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Sri Lanka Equity Forum » Stock Market Talk » SAMPATH BANK ACHIEVES 41% PAT GROWTH IN 1Q, 2018

SAMPATH BANK ACHIEVES 41% PAT GROWTH IN 1Q, 2018

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Harry82

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Senior Vice President - Equity Analytics
Senior Vice President - Equity Analytics
Sampath Bank achieved a post-tax profit of Rs. 3.3 bn for the quarter ended March 31, 2018, a 41.4% growth in comparison to the profit after tax (PAT) of Rs. 2.3 Bn recorded in 1Q 2017. The results stem from higher profit before tax (PBT), which grew by 39.6% YoY to reach Rs 4.9 bn in 1Q 2018. Meanwhile, the Sampath Group, which includes the Bank and four fully owned subsidiary companies also posted a strong performance for the quarter, with PBT and PAT growing by 39.3% and 41.1% respectively compared to 1Q2017, the bank said in a statement.
The Bank achieved a substantial growth in all key business pillars during the quarter under review.
These results were achieved under the guidance of Chairman Channa Palansuriya and Managing Director, Nanda Fernando.
Fund based income (FBI)
Net Interest Income (NII), which is the main source of income representing more than 70% of the Bank’s total operating income, recorded an increase of Rs 2.0Bn (31.0%) during 1Q2018 in comparison to 1Q 2017. Accordingly, the Bank recorded NII of Rs8.3Bnin 1Q 2018, as against Rs6.3Bn recorded for the corresponding period in 2017.
The above achievement was made possible by the robust growth recorded in the deposit and advances bases coupled with timely re-pricing of asset and liability products and other fund management strategies adopted by the Bank.The Bank’s deposit base recorded a 3.6% (annualized 14%) growth while net advances increased by 7.4%(annualized 30%).
Net fee and commission income, which largely comprises of credit, trade, card and electronic channel related fees increased to Rs 2.3 Bn in the quarter under review, as opposed to Rs 1.9Bn recorded in the corresponding period of2017.
This is a notable YoY growth of 18.7%, which is attributed to the strong credit appetite, as well as efforts made by the Bank to expand the credit card operations and a strong market uptake for innovative value additions offered through electronic channels.
Other operating income was up by64.2%from Rs 0.8 bn reported in 1Q 2017 to Rs 1.3 bn in 1Q 2018.Higher dividend income from subsidiaries and the increase in realized exchange income could be identified as the main contributory factors for the increase in operating income.
The Bank’s operating expenses, which amounted to Rs. 3.9 bn in 1Q 2017, increased to Rs 4.7 bn during the period under review, reflecting a YoY increase of 18.3%.
Higher personnel expenses triggered by salary increments and an increase in other operating expenses driven by business expansion together with inflation-led general price hikes were the main reasons for the aforesaid cost escalation. Despite higher costs,the cost-to-income ratio excluding VAT and NBT on financial services, improved to 39.5% in 1Q2018from 43.7% in 1Q2017, an improvement of420 basis points. This is seen as a significant achievement particularly in view of the fact that Sampath Bank has one of the youngest branch networks compared to its closest competitors.
Impairment charge of Rs1.1 bn recorded in 1Q2018 showed an increase of Rs0.5Bn over the comparative period’s charge of Rs0.6Bn. This was predominantly due to Rs 377.5 Mn increase in collective impairment charges.
The increase in collective impairment was the result of the 7.4% credit growth recorded for 1Q 2018 as well as a marginal increase in NPA ratio from 1.64% in December 2017 to 1.95% in March 2018.
However, the Bank’s NPA ratio as at 31st March 2018 remained well below the industry average of 3%and of its closest competitors.
Sampath Bank’s total asset base grew by 6.5% (annualized 26%) in 1Q 2018to reach Rs 846 bn as at 31st March 2018.
The total asset position as at 31st December 2017stood at Rs 795 Bn. Gross loans and receivables from other customers grew by 7.5% (annualized 30%) during the period and moved up to Rs 612 bn as at March 31, 2018 (up by Rs 43 bn from the position reported as at 31st December 2017).
Total deposit base too increased by Rs 23Bn, recording a growth of 3.6% (annualized 14%) during this period to touch Rs 653 bn as at the reporting date.
The CASA ratio as at 31st March 2018 stood at 34.6%,recording a marginal decrease compared to the figure reported as at 31st December 2017 (34.9%).
ROE (after tax) declined from 23.35% as at 31st December 2017 to 20.81% as at 31st March 2018 due to increase in average equity base resulting from the Rights Issue done in November 2017. ROA (before tax) however improved to 2.41% as at end of 1Q 2018 in comparison to 2.29% reported as atend of 2017.Nevertheless, both ROE and ROA ratios showed an improvementas at 31st March 2018 when compared with the position reported as at 31st March 2017.
Meanwhile, the Basic Earnings per shareof Rs 13.92 for 1Q 2018 was a substantial improvement from theRs10.98recorded for the corresponding period in the previous year. This was an impressive YoY growth of 26.8%.The Bank was able to maintain its Statutory Liquid Asset Ratio (SLAR) well above the mandatory requirement of 20% throughout the period, with the SLARof 21.18% as at 31stMarch 2018.
CBSL introduced Basel III to the Sri Lankan Banking industry with effect from 1stJuly 2017. Accordingly, the full implementation is expected to take place in three phases over a period of 18 months and is targeted to be completed by 1stJanuary 2019, at which point Sampath Bank would need to maintain its Tier I Capital Adequacy Ratio (CAR) at 10% and Total CAR at 14%.
In order to fall in line with these new regulatory capital requirements, Sampath Bank raised Rs 12.5 bn worth of Tier I Capital by way of a Rights Issue in April 2018 and Rs 7.5 bn worth of Tier II Capital by way of a Basel III Compliant Debenture Issue in March 2018.
The Bank’s Common Equity Tier I Capital, Tier I Capital and Total Capital Adequacy ratios as at 31stMarch 2018 stood at 9.48%, 9.48% and 14.42% levels respectively, all well above the minimum regulatory requirement of 7.375%, 8.875% and 12.875% respectively, applicable as at the reporting date. 

Harry82

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Senior Vice President - Equity Analytics
Senior Vice President - Equity Analytics
Rs 14.16 x 4 = 56.56

56.56 x 7  = Rs 395.92

Target price is above Rs 400.00

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