikaasiac
mbantota Hambanthota Chember of Commerce Thangalle Road Hambantota Gayan Anusha Muthumali 047-5679241 0772-351716Shermin Ranasinghe 0772378352 sherminasiacapitallk
para 2nd Floor TKS Building DS Senanayake Street Ampara Ravi De Mel 063-5679071 0772-681995 ravideasiacapital lkMadushanka Rathnayaka063-5679070 0779-036577 shankaasia
na 11-8 First Floor Stanley Road Jaffna Sutharshan 021-5671800 0772-395811suthanasiacapitallkNirmalan 021-5671801 0778-449773 nirmalasiacapitallk
ort has been prepared by Asia Wealths (Private) Limited The information and opinions contained herein has been compiled or arrived at based upon information obtained from sources believed to be reliable and in good faith Such information has not been independently verified and no guaranty
ntation or warranty express or implied is made as to its accuracy completeness or correctness reliability or suitability All such information and opinions are subject to change without notice This document is for information purposes only descriptions of any company or companies or their secu
ned herein are not intended to be complete and this document is not and should not be construed as an offer or solicitation of an offer to buy or sell any securities or other financial instruments In no event will Asia Securities be liable for any loss or damage including without limitation indirect
uential loss or damage or any loss or damage whatsoever arising out of or in connection with the use of this report and any reliance you place on such information is therefore strictly at your own risk curities may to the extent permissible by applicable law or regulation use the above material conclusions research or analysis in which they are based before the material is disseminated to their customers Not all customers will receive the material at the same time Asia Securities their resp
representatives employees related persons andor Asia Securities may have a long or short position in any of the securities or other financial instruments mentioned or issuers described herein at any time and may make a purchase andor sale or offer to make a purchase andor sale of any su
nancial instruments from time to time in the open market or otherwise in each case either as principal or agent Asia Securities may make markets in securities or other financial instruments described in this publication in securities of issuers described herein or in securities underlying or
es Asia Securities may have recently underwritten the securities of an issuer mentioned herein
ormation contained in this report is for general information purposes only This report and its content is copyright of Asia Securities and all rights reserved This report- in whole or in part- may not except with the express written permission of Asia Securities be reproduced or distributed or c
ed in any material form by any means whether graphic electronic mechanical or any means Nor may you transmit it or store it in any other website or other form of electronic retrieval system Any unauthorised use of this report will result in immediate proceedings
862019 SAMPATH BANK PLC- review1Q 2011
httpslidepdfcomreaderfullsampath-bank-plc-review1q-2011 913
Page 8
SAMPATH BANK PLC
Capital Adequacy
SAMPrsquos capital adequacy is deemed strong given the Core capital and Total
capital adequacy ratios stands at 951 (minimum 5) and 1141
(minimum 10) respectively However the current levels are below the
previous ratios of Core capital 1071 and Total capital 1291 which is
due to the bankrsquos expansion strategies including an impressive loan growth
of 138 over the 1Q2011
862019 SAMPATH BANK PLC- review1Q 2011
httpslidepdfcomreaderfullsampath-bank-plc-review1q-2011 1013
Page 9
SAMPATH BANK PLC
Future Outlook
The economic developments taking place throughout the country
coupled with low interest rates have posed a continued demand
for credit Hence this is a good opportunity for the bank to further
expand its loan portfolio being benefited through the availability
of funding The current levels of capital adequacy ratios tier 1
95 (minimum is 5) total capital adequacy ratio 1141
(minimum is 10) are well above the regulatory minimums so
that the bank has adequate buffer to absorb more risk and expand
the loan book
Adding further the bankrsquos novel scrip dividend policy would further
strengthen the fund availability as a consequence of dividends getting
injected back to the company rather than being paid out from the bank
SAMPrsquos organic growth strategies in terms of branch expansions
and new product developments would yield favorable resultsgoing forward During the FY2010 the bank has established more
than 40 branches and this momentum would be further continued
with the objective of covering all the unbanked areas and fulfilling
all the banking needs of the nation However the expansion
strategies would expand the cost base where the current cost to
income ratio is 53 slightly above the sector This is due to the
fact that an average new branch taking 15- 2 years to break even
and during this period the bank is not generating adequate
revenues to curtail the expenditure base But once a new branch
reaches its breakeven level it would boost the overall income
levels bringing down the cost to income ratios to par with thesector
The Pawning segment of the bank comprise of 23 of the overall
loan portfolio as at 31st
December 2010 and during FY2010 total
loans granted under pawning has shown a massive growth of
535 YoY This segment has its ability to grow further Generally
pawning is favorable to a bank due to the loan being gold backed
hence generating no risk of nonperforming loan losses and thereby
improving asset quality while strengthening the bottom line due to
no allowances required
Apart from SAMPrsquos organic growth strategies the bank is also
laying plans for inorganic growth Accordingly these would enhance
the competitive position of the bank as while generating
