Sampath Bank PLC (SAMP.N0000) – 2014 results

 Loan book and net interest income improve despite a contraction in pawning portfolio: SAMP’s gross loan book, excluding pawning, grew 31% YoY, while its pawning portfolio recorded a 53% YoY decline. The bank’s pawning exposure is now limited to 8% of total loans. SAMP’s loan book now reflects better diversification and a lower risk profile – with term loans, trade finance and overdrafts accounting for 74% of total loans. SAMP’s net interest income stood at LKR16.8bn (up 4% YoY) in 2014.

 Impairment charges decline in 2014, while NPA is now down to 1.9%: SAMP’s total impairment charge declined to LKR2.4bn in 2014 on account of lower provisioning from its pawning portfolio. Further, gross NPA dropped to 1.9% (versus 2.7% in 2013)

 Net income grew 45% YoY to LKR5.3bn in 2014: SAMP’s operating profit recorded growth of 55% YoY to LKR8.8bn in 2014, while net income grew 45% YoY to LKR5.3bn. The bank’s EPS came in at LKR31.34 (versus LKR21.66 in 2013).

 Valuation: We maintain our current valuation multiples of 1.0x-1.2x P/B, in line with peer valuations. Rolling over to 2015E BVPS and EPS values yields a valuation range of LKR236-270. SAMP’s share price has run up significantly, along with the current market upswing. The BFI sector P/BV has increased to 1.8x from 1.4x and the sector P/E has increased to 14x from 9x a year ago, rising ahead of the market P/E, which rose to 20x from 16x during the same period