JKSB Full Year Highlights_Sampath Bank PLC (SAMP)_CY16
SAMP reported a significant 43% YoY increase in full year earnings for CY16, driven mainly by 1) healthy growth in net interest income (+29% YoY), stemming from an expansion in NIM (+0.23ppt YoY) amid strong net loan book growth (+22% YoY); and 2) a 4.3ppt YoY improvement in its cost to income ratio, supported by cost containment measures (such as the introduction of self-deposit kiosks aimed at improving employee productivity) and a ramp up in contribution from newer branches (SAMP almost doubled its branch network over 2008-2014 amid an aggressive expansion drive). We attribute the expansion in SAMP’s NIM - despite a lower CASA ratio - to faster loan re-pricing, as SAMP has 1) a lower-than-peer share of fixed rate term loans in its lending portfolio; and 2) exposure to shorter tenor loan products such as overdrafts and import loans. Loan book growth for the year (+22% YoY) was primarily driven by strong growth in 1) term loans (+34% YoY); 2) overdrafts (+28% YoY); 3) import loans (+15% YoY); 4) housing loans (+26% YoY); and 5) leasing (+19% YoY).
We project full year earnings of Rs. 10.9bn for CY17, translating to an EPS of Rs. 61.70 (+15% YoY). We expect 2017 to be a more difficult year for the sector as a whole, in terms of credit growth as well as continuing pressure on NIMs, with SAMP now offering a rate of 12% on a one year FD amid increased competition for funding across the sector. Our current earnings projection does not factor in the impact of a proposed Financial Transactions Levy (FTL) at the rate of Rs. 5 per Rs.10,000 on total cash transactions. At its current price of Rs. 271.30, SAMP trades at a CY17E P/E of 4.4x and a P/BV of 0.97x , at an unwarranted discount to our banking & finance coverage universe P/E.
•JKSB is one of 15 founding members of the Colombo Stock Exchange with roots in share trading dating back to 1896, and is a subsidiary of John Keells Holdings PLC (JKH), the largest listed entity on the Colombo Stock Exchange with a market capitalization of US$ 1.3bn.
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