economies of scale
862019 SAMPATH BANK PLC- review1Q 2011
httpslidepdfcomreaderfullsampath-bank-plc-review1q-2011 1113
Page
10
SAMPATH BANK PLC
Risk Management
The key risk categories of credit risk market risk liquidity risk operational
risk and reputation risk are common to every bank therefore in order to
mitigate these risks SAMP is adopting an integrated approach with a clear
understanding of these multiple risks
Credit risk is arising from the inability of a borrower or counter party to
meet their obligations in accordance with the agreed terms In this regard
in order to mitigate the credit risk SAMP has a well structured and
standardized credit approval process and a post credit monitoring
mechanism Consequently these stringent policies and practices have
resulted in improving the NPL ratios of the company (Gross NPL for as at
31st
March 2011 is 364 and improvement from a previous level of 395
as at 31st
December 2010)
Market risk management- this is the risk that can incur through movementsin equity and interest rate markets currency exchange rates and
commodity prices However the committees are placed in handling these
risks via planning the optimum mix of assets and liabilities stipulating the
liquidity gap position and formulating benchmark lending rates etc
Liquidity risk management
Liquidity risk arises due to unmatched maturities of assets and liabilities
These would deteriorate the bankrsquos ability to honor its commitment as and
when they fall due However SAMP manages these risks through their
deposits and investment portfolios
Reputational risk management
Reputational risks arise due to the negative effect of public opinion which
can cause damage to the brand image The bank has mitigated this by
implementing a customer grievance handling policy
862019 SAMPATH BANK PLC- review1Q 2011
httpslidepdfcomreaderfullsampath-bank-plc-review1q-2011 1213
Page
11
SAMPATH BANK PLC
Valuation
Share offers good value at 88x forecast 2011 net profit
For the FY2011E the profits are forecasted considering corporate tax
revisions (35 to 20) and the expected credit growth in the low interest
economy The earnings would approximate to LKR 49510 mn in FY2011
and LKR 53159 mn in FY2012
Having hit a low of LKR1402 in May 2010 SAMPrsquos share price has risen
strongly by 972 YTD Following this gain SAMP trades at 88X projected
FY11E net profit whilst on a PER of 82X for FY12E forecasted profit Based
on an analysis of a historic 52 week price movement we derived a price
movement of +-5001 on a mean of LKR24144 Hence the flux is
approximately +-21 Furthermore if it is assumed that the same upside
price movement is seen pushing the price to LKR33101 (from a current
level of LKR2800) the forward PE multiples would be 1045X for FY11E and
973X for FY12E
Furthermore when adjusting SAMPrsquos returns to its risk (deviation of the
share price) sharp ratio of the counter is at 217 whilst the Banking Finance
and Insurance sector is at 305 SAMPrsquos return volatility is much higher at
29 as opposed to the sectorrsquos deviation of 20 over the past 52 week
trading period Hence SAMP shows a marginal volatility in its return
compared with the sector
862019 SAMPATH BANK PLC- review1Q 2011
httpslidepdfcomreaderfullsampath-bank-plc-review1q-2011 1313
Page
SAMPATH BANK PLC
Researchhelliphelliphelliphelliphelliphelliphelliphellip
d of Research Saminda Weerasinghe Senior Analyst Amali Perera
11)5320250 (94-11)5320256
indaasiacapitallk amaliasiacapitallk
porates Economy
ela Rasheed (94-11)5320252 Umayangana Randeniya (94-11)5320254
wan De Silva (94-11)5320258 Dhanusha Pathirana (94-11)5320257
hani Perera (94-11)5320251 Nuwan Pradeep (94-11)5320257
oli Mallwaarachchi (94-11)5320360
mala Samarawickrama (94-11)5320253
hara Fernando (94-11)5320256
n Wijekoon (94-11)5320253
na Ukwatta (94-11)5320253
aleshelliphelliphelliphelliphelliphelliphelliphellip
STITUTIONAL SALES RETAIL SALES
ri Marikar (94-11) 5320224 077 3576868 sabriasiacapitallk Shiyam Subaulla (94-11) 5320218 0773502016 shiyamasiacashan Wijayakoon (94-11) 5320208 0777 713645 niroshanasiacapitallk Gagani Jayawardhana (94-11) 5320236 0714084953gaganiasiacap
az Aboobucker (94-11) 5320213 0777-727352 niyazasiacapitallk Priyantha Hingurage (94-11) 5320217 0773502015priyanthaasiara Hedigallage (94-11) 5320211 0777 713663 anuraasiacapitallk Neluka Rodrigo (94-11) 5320214 0777366280nelukaasiacaplaka Hapugoda (94-11-5320240 0777 256740 chelakaasiacapitallk Subeeth Perera (94-11) 5320227 0714042683subeethasiaca
minda Mahanama (94-11) 5320223 0777 556582 mahanamaasiacapitallk n Bibile (94-11) 5320238 0777 352032 hiranasiacapitallk
ANCHESbathgoda Asian Alliance Building No04 Sirimawo Bandaranayake Mw Kadawatha Asiri Perera 011-5734773 0773-692812 asiriasiacapitallk
unegala CSE 1st Floor Union Assurance Building No06 Rajapihilla Rd Kurunegala Asanka Samarakoon 037-5628844 0773-690749 asankaasiacapita
ara Asian Alliance Building No 312Galle Road Nupe Matara Sumeda Jayawardena041-5677525 0773-6873sumedaasiacapita
e Capital Reach Building 2nd Floor No 16A Gamini Mw Galle Ruchira Silva 091-5629998 0773-687027 ruchiraasiacapitLasitha Wijewardena 091-5676766 077-6681884lasithaasiacapita
E Floor CSE01-04 World Trade Centre Colombo ndash 1 Thushara Adhikari 011-5735122 0773-688202adhikariasiacapit
ombo Asia Asset Finance 1711 Station Road Negombo Uthpala Karunatilake 031-5676881 0773691685uthpalaasiacapit
nnappuwa No176 Negombo Road Katuneriya Sajith Iroshan 032 5673881 077 3740208 sajithasiacSandun Athulathmudali 032 5673882 077 2533331 srangaasia
RVICE CENTRESdy Capital Reach Building No165 Katugodella Veediya Kandy Nilupul Hettiarachchi 081-5628500 0773-691816nilupulasia
Radhika Hettiarachchi 081-5625577 0777-810694radhikaasiac
mbantota Hambanthota Chember of Commerce Thangalle Road Hambantota Gayan Anusha Muthumali 047-5679241 0772-351716Shermin Ranasinghe 0772378352 sherminasiacapitallk
para 2nd Floor TKS Building DS Senanayake Street Ampara Ravi De Mel 063-5679071 0772-681995 ravideasiacapital lkMadushanka Rathnayaka063-5679070 0779-036577 shankaasia
na 11-8 First Floor Stanley Road Jaffna Sutharshan 021-5671800 0772-395811suthanasiacapitallkNirmalan 021-5671801 0778-449773 nirmalasiacapitallk
ort has been prepared by Asia Wealths (Private) Limited The information and opinions contained herein has been compiled or arrived at based upon information obtained from sources believed to be reliable and in good faith Such information has not been independently verified and no guaranty
ntation or warranty express or implied is made as to its accuracy completeness or correctness reliability or suitability All such information and opinions are subject to change without notice This document is for information purposes only descriptions of any company or companies or their secu
ned herein are not intended to be complete and this document is not and should not be construed as an offer or solicitation of an offer to buy or sell any securities or other financial instruments In no event will Asia Securities be liable for any loss or damage including without limitation indirect
uential loss or damage or any loss or damage whatsoever arising out of or in connection with the use of this report and any reliance you place on such information is therefore strictly at your own risk curities may to the extent permissible by applicable law or regulation use the above material conclusions research or analysis in which they are based before the material is disseminated to their customers Not all customers will receive the material at the same time Asia Securities their resp
representatives employees related persons andor Asia Securities may have a long or short position in any of the securities or other financial instruments mentioned or issuers described herein at any time and may make a purchase andor sale or offer to make a purchase andor sale of any su
nancial instruments from time to time in the open market or otherwise in each case either as principal or agent Asia Securities may make markets in securities or other financial instruments described in this publication in securities of issuers described herein or in securities underlying or
es Asia Securities may have recently underwritten the securities of an issuer mentioned herein
ormation contained in this report is for general information purposes only This report and its content is copyright of Asia Securities and all rights reserved This report- in whole or in part- may not except with the express written permission of Asia Securities be reproduced or distributed or c
ed in any material form by any means whether graphic electronic mechanical or any means Nor may you transmit it or store it in any other website or other form of electronic retrieval system Any unauthorised use of this report will result in immediate proceedings
862019 SAMPATH BANK PLC- review1Q 2011
httpslidepdfcomreaderfullsampath-bank-plc-review1q-2011 1013
Page 9
SAMPATH BANK PLC
Future Outlook
The economic developments taking place throughout the country
coupled with low interest rates have posed a continued demand
for credit Hence this is a good opportunity for the bank to further
expand its loan portfolio being benefited through the availability
of funding The current levels of capital adequacy ratios tier 1
95 (minimum is 5) total capital adequacy ratio 1141
(minimum is 10) are well above the regulatory minimums so
that the bank has adequate buffer to absorb more risk and expand
the loan book
Adding further the bankrsquos novel scrip dividend policy would further
strengthen the fund availability as a consequence of dividends getting
injected back to the company rather than being paid out from the bank
SAMPrsquos organic growth strategies in terms of branch expansions
and new product developments would yield favorable resultsgoing forward During the FY2010 the bank has established more
than 40 branches and this momentum would be further continued
with the objective of covering all the unbanked areas and fulfilling
all the banking needs of the nation However the expansion
strategies would expand the cost base where the current cost to
income ratio is 53 slightly above the sector This is due to the
fact that an average new branch taking 15- 2 years to break even
and during this period the bank is not generating adequate
revenues to curtail the expenditure base But once a new branch
reaches its breakeven level it would boost the overall income
levels bringing down the cost to income ratios to par with thesector
The Pawning segment of the bank comprise of 23 of the overall
loan portfolio as at 31st
December 2010 and during FY2010 total
loans granted under pawning has shown a massive growth of
535 YoY This segment has its ability to grow further Generally
pawning is favorable to a bank due to the loan being gold backed
hence generating no risk of nonperforming loan losses and thereby
improving asset quality while strengthening the bottom line due to
no allowances required
Apart from SAMPrsquos organic growth strategies the bank is also
laying plans for inorganic growth Accordingly these would enhance
the competitive position of the bank as while generating
economies of scale
862019 SAMPATH BANK PLC- review1Q 2011
httpslidepdfcomreaderfullsampath-bank-plc-review1q-2011 1113
Page
10
SAMPATH BANK PLC
Risk Management
The key risk categories of credit risk market risk liquidity risk operational
risk and reputation risk are common to every bank therefore in order to
mitigate these risks SAMP is adopting an integrated approach with a clear
understanding of these multiple risks
Credit risk is arising from the inability of a borrower or counter party to
meet their obligations in accordance with the agreed terms In this regard
in order to mitigate the credit risk SAMP has a well structured and
standardized credit approval process and a post credit monitoring
mechanism Consequently these stringent policies and practices have
resulted in improving the NPL ratios of the company (Gross NPL for as at
31st
March 2011 is 364 and improvement from a previous level of 395
as at 31st
December 2010)
Market risk management- this is the risk that can incur through movementsin equity and interest rate markets currency exchange rates and
commodity prices However the committees are placed in handling these
risks via planning the optimum mix of assets and liabilities stipulating the
liquidity gap position and formulating benchmark lending rates etc
Liquidity risk management
Liquidity risk arises due to unmatched maturities of assets and liabilities
These would deteriorate the bankrsquos ability to honor its commitment as and
when they fall due However SAMP manages these risks through their
deposits and investment portfolios
Reputational risk management
Reputational risks arise due to the negative effect of public opinion which
can cause damage to the brand image The bank has mitigated this by
implementing a customer grievance handling policy
862019 SAMPATH BANK PLC- review1Q 2011
httpslidepdfcomreaderfullsampath-bank-plc-review1q-2011 1213
Page
11
SAMPATH BANK PLC
Valuation
Share offers good value at 88x forecast 2011 net profit
For the FY2011E the profits are forecasted considering corporate tax
revisions (35 to 20) and the expected credit growth in the low interest
economy The earnings would approximate to LKR 49510 mn in FY2011
and LKR 53159 mn in FY2012
Having hit a low of LKR1402 in May 2010 SAMPrsquos share price has risen
strongly by 972 YTD Following this gain SAMP trades at 88X projected
FY11E net profit whilst on a PER of 82X for FY12E forecasted profit Based
on an analysis of a historic 52 week price movement we derived a price
movement of +-5001 on a mean of LKR24144 Hence the flux is
approximately +-21 Furthermore if it is assumed that the same upside
price movement is seen pushing the price to LKR33101 (from a current
level of LKR2800) the forward PE multiples would be 1045X for FY11E and
973X for FY12E
Furthermore when adjusting SAMPrsquos returns to its risk (deviation of the
share price) sharp ratio of the counter is at 217 whilst the Banking Finance
and Insurance sector is at 305 SAMPrsquos return volatility is much higher at
29 as opposed to the sectorrsquos deviation of 20 over the past 52 week
trading period Hence SAMP shows a marginal volatility in its return
compared with the sector
862019 SAMPATH BANK PLC- review1Q 2011
httpslidepdfcomreaderfullsampath-bank-plc-review1q-2011 1313
Page
SAMPATH BANK PLC
Researchhelliphelliphelliphelliphelliphelliphelliphellip
d of Research Saminda Weerasinghe Senior Analyst Amali Perera
11)5320250 (94-11)5320256
indaasiacapitallk amaliasiacapitallk
porates Economy
ela Rasheed (94-11)5320252 Umayangana Randeniya (94-11)5320254
wan De Silva (94-11)5320258 Dhanusha Pathirana (94-11)5320257
hani Perera (94-11)5320251 Nuwan Pradeep (94-11)5320257
oli Mallwaarachchi (94-11)5320360
mala Samarawickrama (94-11)5320253
hara Fernando (94-11)5320256
n Wijekoon (94-11)5320253
na Ukwatta (94-11)5320253
aleshelliphelliphelliphelliphelliphelliphelliphellip
STITUTIONAL SALES RETAIL SALES
ri Marikar (94-11) 5320224 077 3576868 sabriasiacapitallk Shiyam Subaulla (94-11) 5320218 0773502016 shiyamasiacashan Wijayakoon (94-11) 5320208 0777 713645 niroshanasiacapitallk Gagani Jayawardhana (94-11) 5320236 0714084953gaganiasiacap
az Aboobucker (94-11) 5320213 0777-727352 niyazasiacapitallk Priyantha Hingurage (94-11) 5320217 0773502015priyanthaasiara Hedigallage (94-11) 5320211 0777 713663 anuraasiacapitallk Neluka Rodrigo (94-11) 5320214 0777366280nelukaasiacaplaka Hapugoda (94-11-5320240 0777 256740 chelakaasiacapitallk Subeeth Perera (94-11) 5320227 0714042683subeethasiaca
minda Mahanama (94-11) 5320223 0777 556582 mahanamaasiacapitallk n Bibile (94-11) 5320238 0777 352032 hiranasiacapitallk
ANCHESbathgoda Asian Alliance Building No04 Sirimawo Bandaranayake Mw Kadawatha Asiri Perera 011-5734773 0773-692812 asiriasiacapitallk
unegala CSE 1st Floor Union Assurance Building No06 Rajapihilla Rd Kurunegala Asanka Samarakoon 037-5628844 0773-690749 asankaasiacapita
ara Asian Alliance Building No 312Galle Road Nupe Matara Sumeda Jayawardena041-5677525 0773-6873sumedaasiacapita
e Capital Reach Building 2nd Floor No 16A Gamini Mw Galle Ruchira Silva 091-5629998 0773-687027 ruchiraasiacapitLasitha Wijewardena 091-5676766 077-6681884lasithaasiacapita
E Floor CSE01-04 World Trade Centre Colombo ndash 1 Thushara Adhikari 011-5735122 0773-688202adhikariasiacapit
ombo Asia Asset Finance 1711 Station Road Negombo Uthpala Karunatilake 031-5676881 0773691685uthpalaasiacapit
nnappuwa No176 Negombo Road Katuneriya Sajith Iroshan 032 5673881 077 3740208 sajithasiacSandun Athulathmudali 032 5673882 077 2533331 srangaasia
RVICE CENTRESdy Capital Reach Building No165 Katugodella Veediya Kandy Nilupul Hettiarachchi 081-5628500 0773-691816nilupulasia
Radhika Hettiarachchi 081-5625577 0777-810694radhikaasiac
mbantota Hambanthota Chember of Commerce Thangalle Road Hambantota Gayan Anusha Muthumali 047-5679241 0772-351716Shermin Ranasinghe 0772378352 sherminasiacapitallk
para 2nd Floor TKS Building DS Senanayake Street Ampara Ravi De Mel 063-5679071 0772-681995 ravideasiacapital lkMadushanka Rathnayaka063-5679070 0779-036577 shankaasia
na 11-8 First Floor Stanley Road Jaffna Sutharshan 021-5671800 0772-395811suthanasiacapitallkNirmalan 021-5671801 0778-449773 nirmalasiacapitallk
ort has been prepared by Asia Wealths (Private) Limited The information and opinions contained herein has been compiled or arrived at based upon information obtained from sources believed to be reliable and in good faith Such information has not been independently verified and no guaranty
ntation or warranty express or implied is made as to its accuracy completeness or correctness reliability or suitability All such information and opinions are subject to change without notice This document is for information purposes only descriptions of any company or companies or their secu
ned herein are not intended to be complete and this document is not and should not be construed as an offer or solicitation of an offer to buy or sell any securities or other financial instruments In no event will Asia Securities be liable for any loss or damage including without limitation indirect
uential loss or damage or any loss or damage whatsoever arising out of or in connection with the use of this report and any reliance you place on such information is therefore strictly at your own risk curities may to the extent permissible by applicable law or regulation use the above material conclusions research or analysis in which they are based before the material is disseminated to their customers Not all customers will receive the material at the same time Asia Securities their resp
representatives employees related persons andor Asia Securities may have a long or short position in any of the securities or other financial instruments mentioned or issuers described herein at any time and may make a purchase andor sale or offer to make a purchase andor sale of any su
nancial instruments from time to time in the open market or otherwise in each case either as principal or agent Asia Securities may make markets in securities or other financial instruments described in this publication in securities of issuers described herein or in securities underlying or
es Asia Securities may have recently underwritten the securities of an issuer mentioned herein
ormation contained in this report is for general information purposes only This report and its content is copyright of Asia Securities and all rights reserved This report- in whole or in part- may not except with the express written permission of Asia Securities be reproduced or distributed or c
ed in any material form by any means whether graphic electronic mechanical or any means Nor may you transmit it or store it in any other website or other form of electronic retrieval system Any unauthorised use of this report will result in immediate proceedings
862019 SAMPATH BANK PLC- review1Q 2011
httpslidepdfcomreaderfullsampath-bank-plc-review1q-2011 1113
Page
10
SAMPATH BANK PLC
Risk Management
The key risk categories of credit risk market risk liquidity risk operational
risk and reputation risk are common to every bank therefore in order to
mitigate these risks SAMP is adopting an integrated approach with a clear
understanding of these multiple risks
Credit risk is arising from the inability of a borrower or counter party to
meet their obligations in accordance with the agreed terms In this regard
in order to mitigate the credit risk SAMP has a well structured and
standardized credit approval process and a post credit monitoring
mechanism Consequently these stringent policies and practices have
resulted in improving the NPL ratios of the company (Gross NPL for as at
31st
March 2011 is 364 and improvement from a previous level of 395
as at 31st
December 2010)
Market risk management- this is the risk that can incur through movementsin equity and interest rate markets currency exchange rates and
commodity prices However the committees are placed in handling these
risks via planning the optimum mix of assets and liabilities stipulating the
liquidity gap position and formulating benchmark lending rates etc
Liquidity risk management
Liquidity risk arises due to unmatched maturities of assets and liabilities
These would deteriorate the bankrsquos ability to honor its commitment as and
when they fall due However SAMP manages these risks through their
deposits and investment portfolios
Reputational risk management
Reputational risks arise due to the negative effect of public opinion which
can cause damage to the brand image The bank has mitigated this by
implementing a customer grievance handling policy
862019 SAMPATH BANK PLC- review1Q 2011
httpslidepdfcomreaderfullsampath-bank-plc-review1q-2011 1213
Page
11
SAMPATH BANK PLC
Valuation
Share offers good value at 88x forecast 2011 net profit
For the FY2011E the profits are forecasted considering corporate tax
revisions (35 to 20) and the expected credit growth in the low interest
economy The earnings would approximate to LKR 49510 mn in FY2011
and LKR 53159 mn in FY2012
Having hit a low of LKR1402 in May 2010 SAMPrsquos share price has risen
strongly by 972 YTD Following this gain SAMP trades at 88X projected
FY11E net profit whilst on a PER of 82X for FY12E forecasted profit Based
on an analysis of a historic 52 week price movement we derived a price
movement of +-5001 on a mean of LKR24144 Hence the flux is
approximately +-21 Furthermore if it is assumed that the same upside
price movement is seen pushing the price to LKR33101 (from a current
level of LKR2800) the forward PE multiples would be 1045X for FY11E and
973X for FY12E
Furthermore when adjusting SAMPrsquos returns to its risk (deviation of the
share price) sharp ratio of the counter is at 217 whilst the Banking Finance
and Insurance sector is at 305 SAMPrsquos return volatility is much higher at
29 as opposed to the sectorrsquos deviation of 20 over the past 52 week
trading period Hence SAMP shows a marginal volatility in its return
compared with the sector
862019 SAMPATH BANK PLC- review1Q 2011
httpslidepdfcomreaderfullsampath-bank-plc-review1q-2011 1313
Page
SAMPATH BANK PLC
Researchhelliphelliphelliphelliphelliphelliphelliphellip
d of Research Saminda Weerasinghe Senior Analyst Amali Perera
11)5320250 (94-11)5320256
indaasiacapitallk amaliasiacapitallk
porates Economy
ela Rasheed (94-11)5320252 Umayangana Randeniya (94-11)5320254
wan De Silva (94-11)5320258 Dhanusha Pathirana (94-11)5320257
hani Perera (94-11)5320251 Nuwan Pradeep (94-11)5320257
oli Mallwaarachchi (94-11)5320360
mala Samarawickrama (94-11)5320253
hara Fernando (94-11)5320256
n Wijekoon (94-11)5320253
na Ukwatta (94-11)5320253
aleshelliphelliphelliphelliphelliphelliphelliphellip
STITUTIONAL SALES RETAIL SALES
ri Marikar (94-11) 5320224 077 3576868 sabriasiacapitallk Shiyam Subaulla (94-11) 5320218 0773502016 shiyamasiacashan Wijayakoon (94-11) 5320208 0777 713645 niroshanasiacapitallk Gagani Jayawardhana (94-11) 5320236 0714084953gaganiasiacap
az Aboobucker (94-11) 5320213 0777-727352 niyazasiacapitallk Priyantha Hingurage (94-11) 5320217 0773502015priyanthaasiara Hedigallage (94-11) 5320211 0777 713663 anuraasiacapitallk Neluka Rodrigo (94-11) 5320214 0777366280nelukaasiacaplaka Hapugoda (94-11-5320240 0777 256740 chelakaasiacapitallk Subeeth Perera (94-11) 5320227 0714042683subeethasiaca
minda Mahanama (94-11) 5320223 0777 556582 mahanamaasiacapitallk n Bibile (94-11) 5320238 0777 352032 hiranasiacapitallk
ANCHESbathgoda Asian Alliance Building No04 Sirimawo Bandaranayake Mw Kadawatha Asiri Perera 011-5734773 0773-692812 asiriasiacapitallk
unegala CSE 1st Floor Union Assurance Building No06 Rajapihilla Rd Kurunegala Asanka Samarakoon 037-5628844 0773-690749 asankaasiacapita
ara Asian Alliance Building No 312Galle Road Nupe Matara Sumeda Jayawardena041-5677525 0773-6873sumedaasiacapita
e Capital Reach Building 2nd Floor No 16A Gamini Mw Galle Ruchira Silva 091-5629998 0773-687027 ruchiraasiacapitLasitha Wijewardena 091-5676766 077-6681884lasithaasiacapita
E Floor CSE01-04 World Trade Centre Colombo ndash 1 Thushara Adhikari 011-5735122 0773-688202adhikariasiacapit
ombo Asia Asset Finance 1711 Station Road Negombo Uthpala Karunatilake 031-5676881 0773691685uthpalaasiacapit
nnappuwa No176 Negombo Road Katuneriya Sajith Iroshan 032 5673881 077 3740208 sajithasiacSandun Athulathmudali 032 5673882 077 2533331 srangaasia
RVICE CENTRESdy Capital Reach Building No165 Katugodella Veediya Kandy Nilupul Hettiarachchi 081-5628500 0773-691816nilupulasia
Radhika Hettiarachchi 081-5625577 0777-810694radhikaasiac
mbantota Hambanthota Chember of Commerce Thangalle Road Hambantota Gayan Anusha Muthumali 047-5679241 0772-351716Shermin Ranasinghe 0772378352 sherminasiacapitallk
para 2nd Floor TKS Building DS Senanayake Street Ampara Ravi De Mel 063-5679071 0772-681995 ravideasiacapital lkMadushanka Rathnayaka063-5679070 0779-036577 shankaasia
na 11-8 First Floor Stanley Road Jaffna Sutharshan 021-5671800 0772-395811suthanasiacapitallkNirmalan 021-5671801 0778-449773 nirmalasiacapitallk
ort has been prepared by Asia Wealths (Private) Limited The information and opinions contained herein has been compiled or arrived at based upon information obtained from sources believed to be reliable and in good faith Such information has not been independently verified and no guaranty
ntation or warranty express or implied is made as to its accuracy completeness or correctness reliability or suitability All such information and opinions are subject to change without notice This document is for information purposes only descriptions of any company or companies or their secu
ned herein are not intended to be complete and this document is not and should not be construed as an offer or solicitation of an offer to buy or sell any securities or other financial instruments In no event will Asia Securities be liable for any loss or damage including without limitation indirect
uential loss or damage or any loss or damage whatsoever arising out of or in connection with the use of this report and any reliance you place on such information is therefore strictly at your own risk curities may to the extent permissible by applicable law or regulation use the above material conclusions research or analysis in which they are based before the material is disseminated to their customers Not all customers will receive the material at the same time Asia Securities their resp
representatives employees related persons andor Asia Securities may have a long or short position in any of the securities or other financial instruments mentioned or issuers described herein at any time and may make a purchase andor sale or offer to make a purchase andor sale of any su
nancial instruments from time to time in the open market or otherwise in each case either as principal or agent Asia Securities may make markets in securities or other financial instruments described in this publication in securities of issuers described herein or in securities underlying or
es Asia Securities may have recently underwritten the securities of an issuer mentioned herein
ormation contained in this report is for general information purposes only This report and its content is copyright of Asia Securities and all rights reserved This report- in whole or in part- may not except with the express written permission of Asia Securities be reproduced or distributed or c
ed in any material form by any means whether graphic electronic mechanical or any means Nor may you transmit it or store it in any other website or other form of electronic retrieval system Any unauthorised use of this report will result in immediate proceedings
862019 SAMPATH BANK PLC- review1Q 2011
httpslidepdfcomreaderfullsampath-bank-plc-review1q-2011 1213
Page
11
SAMPATH BANK PLC
Valuation
Share offers good value at 88x forecast 2011 net profit
For the FY2011E the profits are forecasted considering corporate tax
revisions (35 to 20) and the expected credit growth in the low interest
economy The earnings would approximate to LKR 49510 mn in FY2011
and LKR 53159 mn in FY2012
Having hit a low of LKR1402 in May 2010 SAMPrsquos share price has risen
strongly by 972 YTD Following this gain SAMP trades at 88X projected
FY11E net profit whilst on a PER of 82X for FY12E forecasted profit Based
on an analysis of a historic 52 week price movement we derived a price
movement of +-5001 on a mean of LKR24144 Hence the flux is
approximately +-21 Furthermore if it is assumed that the same upside
price movement is seen pushing the price to LKR33101 (from a current
level of LKR2800) the forward PE multiples would be 1045X for FY11E and
973X for FY12E
Furthermore when adjusting SAMPrsquos returns to its risk (deviation of the
share price) sharp ratio of the counter is at 217 whilst the Banking Finance
and Insurance sector is at 305 SAMPrsquos return volatility is much higher at
29 as opposed to the sectorrsquos deviation of 20 over the past 52 week
trading period Hence SAMP shows a marginal volatility in its return
compared with the sector
862019 SAMPATH BANK PLC- review1Q 2011
httpslidepdfcomreaderfullsampath-bank-plc-review1q-2011 1313
Page
SAMPATH BANK PLC
Researchhelliphelliphelliphelliphelliphelliphelliphellip
d of Research Saminda Weerasinghe Senior Analyst Amali Perera
11)5320250 (94-11)5320256
indaasiacapitallk amaliasiacapitallk
porates Economy
ela Rasheed (94-11)5320252 Umayangana Randeniya (94-11)5320254
wan De Silva (94-11)5320258 Dhanusha Pathirana (94-11)5320257
hani Perera (94-11)5320251 Nuwan Pradeep (94-11)5320257
oli Mallwaarachchi (94-11)5320360
mala Samarawickrama (94-11)5320253
hara Fernando (94-11)5320256
n Wijekoon (94-11)5320253
na Ukwatta (94-11)5320253
aleshelliphelliphelliphelliphelliphelliphelliphellip
STITUTIONAL SALES RETAIL SALES
ri Marikar (94-11) 5320224 077 3576868 sabriasiacapitallk Shiyam Subaulla (94-11) 5320218 0773502016 shiyamasiacashan Wijayakoon (94-11) 5320208 0777 713645 niroshanasiacapitallk Gagani Jayawardhana (94-11) 5320236 0714084953gaganiasiacap
az Aboobucker (94-11) 5320213 0777-727352 niyazasiacapitallk Priyantha Hingurage (94-11) 5320217 0773502015priyanthaasiara Hedigallage (94-11) 5320211 0777 713663 anuraasiacapitallk Neluka Rodrigo (94-11) 5320214 0777366280nelukaasiacaplaka Hapugoda (94-11-5320240 0777 256740 chelakaasiacapitallk Subeeth Perera (94-11) 5320227 0714042683subeethasiaca
minda Mahanama (94-11) 5320223 0777 556582 mahanamaasiacapitallk n Bibile (94-11) 5320238 0777 352032 hiranasiacapitallk
ANCHESbathgoda Asian Alliance Building No04 Sirimawo Bandaranayake Mw Kadawatha Asiri Perera 011-5734773 0773-692812 asiriasiacapitallk
unegala CSE 1st Floor Union Assurance Building No06 Rajapihilla Rd Kurunegala Asanka Samarakoon 037-5628844 0773-690749 asankaasiacapita
ara Asian Alliance Building No 312Galle Road Nupe Matara Sumeda Jayawardena041-5677525 0773-6873sumedaasiacapita
e Capital Reach Building 2nd Floor No 16A Gamini Mw Galle Ruchira Silva 091-5629998 0773-687027 ruchiraasiacapitLasitha Wijewardena 091-5676766 077-6681884lasithaasiacapita
E Floor CSE01-04 World Trade Centre Colombo ndash 1 Thushara Adhikari 011-5735122 0773-688202adhikariasiacapit
ombo Asia Asset Finance 1711 Station Road Negombo Uthpala Karunatilake 031-5676881 0773691685uthpalaasiacapit
nnappuwa No176 Negombo Road Katuneriya Sajith Iroshan 032 5673881 077 3740208 sajithasiacSandun Athulathmudali 032 5673882 077 2533331 srangaasia
RVICE CENTRESdy Capital Reach Building No165 Katugodella Veediya Kandy Nilupul Hettiarachchi 081-5628500 0773-691816nilupulasia
Radhika Hettiarachchi 081-5625577 0777-810694radhikaasiac
mbantota Hambanthota Chember of Commerce Thangalle Road Hambantota Gayan Anusha Muthumali 047-5679241 0772-351716Shermin Ranasinghe 0772378352 sherminasiacapitallk
para 2nd Floor TKS Building DS Senanayake Street Ampara Ravi De Mel 063-5679071 0772-681995 ravideasiacapital lkMadushanka Rathnayaka063-5679070 0779-036577 shankaasia
na 11-8 First Floor Stanley Road Jaffna Sutharshan 021-5671800 0772-395811suthanasiacapitallkNirmalan 021-5671801 0778-449773 nirmalasiacapitallk
ort has been prepared by Asia Wealths (Private) Limited The information and opinions contained herein has been compiled or arrived at based upon information obtained from sources believed to be reliable and in good faith Such information has not been independently verified and no guaranty
ntation or warranty express or implied is made as to its accuracy completeness or correctness reliability or suitability All such information and opinions are subject to change without notice This document is for information purposes only descriptions of any company or companies or their secu
ned herein are not intended to be complete and this document is not and should not be construed as an offer or solicitation of an offer to buy or sell any securities or other financial instruments In no event will Asia Securities be liable for any loss or damage including without limitation indirect
uential loss or damage or any loss or damage whatsoever arising out of or in connection with the use of this report and any reliance you place on such information is therefore strictly at your own risk curities may to the extent permissible by applicable law or regulation use the above material conclusions research or analysis in which they are based before the material is disseminated to their customers Not all customers will receive the material at the same time Asia Securities their resp
representatives employees related persons andor Asia Securities may have a long or short position in any of the securities or other financial instruments mentioned or issuers described herein at any time and may make a purchase andor sale or offer to make a purchase andor sale of any su
nancial instruments from time to time in the open market or otherwise in each case either as principal or agent Asia Securities may make markets in securities or other financial instruments described in this publication in securities of issuers described herein or in securities underlying or
es Asia Securities may have recently underwritten the securities of an issuer mentioned herein
ormation contained in this report is for general information purposes only This report and its content is copyright of Asia Securities and all rights reserved This report- in whole or in part- may not except with the express written permission of Asia Securities be reproduced or distributed or c
ed in any material form by any means whether graphic electronic mechanical or any means Nor may you transmit it or store it in any other website or other form of electronic retrieval system Any unauthorised use of this report will result in immediate proceedings
862019 SAMPATH BANK PLC- review1Q 2011
httpslidepdfcomreaderfullsampath-bank-plc-review1q-2011 1313
Page
SAMPATH BANK PLC
Researchhelliphelliphelliphelliphelliphelliphelliphellip
d of Research Saminda Weerasinghe Senior Analyst Amali Perera
11)5320250 (94-11)5320256
indaasiacapitallk amaliasiacapitallk
porates Economy
ela Rasheed (94-11)5320252 Umayangana Randeniya (94-11)5320254
wan De Silva (94-11)5320258 Dhanusha Pathirana (94-11)5320257
hani Perera (94-11)5320251 Nuwan Pradeep (94-11)5320257
oli Mallwaarachchi (94-11)5320360
mala Samarawickrama (94-11)5320253
hara Fernando (94-11)5320256
n Wijekoon (94-11)5320253
na Ukwatta (94-11)5320253
aleshelliphelliphelliphelliphelliphelliphelliphellip
STITUTIONAL SALES RETAIL SALES
ri Marikar (94-11) 5320224 077 3576868 sabriasiacapitallk Shiyam Subaulla (94-11) 5320218 0773502016 shiyamasiacashan Wijayakoon (94-11) 5320208 0777 713645 niroshanasiacapitallk Gagani Jayawardhana (94-11) 5320236 0714084953gaganiasiacap
az Aboobucker (94-11) 5320213 0777-727352 niyazasiacapitallk Priyantha Hingurage (94-11) 5320217 0773502015priyanthaasiara Hedigallage (94-11) 5320211 0777 713663 anuraasiacapitallk Neluka Rodrigo (94-11) 5320214 0777366280nelukaasiacaplaka Hapugoda (94-11-5320240 0777 256740 chelakaasiacapitallk Subeeth Perera (94-11) 5320227 0714042683subeethasiaca
minda Mahanama (94-11) 5320223 0777 556582 mahanamaasiacapitallk n Bibile (94-11) 5320238 0777 352032 hiranasiacapitallk
ANCHESbathgoda Asian Alliance Building No04 Sirimawo Bandaranayake Mw Kadawatha Asiri Perera 011-5734773 0773-692812 asiriasiacapitallk
unegala CSE 1st Floor Union Assurance Building No06 Rajapihilla Rd Kurunegala Asanka Samarakoon 037-5628844 0773-690749 asankaasiacapita
ara Asian Alliance Building No 312Galle Road Nupe Matara Sumeda Jayawardena041-5677525 0773-6873sumedaasiacapita
e Capital Reach Building 2nd Floor No 16A Gamini Mw Galle Ruchira Silva 091-5629998 0773-687027 ruchiraasiacapitLasitha Wijewardena 091-5676766 077-6681884lasithaasiacapita
E Floor CSE01-04 World Trade Centre Colombo ndash 1 Thushara Adhikari 011-5735122 0773-688202adhikariasiacapit
ombo Asia Asset Finance 1711 Station Road Negombo Uthpala Karunatilake 031-5676881 0773691685uthpalaasiacapit
nnappuwa No176 Negombo Road Katuneriya Sajith Iroshan 032 5673881 077 3740208 sajithasiacSandun Athulathmudali 032 5673882 077 2533331 srangaasia
RVICE CENTRESdy Capital Reach Building No165 Katugodella Veediya Kandy Nilupul Hettiarachchi 081-5628500 0773-691816nilupulasia
Radhika Hettiarachchi 081-5625577 0777-810694radhikaasiac
mbantota Hambanthota Chember of Commerce Thangalle Road Hambantota Gayan Anusha Muthumali 047-5679241 0772-351716Shermin Ranasinghe 0772378352 sherminasiacapitallk
para 2nd Floor TKS Building DS Senanayake Street Ampara Ravi De Mel 063-5679071 0772-681995 ravideasiacapital lkMadushanka Rathnayaka063-5679070 0779-036577 shankaasia
na 11-8 First Floor Stanley Road Jaffna Sutharshan 021-5671800 0772-395811suthanasiacapitallkNirmalan 021-5671801 0778-449773 nirmalasiacapitallk
ort has been prepared by Asia Wealths (Private) Limited The information and opinions contained herein has been compiled or arrived at based upon information obtained from sources believed to be reliable and in good faith Such information has not been independently verified and no guaranty
ntation or warranty express or implied is made as to its accuracy completeness or correctness reliability or suitability All such information and opinions are subject to change without notice This document is for information purposes only descriptions of any company or companies or their secu
ned herein are not intended to be complete and this document is not and should not be construed as an offer or solicitation of an offer to buy or sell any securities or other financial instruments In no event will Asia Securities be liable for any loss or damage including without limitation indirect
uential loss or damage or any loss or damage whatsoever arising out of or in connection with the use of this report and any reliance you place on such information is therefore strictly at your own risk curities may to the extent permissible by applicable law or regulation use the above material conclusions research or analysis in which they are based before the material is disseminated to their customers Not all customers will receive the material at the same time Asia Securities their resp
representatives employees related persons andor Asia Securities may have a long or short position in any of the securities or other financial instruments mentioned or issuers described herein at any time and may make a purchase andor sale or offer to make a purchase andor sale of any su
nancial instruments from time to time in the open market or otherwise in each case either as principal or agent Asia Securities may make markets in securities or other financial instruments described in this publication in securities of issuers described herein or in securities underlying or
es Asia Securities may have recently underwritten the securities of an issuer mentioned herein
ormation contained in this report is for general information purposes only This report and its content is copyright of Asia Securities and all rights reserved This report- in whole or in part- may not except with the express written permission of Asia Securities be reproduced or distributed or c
ed in any material form by any means whether graphic electronic mechanical or any means Nor may you transmit it or store it in any other website or other form of electronic retrieval system Any unauthorised use of this report will result in immediate proceedings
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